Trademarks are a strategic tool used (i) in identifying the niche in the market for a new entrant: (ii) developing the customer base; (iii) as a focus for all stakeholders in the company; (iv) improving the management of the company; (v) as a source of collateral for borrowing funds; (vi) as a potential source of revenues through licensing and franchising; and (vii) in providing residual income on their sale at cessation of trading.

The brand is thus one of a company’s greatest assets and nowadays more and more companies are now placing equal importance on managing their intangible assets as managing their tangible assets.

If intangible assets are to be managed properly and make a full contribution to the performance of the company, then IP such as trade marks must be accounted for and valued.

The majority of firms do not generally carry out a formal valuation of their intellectual property and a significant majority of firms do not even collect statistics necessary for carrying out a valuation. As a matter of fact, (i) majority of firms do not formally monitor the performance of their IP, (ii) majority do not value IP for internal management purposes, (iii) valuation of IP is much more likely where transactions are involved, i.e. mergers, license agreements, etc, (iv) only few firms use their IP as an asset to secure finance and (v) firms generally believe that acceptable methodologies to value IP do not currently exist

France has now admitted that certain companies’ balance sheet must provide not only reasonable estimates of the physical assets and financial capital but also information about their intangible assets such as trademarks and other IP rights. In this regard, there are a range of recognized methods of valuing intangible assets and specialized lawyers or attorneys shall be able to help.

Once it is valued, trade marks has to be seen as a potential source of borrowing and in their potential for generating additional streams of income. While this is an important issue amongst all firms, it is of particular importance for small firms, which regularly report the difficulties of accessing finance.

Finally, we turn to the issue of the “residual value” of trade marks, when a company is sold or, even, when it ceases trading and its remaining assets are identified and sold off. In this case, trade marks can be a separately identifiable asset that can have residual value.

The value of key trade marks can be illustrated by the sale of Rolls-Royce Motor Cars, which was purchased by Volkswagen in 1998. VW is reported to have paid £479 million for the company, only to find that it had not secured the RR trade mark rights. In fact, BMW, one of VW’s main rivals, had bought the rights for £40 million. Given that the RR name was arguably the single most valuable asset of the company, it is not surprising that the press reported the events as a major error on VW’s, while it was argued that BMW had pulled off a major coup, obtaining an “extraordinary brand” at what was viewed as a very low price.

While it is argued that trade marks are essential to the identification of products and services, it has become clear from the above elements that they play a much broader and more important role than this would suggest.