Legal Matters: Pandemic pause: Intellectual property strategies during a unique business environment

Most Utahans will admit that the COVID-19 pandemic caught businesses by surprise. I was no different and first learned that the illness was in my own community while sitting next to tourists on a ski lift at Park City Mountain Resort. The next day, that ski resort was closed for the season and so was much of Summit County. Since that time, I’ve seen Park City empty of visitors and resemble a bust-era mining town.

But while Utah’s economy is restrained, we don’t have to be idle. Businesses can still plan for how to get back to business when the governor says go, and now is as good of time as any to start thinking about how to deploy a company’s intellectual property when the lockdown is lifted.

For a company that has focused its investments on trademarks and trade dress, now is an opportunity to reassess how those assets can be better utilized in the company’s post-lockdown marketing. Trademarks and trade dress assets both serve to help consumers identify a company as a source of the products they sell, and both can greatly increase the value of a company’s goodwill. But despite being valued the same way and serving the same purpose, they should be promoted differently in a company’s post-lockdown marketing strategy.

First, a trademark is a symbol or name that helps a consumer associate a given product or service with the producer of that service, but not all symbols or names are equal. Instead, symbols or names can fall into five distinct categories of strength, and those categories, ranked from weakest to strongest, are: “(1) generic; (2) descriptive; (3) suggestive; (4) arbitrary; or (5) fanciful.”

Generic marks are the common names for the products they represent and cannot act as trademarks (“cola” is a type of soft drink). Descriptive trademarks are the weakest protectable marks and describe the product they are associated with (American Airlines). Suggestive trademarks suggest the characteristics of the product they are used in connection with (Netflix). Arbitrary trademarks are common words that have real meaning, but that meaning is unrelated to the products they are used in connection with (Apple). Finally, the strongest category of marks is fanciful, or marks that are made-up words invented for use as a trademark (Pepsi).

For many companies going into the lockdown, they have already adopted names or symbols to help them identify their businesses. But, if a company’s post-lockdown strategy involves launching new products or services, that company should consider what trademark naming strategy is best for its branding. While a descriptive or suggestive trademark may help consumers quickly understand the product and generate more immediate sales, those types of marks may not be as valuable in the long term as a mark that is arbitrary or fanciful.

Drawing a contrast to trademarks, trade dress is the “look and feel” of a company’s particular product, or that product’s packaging. To provide an example that will be familiar to Utahans, in 2005 the popular Café Rio restaurant chain asserted a trade dress claim in its menu, layout and food presentation against its rival Costa Vida. For those that have eaten at those restaurants, consider whether the similarities and differences would lead you to believe that the two companies are owned by the same parent company. That is trade dress.

For trade dress assets, a marketing campaign should focus on consistently using the trade dress, making as little modifications as possible over time, and actively promoting that dress as unique to that company in advertising. Such a strategy will help avoid one of the most common trade dress pitfalls, which is failing to “promote a conscious connection” between the trade dress and the company that is the source of that trade dress.

Finally, for a company that has focused its investments on patents, new opportunities to monetize those patents have arisen through litigation finance providers. While many companies may not be in a financial position to enforce their patent rights during this downturn using their own capital, litigation finance companies can provide both immediate operating capital to patent owners for litigation and operating costs, while also allowing those patent owners to retain their patent rights.

This is an attractive option for companies with claims against competitors that they are reluctant to pursue, as it allows a business to tap some liquidity out of its patent investments. However, if litigation finance is used, a company should be prudent to find an appropriate balance between extracting operating capital and forgoing patent damages.

If we are all patient, business can return to usual. And when that happens, those that continued to work on their businesses will be positioned to grab as much of the market as they can. Having a thoughtful intellectual property strategy is essential to that goal.

Eric Maschoff, a partner in the Park City office of Maschoff Brennan, is a nationally recognized expert on intellectual property law.  He has extensive experience in patent preparation and prosecution, strategic counseling, licensing and IP portfolio management.

Danny Barber, an associate in the Park City office of Maschoff Brennan, assists clients in defending their research and development investments by ensuring their intellectual property is protected.