Monday Mornings with Madison

Are Trademarks and Patents Worth It?

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Ask any intellectual property attorney if a brand name, tag line, motto or slogan should be trademarked or an innovation or invention should be patented and the answer will invariably be yes.  After all, without intellectual property protection, a business is a sitting duck to have its unique identity and ideas poached by competitors.  Bear in mind, though, that those attorneys have a horse in the race.  Intellectual property attorneys earn a living by filing patent and trademark applications and fighting to protect the intellectual property rights that their clients fought to obtain.  And, they are paid to do that work whether they win or lose.  Thus, they have a vested interest in promoting patents and trademarks.

That might explain, at least in part, why the number of applications for patents and trademarks in the U.S. has been increasing much faster than the population over the last 50 years.  For example, the total number of applications for patents in the U.S. in 1965 was 94,629 while the total number of patent applications in the U.S. in 2015 was 589,410, a surge of over 620%.  Meanwhile, the total population in the U.S. was 194.3 Million in 1965 and it increased to 320.7 Million by 2015, an increase of about 165%.  That means patent applications increased at a pace four times as fast as the population.  But, an increase in intellectual property protection applications cannot be explained by sales and marketing efforts alone.  So why the surge?

The primary driver of the increase in patent and trademark applications is due to submissions from foreigners.  Fifty years ago, the ability for foreign businesses to make and sell products in the U.S. was limited to the largest companies.  Penetrating U.S. markets was hard.  However, as barriers to global sales decreased — thanks to the Internet, and explosive advances in technology, logistics, communication and transportation – more companies began selling to U.S. consumers, the largest and richest economy in the world.  Foreign companies wanted to protect their intellectual property from poaching just as much as U.S.-based companies did.

Global trade has also pushed businesses to pursue intellectual property protection in other countries as well.  Patent applications have been on the rise in other countries as well.  In 2016, 3.1 million patent applications were filed with patent offices worldwide, an increase of 8.3% over 2015 and the seventh year in a row in which there was a year-over-year increase in global patent applications.  China, Japan, EU, US and South Korea accounted for 84% of all the patent applications filed worldwide in 2016.  Of the total, 1.3 million patent applications were filed with China’s State Intellectual Property Office (SIPO).  That is the highest number of patent applications received by any patent office in a single year and it was higher than the total of patent applications filed in the U.S. (605,571), Japan (318,381), South Korea (208,830) and Europe (159,358) that year combined.   In fact, Asian patent offices took in 2 million (out of the 3.1 million) patent applications filed globally in 2016, and China accounted for much of that surge.

Clearly, inventors, innovators and business owners want proprietary rights to develop and market their products worldwide without fear of poaching.  The same is true not just of protecting inventions but brands as well.  The most savvy companies are taking the time and spending the money to shield and defend all aspects of their company’s unique identity.  And this is not just true of multinational, multibillion dollar companies.   Even individuals are filing to trademark their slogans.  Paris Hilton (heiress of the Hilton brand) successfully trademarked her “It’s Hot.” slogan.   However, sometimes even having intellectual property protection is not enough to keep a brand from trouble.

The “Big” Trademark Battle:  McDonalds vs Supermacs

Case in point.  McDonalds filed for protection from trademark infringement in the European Union against an Irish burger chain called Supermacs.  The story serves as a cautionary tale about both the purpose and problems associated with patents and trademarks.  In its filing dating back to 2014, McDonalds claimed Supermac’s name was confusingly similar to Big Mac and asked the EUIPO to force them to change their name.  Supermacs challenged McDonalds’ claim saying that McDonalds was engaging in “trademark bullying” to stifle competition and stop them from expanding into Great Britain and the rest of Europe.

To most everyone’s surprise, the EUIPO (European Union Intellectual Property Office), based in Spain, sided with Supermacs and ruled in January 2019 that McDonalds had failed to prove ownership of the Big Mac trademark.  In its filing, regulators said the proof McDonalds submitted to show it had “genuinely used” the Big Mac trademark in recent years was not sufficient.  McDonalds had submitted information about millions of Big Macs sold in Europe, menus, brochures and a Wikipedia page telling the history of the Big Mac, dating back to 1967.  Regulators, however, said records from McDonalds’ employees were neither sufficient nor independent, and that Wikipedia pages are not reliable sources of information.  In the U.S., many saw the ruling as the latest example of an EU allergy to U.S. multinationals.

Let’s start with the first issue.  Was McDonalds bullying Supermacs with its trademark or was Supermacs taking advantage of McDonalds’ globally-recognized brand?  It seems like a bit of both.  On the one hand, the first Supermac’s restaurant opened on the main street of Ballinasloe in County Galway, Ireland, in 1978, and today there are more than 100 outlets across Ireland and Northern Ireland generating $93 Million in annual sales. Pat McDonagh, the chain’s founder, said Supermac was his boyhood nickname when he played Gaelic football (soccer), so the name was legitimately based on the owner’s identity.  It was not just a ploy to imitate the burger giant.  Moreover, the Supermac brand went unchallenged by McDonalds for 40 years.  To suddenly want to stop a restaurant owner from using his own nickname for a company that has been in business for four decades seems like bullying.  And, McDonalds even trademarked the name of one of Supermac’s most popular products, the SnackBox, even though McDonald’s doesn’t have any item on its menu in the EU or anywhere with that name.  Clearly, McDonalds was aware of the Supermacs brand and did not ask them to ‘cease and desist’ using the name in the 1980s or 1990s.

On the other hand, many of Supermacs’ menu items were named eerily similar to those of McDonalds.  For example, Supermac’s line of burgers and meals include a Mighty Mac burger and there are plans for a SuperMac burger.  It could certainly be argued that the Supermacs name infringed on McDonalds’ most famous and most advertised menu item, the Big Mac.   In fact, the Big Mac is such a big part of the company’s product identity that the chain even wrote a jingle about it in the 1970s and 1980s and ran television campaigns promoting it for years.  The jingle described the Big Mac in detail: “Two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun.”   Moreover, McDonalds has taken great pains to guard its trademarks and has numerous EU trademarks for its well-known products, including McNuggets, McChicken, McFeast and McFlurry.  For the EUIPO to claim that McDonalds had insufficient proof that they had “genuinely used” the trademark seems hard to swallow.  After all, McDonalds is a publicly-traded corporate giant that generated $22.8 billion in sales last year and has over 37,000 restaurants in more than 100 countries, and the Big Mac is its most popular menu item.  And yet they lost trademark protection for the Big Mac in the EU.

What is the take-away?  Clearly, even with a trademark and deep pockets to protect its intellectual property, even a behemoth like McDonalds may not be able to protect the name of its most famous product.  However, without any effort at trademark protection, things could be much worse.  This became evident when McDonalds’ competitors learned that the chain had lost its Big Mac trademark protection.   To troll McDonalds for its legal defeat, competitor Burger King hired their Stockholm-based ad agency Ingo to create a menu of “The Not Big Macs” which would be featured at local Burger King establishments in the EU.  Menu items included:

  • The Like a Big Mac, But Actually Big
  • The Kind of Like a Big Mac, But Juicier and Tastier
  • The Burger Big Mac Wished It Was
  • The Anything But a Big Mac
  • The Big Mac-ish But Flame Grilled of Course

Not only did McDonalds lose the battle over trademark protection of their Big Mac name, empowering Supermacs to expand into the EU, it enabled their biggest competitor to mock and ridicule their best product.  However, even this is not the end of the story.  The fallout from the “Big Mac” trademark battle continues.  A few months after the EUIPO ruling, the CMO of McDonalds was terminated by CEO Steve Easterbrook.   No reason was given.  And this month, McDonalds Board of Directors fired Easterbrook for reasons unrelated to the trademark battle and BK trolling, but the timing was incredibly suspect.  If it seems ridiculous to think that a global behemoth like McDonalds would terminate its CEO for the trademark fiasco, consider what Kalyan C. Kankanala said in the book “Fun IP, Fundamentals of Intellectual Property, “Every trademark you build adds to the financial value of your business, much more than your tangible assets.”  Given that, it stands to reason that every trademark lost then would detract from the company’s financial value.  Food for thought.

To Protect or Not to Protect

So what is the lesson?  Intellectual property protection is no guarantee that a company’s brand, products or inventions are safeguarded from poaching, trolling or copying.  It is only a start.  McDonalds needed to have done more to use its trademarked items repeatedly and document that use continually over time.  Relying on its size and reputation, McDonalds failed to meet the EUIPO’s standards to retain trademark protection.  Companies that have a unique brand should take the time to file for trademark or service mark protection.  Unique processes and products should get patented.  Then, the standards for maintaining those protections must be adhered to by every person involved with the company’s sales, marketing and business operations.  Only then can a company have some assurance that its intellectual property is safe.

 

Quote of the Week

“The value of a trademark is directly proportional to your aggression and risk ratio.” Kalyan C. Kankanala, Fun IP, Fundamentals of Intellectual Property

 

© 2019, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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