An edited version of this article appeared on the Communication Agencies Association of New Zealand's website.

We live in a world where we are constantly bombarded with brands. The average Western consumer is exposed to 3,000 different brand images each day.

While standing out from the crowd is becoming increasingly tough, the best brands continue to play a critical role in helping their owners boost sales, engender customer loyalty, generate referrals and ultimately build business value.

So what makes a good brand? Most marketers will tell you that a good brand should be one that is memorable, pronounceable and has positive connotations. But businesses developing new brands can often overlook some basic legal considerations. An understanding of the legal issues of brand selection can help a business stay one step ahead of the competition.

Legally, the best brands are those that are distinctive. When a brand is distinctive, it can be registered as a trade mark. Trade mark registration is a government granted monopoly that provides a number of key benefits that include:

  • Exclusivity - The exclusive right to use the trade mark for the products or services covered by the trade mark registration throughout New Zealand.
  • Public notice - Because the registration is searchable on a publically available online register, registration can provide public notice of the trade mark owner's rights.
  • Prevention - Registration can prevent another business registering an identical or confusingly similar trade mark for the same or any similar products or services as those covered by the registration.
  • Right to take legal action – Registration provides the owner with the right to take legal action against another business using the same or a similar trade mark for the same or similar products or services.
  • Rights can last forever - Registered trade mark rights can last indefinitely provided the registration is renewed every 10 years.
  • Drive business value - Trade mark registration can help to significantly drive business value. Buyers of a business will look closely at what assets they are buying. A key business asset is often its trade marks. The absence of trade mark registration may reduce the value of a business because it increases the risk that a competing trade mark will limit a buyer’s plans for the business.

A surprising number of businesses don’t know about these benefits or don’t fully understand them. Some businesses mistakenly believe that having a company or domain name registered gives them the right to use the relevant name.

So how do businesses come up with brands that will be distinctive enough to be registered as trade marks? A great starting point is understanding that all brands essentially fall within the following legal categories:

  • Invented

    This category has no meaning other than as a trade mark. Examples are ZESPRI® and KODAK®. Legally, invented trade marks are the strongest and the easiest to protect and enforce.

    However, this category can require a significant amount of advertising and marketing investment to create and build a link between the trade mark and the relevant product or service. For this reason, these trade marks are often not an initially popular choice with businesses.

  • Arbitrary

    Arbitrary trade marks are those that have commonly understood meanings that are unrelated to the relevant product or service. A great example is APPLE® for computers and other electronics or AXIS® for awards shows recognizing creative excellence.

    Like invented trade marks, arbitrary trade mark provide strong trade mark rights and are easy to protect and enforce. One downside is that these may also be expensive for businesses to establish the link between the trade mark and the relevant product or service offered under the trade mark.

  • Suggestive

    As the name implies, this category suggests a quality or characteristic of the relevant product or service but does not directly describe that product or service.

    Examples of suggestive trade marks include AIRBUS® (for planes) and COPPERTONE® (for sun screen).

    The strength of this category can vary. Although suggestive trade marks are not as easy to legally protect or enforce as invented or arbitrary trade marks, they are popular from a marketing perspective. This is because a consumer can more readily make the link between a suggestive trade mark and its associated products or services which often means the business does not have to spend as much time and money to establish and maintain that link.

  • Descriptive

    These trade marks merely describe the product or service. Because descriptive trade marks are not distinctive, they are very difficult to protect and enforce.

    These trade marks can be registrable but only with difficulty and usually at great expense. An example is THE WAREHOUSE®. While this is a registered trade mark, the rights in the registration are quite narrow and do not extend far enough to be able to prevent the use of other "WAREHOUSE" combinations such as GOLF WAREHOUSE or THE INSULATION WAREHOUSE.

  • Generic

    Generic terms can never be protected as trade marks because they are the common name for the product or service. For example, the term “software” can never be registered as a trade mark for software. Likewise the term “advertising” for advertising services.

If a business chooses a brand name that is descriptive or generic, that business runs a serious risk of not being able to stop anyone else (including their competitors) from using the same brand for the same products or services.

Taking a bit more time to choose a brand that is invented, arbitrary or suggestive will help put the business in pole position to take advantage of trade mark registration. That might just be the competitive advantage they need to stand out from the crowd.