Tuesday, February 28, 2012

Small Business and Entrepreneurship - To Startup or Not To Startup Part V - Profit Loss and Break-even

"Remind people that profit is the difference between revenue and expense. This makes you look smart." -- Scott Adams

In this section of our look into the decision of whether or not to start a new business, we will look at compiling the results of our financial projections. We've taken a look at collecting our expected costs, and predicting our future sales. Now we will combine the two but first we should note that there are many ways to format a cash flow projection spreadsheet. We will make some general recommendations that may help with analyzing the results but these are by no means the only way to do things.

For your columns, a typical dating format may begin with monthly figures (Month 1, Month 2, etc) for the first year, go quarterly for year two, and yearly for the remainder of the projection. Financial statements will typically be compiled for 3, 5 or 10 year periods.

As far as formatting the rows it is usually helpful to arrange figures categorically, and to help analyze your results later it is best to put in as much detail as you can. Remember, this set of figures is to help you make a decision on starting a business (as opposed to presenting an idea to an investor, or convincing a boss to authorize a project), we are not looking to hide anything from ourselves, we want information and functionality. Typically you would start with revenue figures, then costs, then totals, and it is helpful to try to list your assumption in the first column after your descripion, something like:

If you are able to list your assumption this way and tie your monthly or yearly figures to the assumption using formulas then changing the assumption should update all the fields in the forecast allowing for quick updates or easy sensitivity studies.

When listing your revenue figures it could be helpful later to embed in your projections the process used to determine your numbers. If you are using a salesman/marketing effort based calculation perhaps your revenue section will look something like:

  • Number of Sales Staff
  • Number of Potential Customers Reached per Staff Member
  • Amount of Advertising Budget
  • Number of Potential Customers Reached per $10,000 in Advertising
  • Total Number of Customers Reached
  • Percentage of Reached Customers Converted to Sales
  • Total Unit Sales
  • Price
  • Total Forecasted Sales
Of course we can abbreviate them in our spreadsheet, but laying out all the detail will allow us to play with the assumptions and analyze changes once we are done.

When listing costs it is helpful to be organized by categories perhaps by listing up-front costs first (these may only show up in month 1 but it is nice to have the total easily identified). We can further organize our costs into variable and fixed monthly expenses. Variable would contain things that vary with the level of production (such as materials, shipping, packaging, manufacturing labor, etc); while fixed costs are monthly expenses that are expected to be roughly the same despite the current level of production (such as rent, salaries, insurance, utilities, office supplies, etc).

Now that we've compiled our revenues and costs we will want monthly (or quarterly or yearly depending on your date formatting) totals for:

  • Total Cash In
  • Total Cash Out
  • Net Cash Flow

In addition to this we will want a running total of our cumulative cash flows. Totals should look something like the simplified example below:

Once we've compiled all our figures and totals we can look for some key points. One is the cash-flow positive point. This is the point where your net income exceeds your net outflow, when you have more money coming in than you expend. At this point your company will start making back some of the money it needed to get started. In the simplified example above, this occurs at Month 8 of Year 1, with a Net Cash flow of $2,500 ($7,500 in sales and $5,000 in expenses).

The month prior to that, Month 7 year 1 is significant as well as that is the point where your cumulative losses cease to increase. This figure is thus your "cash need". In the simplified example this company expects to lose a total of $17,500 before it becomes cash-flow positive and therefore this company needs to come up with $17,500 in order to make it to Month 7 of Year 1 at which point it should be okay on its own.

The other significant point is Month 11 Year 1, this is the cash flow breakeven point, the point where the company has made back the money from its cash needs. Next week we will take a more detailed look at our completed financial projections including cash needs, and sensitivity to our assumptions.

Thursday, February 23, 2012

The Copyright Process - Part 19 on our IP and Patents Series

This is the nineteenth in a planned 20-part series of articles on intellectual property.

In this posting, we will take a look at the process of obtaining a copyright.

In reality, the way one obtains a copyright is to simply produce an original work. According to the US Copyright Office, “your work is under copyright protection the moment it is created and fixed in a tangible form that it is perceptible either directly or with the aid of a machine or device.”[1]

However, you might want to let them know about it just the same! Registering the work ensures a public record of your ownership.   In the event of legal issues surrounding the work, a registration with the copyright office can be of great benefit.

Submitting a work for copyright registration is straightforward and can be done online or by hard copy. An application form, with a small fee (generally $35 to $65 [renewals are more] depending on the form, the item being copyrighted and whether it is submitted online or by hard copy) and copy or copies of the work in the proper format are all that is required. The copyright office will review the filing and respond.

Visit the US Copyright Office website at http://www.copyright.gov for more information and to register your work. Doing so is inexpensive and, in many case, well worth the effort.

In our final post we will provide a summary of intellectual property and commercialization.

[1] http://www.copyright.gov/help/faq/faq-general.html

Tuesday, February 21, 2012

Small Business and Entrepreneurship - To Startup or Not To Startup Part IV - Sales Forecasts

"At my lemonade stand I used to give the first glass away free and charge five dollars for the second glass. The refill contained the antidote." -- Anonymous

In this part of our series on the decision of whether or not to start a new business we will look at sales forecasts. The two major parts of our financial projections, costs and sales, are very different entities to predict. Whereas predicting costs can be basically an exercise in brainstorming and collecting quotes, sales projections require a lot of thinking about what exactly is the nature of our business and what is our business model - how are we going to make money?

First off, what are sales projections? Well, they are educated (hopefully) guesses about how much money the company expects to generate over the next few years. They are usually wrong and the farther out the projected figure, the more likely it is to be wrong. They are often shaped something like a hockey stick (see Exhibit 1), and they tell a story. Sales forecasts can say something like "we don't expect to make any money for the first year while we do product development, but then we will start limited sales as we hire a small sales staff. Soon our marketing efforts will begin to pay off as customers realize the superiority of our product and viola! We get a larger sales staff, things take off and we never look back (see Exhibit 1)".

Before we begin to determine some numbers, let us think about the purpose of these projections. In this circumstance the figures are for ourselves. We are not trying to sell a project to ourselves, we are trying to decide whether or not to start a business. This is a potentially serious undertaking, and we want to have as clear an idea as possible of what to expect should we decide to go ahead. For that reason we want to use as much of a sound and realistic basis for our projections as we can.

So a good way to begin is to think about the nature of your product, how you expect to generate revenue, and what the major roadblocks to more significant revenue may be:
  • Will your sales be reliant upon the efforts of a direct sales force?
  • Is the size of the sales force a limiting factor in your ability to generate additional revenue?
  • Do you need the cumulative effect of marketing efforts (i.e., "getting the word out") before you see significant sales?
  • Are you limited by manufacturing capabilities - can you only produce X number of units per month?
Consider the following two sound examples of determining initial sales figures:

"I will begin with 3 sales people, and we will spend $50,000 on advertising. I expect my sales people and ads to reach 300,000 people and 5% of those will purchase my product meaning 15,000 units sold. I do not expect to have any difficulty meeting those production demands. With my product priced at $10.00 this gives me $150,000 in sales during the first year".

The second example is:
"My product will take 300 hours to produce and I expect to start with 4 technicians meaning I can produce at a maximum 2 products per month. I don't expect to have difficulty selling the product at $25,000 a piece so I expect initial sales of $50,000 per month".

What both of these examples have in common is that the basis for the sales figures is founded in logic. If all the assumptions (such as "5% will purchase my product", "my product takes 300 hours to produce", or "$25,000 is a good price for my product") are reasonable then the sales projections these methods yield can be just as reasonable.

Both of the above examples identify where the sales come from, and both identify limiting factors. However, it will not always be possible to generate a sales forecast using this "bottom-up" type of method. One common "top-down" method used instead utilizes market share to determine sales figures. This method is to identify the likely size of the market during your time period and identify what percentage of the market you think your product can control, relative to competing products. So if you enter a $150 million per year market and expect to control 0.5% (for the duration of the year) you would generate $750,000 in revenue.

The sales forecasts generated by this "top-down" method are just as reliable as the assumptions used to determine the size of the market and the percentage of market share expected to be captured. The problem is that it can be difficult to make a logic-based prediction of captured market share, and that when compared with "bottom-up"forecasting methods, the "top-down" methods do not take into account as much the nature of the product or business.

Whatever the method we have used to determine our initial sales forecast, it is now time to think about growth. If we've used a "bottom-up" type approach for our initial sales forecast, growth could be determined by adjusting the variables according to the future nature of the company. Looking at the "sales force" first example above, perhaps after a year and $150,000 in revenue you think it would be a good time to expand the sales force and increase your marketing budget. You could then adjust the figures and %s accordingly and calculate your sales figures for the next period.

When using a "top-down" market share approach to predicting sales two things to consider would be the growth in market share of your company (say we moved from 0.5% to 1%) and also the growth in the market itself (maybe the market itself by 10%). Adjusting both figures accordingly will yield your next period's sales forecast.

The bottom line in both forecasting costs and forecasting sales is that the numbers are going to be just as good as the logic and assumptions we used to create them. If we are trying to decide whether or not to start a business we do not want to mislead ourselves with poorly founded figures. The numbers are going to be wrong, it is doubtful that any financial projection ever compiled was 100% accurate; but it is important to get as close an idea as possible to what we can expect should we decide to start this business. Now that we have calculated our expected sales and costs we will take a look next week at compiling and analyzing the results.

Thursday, February 16, 2012

An Overview of Copyrights - Part 18 in our IP and Patents Series

This is the eighteenth in a planned 20-part series of articles on intellectual property.

In this posting, we will take a look at copyrights – what they are and what their value might be.

A copyright protects “original works of authorship” (see the link below to the US Copyright Office, which explains copyright law in detail). This is different from a patent (which protects an inventor from someone who might steal an invention) and a trademark (which protects the use of a word, phrase, symbol or design that is used to distinguish one source from another). Copyrights protect things like original books, stories, songs and software.

In terms of protection, the US Copyright Office says that once an original work is created and put into a tangible form that is decipherable, it is automatically protected. However, like trademarks, it probably makes a lot of sense – from a legal standpoint – to copyright one’s works.

One of the most famous cases of copyright infringement involved Napster – the website that offered music sharing online without the permission of the copyright owners. Napster was sued, lost and was purchased in bankruptcy proceedings.

Another well-known example is George Harrison’s song My Sweet Lord, which was found to be an unintentional and “subconscious” use of the tune from the copyrighted song He’s So Fine by the Chiffons from several years earlier. Although no one believed Harrison plagiarized the song intentionally, he still had a judgment entered against him for over a half million dollars, which was paid and the issue resolved.

Brad Templeton has a nice web page that explains some myths about the use of copyrighted works. If you want to learn more, it’s definitely worth a visit, as is the US Copyright Office site:

Templeton’s site: http://www.templetons.com/brad/copymyths.html
US Copyright Office: http://www.copyright.gov/

In the next post, we will discuss the (very straightforward) process of obtaining a copyright.

Tuesday, February 14, 2012

Small Business and Entrepreneurship - To Startup or Not To Startup Part III - Costs

"If you would know the value of money, go and try to borrow some." - Benjamin Franklin

"Dogs have no money. Isn't that amazing? They're broke their entire lives. But they get through. You know why dogs have no money? No Pockets." - Jerry Seinfeld

Happy Valentines Day! In the spirit of Valentines Day we've decided to continue our Small Business and Entrepreneurship series with a look at determining the costs of starting a new business. :-)

As we continue our series on examining the decision to start a new business we want to note that while we will cover many topics there is no specific order in which any of this work needs to be conducted. It may be that in researching your target customers you develop a better "idea" and go back to refine your prospective product. Perhaps you complete a set of financial figures only to determine in other research a new set of costs you had not previously considered. The point is the whole work, as anything in life, can be an ever-changing piece. Knowing when to say "enough is enough I've done enough research" may be just as important as understanding anything else in this process.

In our next few articles we will examine financial projections. We will begin here with examining costs, and in the coming weeks we will look at projecting sales, analyzing our results, determining cash needs and then we'll begin to get into marketing with a look at product pricing.

Financial projections consist of two major parts - revenues and costs. When begining to think about starting a new business it is often helpful to do a quick calculation - "I think I can make $X.XX and it will cost $X.XX" (hopefully more like $X,XXX,XXX.XX for the former and $X.XX for the latter of course), but at some point it will be necessary to get into a litter more detail.

We can begin by simply making a list of every cost we can possibly think of. Of course, businesses vary widely in their nature and for that reason no two lists of costs will look the same. There is an equally wide variety of ways to categorize or group these costs together when constructing your financial projections. But for this "brainstorming" type of exercise it can be helpful to look at potential costs in a systematic, organized manner. In other words, to "brainstorm" by category, something like:

Pre-Launch Costs - Are you going to need a functioning prototype of a product prior to launch? Sometimes beginning companies can arrange orders with customers prior to launch (after confirming with manufacturers what it will take to produce a product). Sometimes companies can even secure advanced orders and get cash in house before beginning production, but this is not always the case. Does any additional research or other product development need to be conducted prior to launch? You may not be completely certain your product will work, does any testing need to be conducted first?

Up-front Costs - These up front charges are more specific to operations than the pre-launch "development" type costs discussed above. Will you need manufacturing or other types of equipment? If you need an office or warehouse space, what about rent and security deposits? Also consider office supplies, office equipment, state Business and licensing fees? Are there any other legal or licensing fees for establishing your type of business?

Production costs - What is it going to take to actually produce your product or service? What sort of materials or training will you need? At this point do you believe you will be manufacturing the product yourself or contracting with another company? What about packaging for your product? If this is a service what materials do the service providers consume?

Shipping - Does this item need to be shipped? Do you know what the weight and dimensions of a packaged product may be? What geographical range do you think your customers will inhabit and therefore, what would be the range of your shipping costs to reach them?

Operations Costs - This would be things like monthly rent, phones, utilities, internet, marketing costs, travel, and office supplies, but also make sure to consider insurance. How many employees do you think you will have? How much would it cost to cover workman's compensation insurance? What about general liability and/or product liability insurance?

Employees and Labor - How many people will you need for production of your product or service? What about for support, management, accounting, sales and marketing? What are the current market rates for those types of employees? If you do have employees what about their payroll processing and benefits?

After compiling a good list of potential expenses it is time to come up with some figures for them. As the saying goes "garbage in garbage out"; if the estimated figures you determine for your individual costs are based on nothing, then the results of your financial projections will be just as meaningless. This can be a time-consuming process but it is an important one. Collect quotes for each of the items in your list. People often remark that when starting a business everything "takes twice as long and costs twice as much" as what is expected. The goal here is to come up with as accurate a picture as possible of what you are likely to face. After you start your business if some things come out more expensive than you expected, that is ok and to be expected. However, if everything costs twice as much as you expected you could be in trouble!

Determining costs is an important part of the process of deciding whether or not to start a business. It is important to try to think of everything you can. Many overlook things like general liability, workers compensation or product liability insurance, legal fees, business establishment costs and licensing fees. One large missed expense, or the combined impact of many small missed expense, can seriously hurt a business. Next week we'll take a look at what should (hopefully) be a happier subject, sales!

Friday, February 10, 2012

Scientists use nanotubes to kill breast cancer cells

We've all been touched, in one way or another, by cancer -- with relatives, people we've known or even our own struggles with the disease. 

One of the worst forms is breast cancer.  According to breastcancer.org, "about 1 in 8 U.S. women (just under 12%) will develop invasive breast cancer over the course of her lifetime." 

Yesterday, however, we received a little bit of good news: Science Daily published an article showing that inserting a special kind of nanotube into a breast cancer cell and applying heat can kill the cell.  The article can be found here: http://dld.bz/aQa55

Nanotubes are extremely small -- on the order of 1/1000th the width of a human hair; on the scale of molecules.  They are usually made using nanopore templates, similar to the kind we can make using our patent pending technology.  If you picture blades of grass, you get an idea of what these things generally look like -- tiny poles standing on end.

They can be made out of a variety of materials.  So, if a way can be found to attract them to cancer cells, attach them to the cells, then apply heat or a current or whatever is necessary to kill the cell, we'd have an effective cancer fighting tool.

The research here was funded by the National Institutes of Health and the Department of Defense Breast Cancer Research Program (yes, that's right -- the DoD has a breast cancer research program).   Programs like these point out the need for certain kinds of government funding (as opposed to bridges that go nowhere and loan guarantees for companies that go bankrupt).

This research is terrific news, of course, but there is a long way to go in this fight.  We strongly encourage donations and support to worthy cancer charities.  There are many of them out there, but we (i.e., Enable IPC personnel, individually) have supported, and continue to strongly support, the Susan G. Komen Foundation (the recent news and ridiculous politics of late notwithstanding).

Thursday, February 9, 2012

The Registered Trademark Process -- Part 17 in our IP and Patents Series

This is the seventeenth in a planned 20-part series of articles on intellectual property. In future posts, we will explore copyrights.

In this posting, we will take a look at how to register your trademark with the US Patent and Trademark Office (USPTO).

As noted in our last post, a trademark protects a word, phrase, symbol or design that is used to distinguish one source from another. Registering trademarks with the USPTO means you have a “legal presumption” of ownership of the trademark. It’s an important distinction, as we discussed in the previous posting.

The process to obtain a trademark is well-explained at the USPTO website here: http://www.uspto.gov/trademarks/process/index.jsp. Below, we’ve provided a shortened, summarized version of what the USPTO has already published at the link above.

The applicant should begin with a search of the USPTO trademark database, to make sure that no one else has already registered the mark for use in your field. This can be done at: http://tess2.uspto.gov/bin/gate.exe?f=tess&state=4003:a9kk1u.1.1.

Assuming you find that no one else has laid claim to your mark, the next step is to complete an application, which can be done online at the USPTO website. It is not too complex, but still you may want to enlist the help of an attorney or an online legal website, such as LegalZoom.com. This will cost you more, but you will be assured that the application will be filed correctly.

There will be a “basis” for filing that you will need to identify – that is, whether you are currently using the mark in commerce or whether you have an “intent to use” the mark. In addition, there is a filing fee, which will probably be between $300 and $400, depending on a number of things. The schedule of fees for the USPTO can be found here: http://www.uspto.gov/web/offices/ac/qs/ope/fee092611.htm#tm

The USPTO will review your application and, if the examiner finds a reason not to allow the trademark, he or she will issue an office action (i.e., a letter) to you explaining his or her finding and the reason(s). The applicant has six months to respond or the application will be considered abandoned.

If the examiner has no objection (or the applicant overcomes any objection(s)), the trademark will be published in the Official Gazette, giving others 30 days to object to the mark. If there are no objections, and the basis for the filing was that the mark is already used in commerce, “the USPTO will normally register the mark and issue a registration certificate about twelve (12) weeks after the date the mark was published. After the mark registers, the owner of the mark must file specific maintenance documents to keep the registration live.” [1]

If the basis was an “intent to use”, then the USPTO will send a “Notice of Allowance”, giving the applicant six months to file a “Statement of Use”, showing the use of the mark in commerce, or file an extension. There is a fee for filing the Statement of Use.

The full cost of obtaining a trademark will vary from under $500 (for a straightforward filing based on current use in commerce) to much more if the applicant decides to use an attorney. We have found that, for trademarks, using a service such as LegalZoom is easy, straightforward and cost effective. However, if there is a greater level of complexity involved, or if one fears an office action for some reason, it is best to utilize the services of a qualified attorney.

In future postings, we will look at copyrights.

[1] http://www.uspto.gov/trademarks/process/index.jsp

Tuesday, February 7, 2012

Small Business and Entrepreneurship - To Startup or Not To Startup Part II - The Idea

"I ain't never had an idea before, how does you know when you has had one?" -- Ali G

In the segment on Da Ali G Show from which this article's opening quote was taken, Ali G explores the commercial prospects of his new invention, the Ice Cream Glove. The Ice Cream Glove is basically a rubber glove designed to be used while eating an ice cream cone in order to protect one's hands from the dangers of melting ice cream. Most of us have had ideas for new products or businesses and most of those were probably superior to the Ice Cream Glove. Ideas do not need to be fully examined before taking the leap and turning them into businesses, but thoroughly examining an idea prior to launching a business can certainly help! This article will examine "the idea" and discuss some important components of, if not a "good" idea, then at least a "fully-fleshed out" idea.

First off, where do ideas come from, and where can I get one? Not surprisingly, many business ideas spring from work experience. As one works in a particular field or in a particular function, one gains increased understanding and expertise. Solutions to particular problems in that field or function are therefore more likely to be generated by someone with that expertise and familiarity than from someone completely detached. A person's "prior knowledge" is important in that it helps to shape the range of available opportunities that they see when considering a problem, but the key is identifying the problem.

Obviously ideas can come from anywhere, and there is no way to guarantee or predict a brilliant new idea, but there are ways to assist in idea generation. One effective way of business idea generation is to be "pain focused". When observing the world, as you go about your life, focus on your pain! Specifically, think about what is the pain, and how can I solve it? Whenever you come across an obstacle, or view others reaching an obstacle, define the problem and try to come up with solutions. For example, picture yourself walking down the street eating an ice cream cone, only to have the ice cream melt and get all over your hands and suit:

Pain - Ice cream melts and becomes messy

Solution - Gloves!

While that particular idea may already be copyrighted it provides a good example of being pain-focused. Constantly looking for pains and their corresponding solutions can, with practice, become an automatic part of one's thinking -a habit - and can perhaps lead to the next brilliant new product or service. All else being equal, an idea or product that is focused on solving a particular pain will be superior to an idea or product that is searching for a pain to solve.

Once we have a business idea it needs to be clearly defined. This is the "what, who and how" part of the idea, and means specifically identifying:
  • the product or service (What you will be selling)
  • the target customer (Who you will be selling to) and,
  • the business model (How you will generate revenue)
It is important to identify all 3 of these components of your idea. Why? If any one of these 3 components are lacking it can severely hamper the business potential of your idea. Let's say you have a great product and customer identified, but no business model, no way to make money - would you still pursue the idea? If you have a customer and a way to make money from them but no product? Perhaps in that situation you have identified a pain and part of a solution but just need to figure out that specific product or service to bring it all together. What if you have a product or service and a way of generating money with it but no one to sell it to - will that business get very far?

In clearly identifying the product or service, much of what we've discussed already in this article applies - what is the pain and what is the solution. This Ice Cream Glove prevents melted ice cream from getting all over people's hands. What we need next is to identify the customer.

Part of understanding our idea is understanding to whom we will be selling this product or service, how can we reach them, and why would they want it? The absolutely essential point in this is examining our idea and identifying the key benefit. Ali G says the target customer is "people who eat ice cream and people who have hands" but the key question is why would those people buy the Ice Cream Glove? What is it about our product that makes it irresistible to customers? What is the key benefit the customer derives in exchange for purchasing our product or service?

For the Ice Cream Glove perhaps the key benefit is cleanliness? Perhaps it is not cleanliness - maybe it is the prestige and self-satisfaction the customer gains in knowing that by wearing this glove in public others around him view him with envy and see him as someone to be reckoned with? Identifying the benefit helps immensely with guaging how we can later test this concept, just how successful this product can be, and helps us to begin thinking about how to market our product. Understanding the key benefit thus helps us to narrow in on and identify who our target customer is, and then we can explore how to reach them. The target customer is a vital part of any business idea. We will be discussing examining markets, targeting customers, and testing customers in more detail in later parts of our series.

Along with the idea and the customer comes the business model. Do you sell a product directly to customers? Do you provide a service and charge membership fees? Do you provide a service to people for free and instead sell advertising to other businesses? A business model in our context means primarily "how do you intend to make money"? There are some examples of companies launching without defined revenue models, especially internet based companies. Some of these have successfully implemented business plans much later in their life (perhaps they started as a hobby site and reached a large number of users and then implemented an advertising or membership-based revenue model). However, most companies are not going to be able to get very far or secure funding without explaining how they plan to generate money.

The idea is the first part of the journey towards starting a business. Clearly defining what that idea is, whom it benefits and why, and how it will become a successful business is an important part of the process of examining the commercial prospects of potential business, but it is also just the beginning!

Thursday, February 2, 2012

An Overview of Trademarks -- Part 16 in our IP and Patents Series

This is the sixteenth in a planned 20-part series of articles on intellectual property. In future posts, we will explore trademarks and copyrights.

In this posting, we will take a look at trademarks – what they are and what their value might be.

A trademark protects a word, phrase, symbol or design that is used to distinguish one source from another.

For example, trademarks keep Pepsi from naming its product Coke (and vice versa), they prevent Burger King from naming its hamburger a Big Mac (in case it ever wanted to), and they prevent some guy who builds custom cars in his garage from naming his enterprise Ford Motor Company. Trademarks identify and distinguish the source of the goods of one party from those of others.

Consumers (knowingly or not) rely on trademarks to ensure they are getting what they think they are getting. I was in a grocery store and noticed that, near the bottles of “Dr. Pepper” was a different version of the soft drink calling itself “Dr. Skipper”. One could easily surmise that the drink purported to be similar to Dr. Pepper (in this case, at a lower price), but had to ensure that it called itself by a different name, in case the shopper wanted the real thing.

One can trademark a word, a logo or phrase. Some examples of trademarked words include:

  • Versace
  • Fungal
  • Sprint
  • Persuasion
  • Imagine
Of course, this doesn’t mean the word cannot be used; someone named Versace could still be identified by that name, and if you said you were going to “sprint to the finish line”, you can’t be sued for trademark infringement by the cell phone company.   However, the trademark ensures that no one else can use the name “Versace” to identify their clothing line, or “Sprint” to identify their cellular phone. The same applies to the term “Fungal”, when it comes to children’s toys, “Persuasion” for cosmetics, chocolate and wine, and “Imagine” on surfboards.

Phrases can be trademarked as well. Examples include:
  • The Power of You (used by Time Warner Cable)
  • Just Do It (Nike)
  • Got milk?
  • Quality is Job One (Ford)
  • and, our favorite, S/Cap RFID Tags
Logos, as well, can be trademarked. Examples include the familiar logos used by McDonald’s, Starbucks, Nike's “swoosh”, and many others.

When a logo, word or phrase is trademarked, the owner can claim that ownership by adding the letters “TM” to it. For example, the theater chain, AMC, advertises the AMC Gold ExperienceTM. This phrase is considered to be a trademark by AMC, as noted by the “TM”. Anyone who feels that their logo or word or phrase is a trademark that belongs to them can add the “TM” designation.

However, when a trademark is registered with the US Patent and Trademark Office (USPTO), the designation ® can be used. For example, the same company AMC, has a ® after its term “Show Snacks®”, which suggests that, although the terms “AMC Gold Experience” may or may not have been registered with the USPTO, the term “Show Snacks®” has. The ® designation can resolve a host of issues and can be a huge benefit for the trademark owner, when it comes to trademark litigation.

In the next post, we will discuss the process of obtaining a registered trademark.