Building Asset Value In Trademarks and Copyrights Presented by Alec P. Rosenberg Arent Fox LLP Washington, DC | New York, NY | Los Angeles

Part I: Developing Rights

Definitions – Trademarks Trademark/Service Mark: word, name, symbol or device used to identify and distinguish the goods or services of a business from those offered by others Trade dress: a distinctive, nonfunctional feature of a label, package, advertisement, web site or other object that identifies and distinguishes goods or services Certification Mark: a word, name, symbol or device used by a person other than its owner to certify regional or other origin, material, mode of manufacture quality, accuracy, or other characteristics of such person’s goods or services Collective Mark: a trademark or service mark used by members of a cooperative, association, or other group or organization including marks indicating membership

Definitions – Copyrights Copyright: A bundle of exclusive rights granted by government for a limited time to protect an original, “fixed” expression of an idea. Examples of Copyrightable Subject Matter:  Literary and Musical Works  Movies and other Audio-Visual Works  Factual Compilations  Software  Translations  Paintings  Photographs  Architectural designs

Developing Trademark Rights Use in Commerce = Common Law Rights Benefits of Federal Registration  Constructive Notice  Rebuttable Presumption of Validity, Ownership and Exclusive Right to Use  Federal Jurisdiction and enhanced relief available  Incontestability After 5 Years  Nationwide and International Priority Registration may be based on Actual or Intended Use Process  Selection  Search and Clearance  Use / Registration  Proper Use and Licensing  Monitoring and Enforcement

Developing Copyright Rights Rights Accrue Upon Creation and Fixation of “Original Works of Authorship”  Only Minimal Creativity Required  Selection and Arrangement of Facts, Not Facts Themselves Author = Owner  Works Made for Hire  Joint Works Benefits of Registration  Constructive Notice  Federal Jurisdiction  Potential for Evidentiary Benefits and Enhanced Damages

Part II: Strengthening and Protecting Rights

Maximizing the Value of Trademarks Pick Strong, Distinctive Marks The Strength of a Mark and Scope of Protection Available is Affected By The Degree of Inherent Distinctiveness Spectrum of Inherent Distinctiveness  Coined  Arbitrary  Suggestive  Descriptive  Generic Acquired Distinctiveness (aka “Secondary Meaning”)

Examples of Coined Marks Kodak Exxon Verizon

Examples of Arbitrary Marks Apple Camel Saturn

Examples of Suggestive Marks Wrangler Coppertone Sparkle (for glass cleaner) Samson (for hair care products)  KEY: Some Imagination Required

Examples of Descriptive Marks Steak N Brew Raisin Bran Bank of America Bufferin The Dollar Store  KEY: Identify, Describe, Characterize a Quality, Attribute, Ingredient, etc.

Proper Trademark Usage Trademark Rights May Be Lost Through Improper Use  Use Trademarks as Proper Adjectives  Avoid the Possessive or Plural Form  Display Marks in a Distinctive Manner  Display a TM, SM, or ® Symbol with Marks  Display Marks in a Consistent Format  Never Permit Unauthorized Use of Marks

Strategies for Enhancing Trademark Value Monitoring Enforcement Licensing (Quality Control is Critical) Family of Marks Doctrine U.S. and Int’l Trademark Registration

Strategies for Enhancing Copyright Value Exploit Range of Copyrightable Subject Matter Proper Content Clearance Register Important Works Made for Hire Careful Licensing (Exclusive License = Assignment) Consider Registering Websites (and Updating Regularly)

Websites and Domain Names Domain Name Selection  Consider Seeking Trademark Protection  Consider Defensive Registration Enforcement Techniques  Domain Names: UDRP vs. ACPA  Copyrights:Notice and Takedown (DMCA) Key Words and Pop-Ups Website Content and Programming (i.e., hyperlinks) Content Clearance and Copyright Registration

Part III: Using Trademarks and Copyrights to Obtain Financing

Relatively Recent Phenomenon Exploits Fullest Economic Potential of IP Blend of State Law / UCC and Federal Law Careful Due Diligence is Critical Trademarks and Copyrights As Security For Financing 18

Valuation of Trademarks and Copyrights Context is Key  Mergers / Acquisitions  Bankruptcy / Reorganization  Inter-company Transfers  Litigation / Damages  Tax  Licensing  Loan Securitization Important Overlapping Concepts  Goodwill (image / reputation, probability of continuing patronage, intangibles giving going concern advantage over start-up)  Intangible Assets (precisely identifiable, legally owned, traceable, provable, and quantifiable)  Intellectual Property (trademarks, patents, copyrights, trade secrets, software, domain / web assets)

Valuation Methodologies Cost Approach  Historical or Replacement Cost  “Substitution, not “Earnings” Value ” = Generally a Low Value  Best Suited to Very Young, Experimental Assets Market Approach  Compares Actual Market Transactions  Requires Accessible, Reliable Data concerning Similar Assets Income Approach  Considers Reasonable Future Income Stream (DCF Analysis)  Challenge is Separating IP Income Stream from Business as a Whole  Requires Multiple Predictions / Estimates Relief From Royalty Approach  Subset of “Income Approach” – Measures NPV of Royalties Company Saves Through Ownership of IP  Combinations of Real World Info (i.e., Royalty Rate) and Predictions (i.e., Future Income Streams)

Considerations When Valuing Trademarks Only Government-Sponsored Monopoly That Is Endlessly Renewable Mark May Be the Brand, So Value of Mark = Value of Brand Trademarks Cannot Travel Alone – They Require Associated Goodwill What Are You Valuing? (Mark / Brand Only, or also All Related Assets) KEYS:  Is it really a trademark, and does it work?  Would others want to use it to distinguish their goods / services?  Would someone pay for a license to do so?

Considerations When Valuing Copyrights Long Term of Protection  Generally: Life + 70  Works Made For Hire: 95 from Publication or 120 From Creation Keys  Consider Specific Work In Question  Consider Current Value Based on (a) Licensing and (b) Internal Use / Benefits  Consider Potential New Future Uses

Security Interests in Trademarks / Copyrights Careful, Thorough Due Diligence  Check Licenses: Can Only Pledge What is Owned  Check USPTO and Copyright Office / International? Trademarks  Rule Against Assignments-In-Gross  Best Practice is to Make Dual Filings (State and USPTO)  Intent-To-Use Applications = Pledge vs. Assignment Copyrights  Federal Law Preempts, But Dual Filings Recommended  Unregistered Copyrights A Note About Domain Names  Property vs. Conditional Contractual Right

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