For companies looking to roll out a product and win loyal fans, branding is absolutely crucial. Names, taglines, color schemes - and yes, even product designs - are all potential candidates for brand protection. But how exactly do you protect a brand? Do you protect it only in the states where you are selling your products or services, or go through federal registration? Do you pay to protect your brand globally? They're big - and not cheap - questions.
Before going global with your startup, these are just the questions you should be thinking about - and often times, before you roll out the product. A lack of planning can catch your business flat-footed, leaving your buyers confused about your brand, and especially its significance versus its competitors and copycats. At the worst case, lacking proper protection can mean the death of a brand, through a complete lack of distinctiveness and trademark rights.
In-N-Out: What Quality is All About
For all those on the West Coast, In-N-Out Burger has become a staple of the interstate-bound traveler and a popular hang out spot for millennials. The delicious burgers piled high with all the fixings and fresh-made french fries are practically within reach once you see the iconic giant road sign, with a vibrant yellow arrow and bold letters pointing the way.
From very humble beginnings as a single roadside hamburger stand between Los Angeles and Palm Springs to a burgeoning chain of 305 restaurants, it has been a slow and steady growth trajectory for In-N-Out Burger.
As with other businesses in the restaurant and retail sector, In-N-Out’s main differentiating assets are the quality of the product and its first-class service. Indeed, it is an obsession with food quality that has caused In-N-Out to expand at such a slow pace (and to completely rule out expansion to some areas), preferring to keep most of its restaurants near distribution centers where the company makes its own burger patties and keeps a supply of other fresh ingredients.
Consistency is Key: Protecting The Brand
When talking about food quality and service, one of the ways that In-N-Out (or any service-based business) can strengthen associations between the product and the company is through a strong, consistent, and vigorously protected brand.
The IN-N-OUT name, the tagline “quality you can taste”, the signature white, red, and yellow signs marking the location of the restaurant, even the layout of the restaurants and the use of particular color schemes for tile designs and graphics inside the restaurants are all distinctive signatures of the restaurant. Recognizing the importance of each of these components, In-N-Out has zealously protected various logos, product names, and color schemes by obtaining federal trademark registrations in the whole United States.
The federal trademark registrations have protected In-N-Out’s operations in the US and have prevented other companies from using similar names in connection with their restaurants. Although the company does not have any stores outside the Western and Southwest US, it has obtained trademark registrations for the In-N-Out mark in Mexico, Canada, Europe, the Philippines, Korea, and China.
You might think that In-N-Out is out of its mind spending money on trademark applications in foreign countries, which can sometimes run over $10,000 per country, to protect an image that might not have a lot of local significance. But thinking deeper, it's not hard to fathom the risk of leaving a brand unprotected in China or Mexico.
From China with Love: In-N-Out’s “Secret” Competitor
With a cult following like In-N-Out, it was only a matter of time until a competitor swooped in to capitalize on the successes of the original. Enter “CaliBurger”, a California-based company with a penchant for carbon-copying everything about In-N-Out... in China.
From the business model all the way down to the red, white, and yellow logo that was a virtual replica of In-N-Out, CaliBurger's brand was definitely "inspired". To mark the arrival of the famed (and faked) California burger fixture, CaliBurger took out billboard space in popular areas around Shanghai featuring huge ads for the “Double-Double” and “Animal Style” secret menu orders - that is, the same secret menu In-N-Out runs.
To make the whole operation more legitimate, CaliBurger even obtained trademark registrations for In-N-Out trademarks including “IN-N-OUT BURGER” and the palm tree motif. All of this was done, of course, without any license or authorization from In-N-Out Burger.
Because In-N-Out Burger had not filed trademark applications for their important brands in China, they were effectively locked out from the inside. CaliBurger had reached the grill first and they were seasoning the market with their own take on In-N-Out’s brand and concept. It didn’t take long for In-N-Out Burger to discover CaliBurger. And In-N-Out Burger went animal on CaliBurger.
Shortly after the Shanghai launch, In-N-Out Burger filed a lawsuit against CaliBurger’s parent corporation in the US alleging trademark infringement. Although the US court ruled against In-N-Out Burger’s attempt to stop CaliBurger’s actions in China on the grounds that the Chinese operations did not harm In-N-Out’s brand and business in the US, CaliBurger and In-N-Out reached a settlement. CaliBurger would stop using phrases like “Animal Style” in favor of “Wild Style” and would stop using some other visuals inside the restaurant outlets that made CaliBurger a little to close to In-N-Out Burger.
And, of course, In-N-Out Burger acquired the Chinese trademark registrations, most likely at a premium to what they would have paid to register the trademarks themselves.
Protecting Your Brand at a Global Level
It might seem that In-N-Out Burger’s strong foothold for their food, store outlets, and name would extend out to the rest of the world by virtue of their legacy. Alas, just as the aroma of freshly peeled potatoes and the sound of milkshake mixers only reaches so far, so too do trademark rights have limited boundaries.
Because a trademark is a source identifier for a company’s goods and services, it must have meaning to the consumers that a particular company wishes to reach, and this requires one of the following: (1) registration in a specific country, or (2) use of the trademark in that specific country.
Even in the Internet era, in which businesses reach beyond physical marketplaces, trademark rights are still largely geographic. The legal systems in each country has its own laws for the registration and enforcement of trademarks. Many often fail to give any consideration to trademarks of foreign companies that have not registered the mark in that country.
This presents a bit of a conundrum to those companies that, for strategic or demographic reasons, have their operations confined to a specific area. The company can focus on protecting their brand in the main target country, but they must always be mindful of threats to the brand that arise from outside.
For example, if a US software developer is worried about the threat of a counterfeiter selling apps in China, the US developer should seriously consider registering trademarks in China and any other country where a threat to the brand is perceived. The developer should also consider acquiring a .com.cn domain name registration for its app/brand, even if it is not planning on developing a website. This will prevent cybersquatters (an equally onerous problem) from jumping on the domain name and using it to redirect users to competing websites.
If the company is holding off from expanding into China because they need more time to study the market or are unsure of the best distribution outlets, it can always license another company in China to handle distribution. Owning the trademark rights in such a scenario will be invaluable and save the company from rogue distributors.
A company can mitigate the cost of international trademark protection through a vehicle called the Madrid Protocol, which allows companies to secure trademark protection in multiple countries with a single trademark filing. While the company will still have to pay filing fees in each country where it seeks protection, attorney’s fees for filing a compound application are often lower than they would be if a trademark was to be filed individually in each country.
Read next: 10 Tips for Marketing Your Startup Globally
The Takeaway: Nothing Happens in a Vacuum
Trademark use and protection does not occur in a vacuum. A company that has long-term growth plans in other countries (even if relatively far into the future), should give serious thought to the threats that competitors may pose to the company’s identity.
A brand that is creative or which has been in the making for many years is a target for a competitor that is seeking to capitalize on the consumer associations with the brand. Because trademark protection is largely geographical, this creates opportunities for competitors to “steal” the trademark rights that a company might otherwise secure in a far-away market. This risk creates the need for brand protection in specific countries where the company may not be planning to release its product or service in the near future.
Companies should evaluate the marketplace and determine where counterfeiting occurs most often in their product/service space, creating a trademark protection plan accordingly.