Small businesses should ask what’s in a name and protect their intellectual property
If David were to take on Goliath today, it would likely be an altogether different type of confrontation. An army of lawyers fiercely arguing over whether David’s slingshot was a proprietary design and an eventual out-of-court settlement from which Goliath would ultimately walk away unscathed.
Large corporations flexing their legal muscle to defend their market share, or to strong-arm suppliers into forgoing creative rights, is a constant obstacle that small and medium-sized enterprises must contend with.
Clothing giant Zara is the most recent example. The company has been pursuing quite aggressive and, in some cases very speculative, trademark disputes against smaller organisations. One claim in particular, against a woman called Zara who named her business after herself, was always unlikely to be successful. From a purely legal perspective, honest business use of one’s own name is highly unlikely to be judged a trademark infringement. But the prospect of getting tied up in a lengthy dispute is often all that is needed for a larger firm to get its way.
On one hand, Zara’s heavy-handed enforcement of trademark rights might not seem like a fair fight. On the other, it’s hard to expect large entities to behave differently. SMEs need to acknowledge this and more frequently deploy intellectual property (IP) law themselves to level the playing field.
SMEs that file at least one of the main types of IP – a patent, trademark or design – are 21 per cent more likely to grow over three years than one without, according to a 2019 study from the European Union Intellectual Property Office. Despite this, at the time only an estimated nine per cent of SMEs had a registered IP asset, compared to 40 percent of large companies.
For SMEs, registered IP is often an afterthought, rather than part of the strategy behind a product or branding.
The constant and proactive use of IP law demonstrated by Zara and other large firms is probably not something an SME has the resources to replicate, but there are plenty of ways that smaller businesses can use trademarks, patents and designs to their advantage. The vast majority simply choose not to.
Often it is the cost that puts off an SME from exploring registered IP properly, but this can be a false economy. The standard fee for filing an application to register a single UK trademark online with the UK Intellectual Property Office is £170, infinitely less than a legal dispute with a big rival. Trademark and other common law searches to identify if a chosen trading name is in use can be expensive, but casting a narrow net will mitigate this to an extent – focusing the search on the UK only, for example.
Developing and implementing an IP strategy can be relatively painless, and puts any business in a much stronger position to protect what makes it valuable. There is a reason why investors will always factor IP assets into their valuation of an acquisition prospect.
IP can even be the pivot point for a change to a more lucrative business model. For example, moving from a purely consultative offering to one where the company licenses its own designs can significantly boost revenue streams. SMEs too readily relinquish ownership of their creative produce, giving their customers – often larger organisations – valuable IP rights that they don’t need.
It is unlikely that large companies like Zara will stop deploying IP in a combative way. But, overall, smaller firms could be doing so much more to protect themselves. Success doesn’t always require David to bring down Goliath, but it can’t hurt to ensure he has the tools to do so if needed.