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Friday, 15 July 2011

The CFO: Your Trade Mark Window to the Company


It's time for my periodic rumination about IP obsession No. 1--how does IP get handled within an organization? Let's focus on trade marks. Let's get behind matters such as multiclass applications, relative and absolute grounds of objection, likelihood of confusion, intent to use, quality control, and oppositions and cancellations -- not that these considerations are unimportant. To the contrary, they are the bread and butter of my day-by-day trade mark practice. But lurking behind these building block aspects of trade mark law is the question of what happens to trade marks within the organizational context of the commercial world.

After all, unlike patents and copyright, both of which can be viewed as acts of intellectual creation that enjoy a legal half-life even if they are never translated into commercial exploitation, trade marks are a form of legal right that is solely the creature of commerce. Trade mark rights emerged because, 200 years ago, merchants came to realize that there was commercial value in obtaining an exclusive right in one's product name. Since then, trade marks have been intertwined with the manner by which business is conducted.

These observations are fine, but they are stuck at a macro level. To say that trade marks are part and parcel of commercial life does really explain how trade marks are dealt with within the orgaization. To answer that micro-level question, we need to delve into the way that commercial organizataions are organized and managed. Let's focus on the threshold question: who is likely to be responsible for trade marks within an organization. Let's refine the question even further. In the start-up, hi-tech world, who is handling trade marks in such companies?

My initial sense was that the answer is obvious. Trade marks will be the managerial purview of a marketing person (we assume that the company does not have a legal department). After all, trade marks are ultimately a form of commercial communication. Who better, therefore, to deal with the legal aspects of a trade mark than the person charged with marketing?

The only problem here is this: I was wrong. Time after time, upon receiving instructions to handle a trade mark application for such a company, I find myself not dealing with a marketing person but rather the CFO ("chief financial officer") or his equivalent. And so the question--why? Why the disjunction between the job category that seems most appopriate to be responsible for trade marks, namely the marketing person, and the fact that responsiblity for trade marks is usually lodged in the financial wing of the company?


It seems to me that the answer can be found in the observation that, for such companies, trade marks are viewed simply as another expense item rather than as an intangible asset redounding to the potential long term benefit of the company. Trade mark registration is not seen as a process in the srevice of this long-term goal, replete with possible uncertainties about about the ultimate success and short-term cost of the process. Rather, it is seen a simple act of recordal, at worst no more complex than the registration of a company name. As such, the expenses connected with the registation should be readily determinable (and modest) rather than being subject to uncertainty and ultimately dependent upon the potential complexity of the registration process.

Once the trade mark registation process is viewed as a curent expense rather than a potentially valuable asset, additional implications follow:

1. Primary attention will be on consummating what are viewed as the mechanics of registration. Little or no attention is given to issues such as the circumstances by which the trade mark is used, brand equity or how how enforcement works.

2. There is no budgetary appetite for trade mark clearance and little budgetary appetite for funding trade mark prosecution.

3. There is little or no strategic thinking about how trade marks fit within the organization.
Don't get me wrong--trade marks may justifiably viewed as of minor importance, especially if the company's goal is to sell its technology rather than to establish a continuing commercial presence in the marketplace. Under such a view, the rationale for lodging responsibility for the organization's trade marks to the CFO makes more sense. Whether or not this is the case, however, the underlying fact is that the trade mark practitioner will likely find himself working with the company's CFO or the like with respect to trade mark matters. It is essential to get one's arms around the implications of this fact in trying to usefully provide trade mark services.

3 comments:

Anonymous said...

Well I thing that in the case of middle and large companies is more suitable to exist a position of IP manager who can play the role of a connection between Marketing department and legal persons ( It doesn't matter if this person is in-house or outside).
By this way I think that all trademarks will be managed as intangible assets than just as an ordinary expense.

Ventsi Stoilov

Anonymous said...

Agree about the IP Manager – and most of the time my experience has been the same with CFOs. However, we have found an absolutely superb CFO of a technology company whose key mission has been to turn the company around to recognizing the value of its intangible assets in all its shapes and forms. He is the one who is working to turn the tide. I can therefore vouch for the fact that there are those CFO’s out there who “get it”! Long may they live!

Part Time Cfo Advisor said...

I think it matters what type of company you are dealing with. Companies that are focused on establishing their brand in the marketplace may be more focused on ip issues whereas others really don't care at all.

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