Goodwill Hunting - The Destruction, Rehabilitation, And Saving Of Trademarks
Goodwill – what is it?
How does goodwill relate to trademarks?
Can goodwill be created?
Can goodwill be destroyed?
And of course, most importantly, can goodwill be rehabilitated?
In order to understand goodwill in the context of trademarks, let’s start with some basic and general definitions.
A trademark is any word, logo, slogan, or design, commercially used in association with products and services so as to identify the source of those products and services.
But how does goodwill relate to that?
We can start by considering some dictionary definitions of goodwill.
Dictionary.com offers a few definitions of goodwill:
So we see we have some choices for our definition.
In noun form, goodwill could be:
1) friendly disposition; benevolence; kindness;
2) cheerful acquiescence or consent; or
3) intangible, salable asset arising from the reputation of a business and its relations with its customers, distinct from the value of its stock and other tangible assets.
It’s the third definition that we are particularly interested in, since the third definition is in the context of commerce.
So, now we’re starting to get an idea of what goodwill really is.
If goodwill is salable, that must mean that it’s something that will bring a trademark owner profit.
Why would goodwill bring profit?
Goodwill is what attracts customers to your products and services, and any person buying your business is also going to want those same customers.
In fact, goodwill is so important, the Canada Trademarks Act also mentions goodwill.
So let’s take a closer look at what this means.
The Trademarks Act tells us:
No person shall use a trademark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.
What does this mean?
This provision means that no third person – someone other than the trademark owner – is allowed to depreciate the goodwill of a trademark.
But can a trademark owner depreciate the value of their own trademark?
Well, you might wonder why a trademark owner would willingly depreciate the value of the goodwill of their own trademark.
Of course, willingness is usually the key.
Most trademark owners don’t intend to depreciate the goodwill in their trademark, but unfortunately, sometimes, that happens.
Sometimes, it’s just the market forces that might depreciate the goodwill of their trademark.
Whichever force is responsible (market force or trademark owner), the reality is, depreciation can happen.
For example, what would happen if your business was a world famous theme park but you started to make movies?
What if your business became famous for family friendly movies?
What would happen if all of a sudden you started making non-family friendly movies?
What if your theme park built its reputation on producing family loving and God-respecting movies?
What if those family-based movies was responsible for your business’s success?
What if all of a sudden your theme park and movies instead started glorifying concepts like racism, sexual activity, and gender dysphoria?
Would your family-respecting customer base continue to give their patronage to your theme park and movies?
Would your family-orientated customer base sour at the idea that you’ve changed what they always loved?
How about if your business (and your trademarks) related to the food industry?
What if at one-time you became a world-famous soda drink that everyone loved?
What if your soft drink managed to become not just the choice of an entire nation, but the entire world?
What would happen if all of a sudden the market shifted and people became more health conscious and started avoiding your soda?
What if years after becoming established, senior executives in the company became politicized and pushed their political views on your staff and customers?
In the health conscious scenario, it’s possible to explore alternatives, like changing a recipe to use a sugar substitute.
But in the latter scenario, once a company goes politically woke, can you recover?
What if it wasn’t soda, but instead a food item people loved – like fried chicken?
What if you had a huge corporate history built on nothing but a fried food?
It’s not so easy to change a fried chicken recipe everyone loves.
And don’t forget, health consciousness is always changing.
One day the health care industry tells you to avoid chicken, the next day they tell you you’re not getting enough chicken.
Your trademark is at the mercy of market forces.
What if you’re a famous Hollywood award show, but year after year, your participants get more and more political?
What if your award show participants have no idea that they are continually turning off your audience with their politics and preaching?
Can your award show survive?
What happens to the goodwill associated with your trademark?
Will your trademark be destroyed, or can you rehabilitate it?
Trademark goodwill will always be subject to attack.
The attack on the value of the goodwill of your trademark can come from internal forces or external forces.
Therefore, it’s a good idea to adopt some key practices to maintain the value of the goodwill of your trademark, or at the least rehabilitate your goodwill.
To avoid internal damage, trademark owners should stay away from politics, sex, religion, and other topics intensely personal to individual taste.
One key to maintaining trademark goodwill (from the internal perspective) is instead to focus on your business’s products and services only.
Yours customers don’t want your personal opinions, and they don’t want your preaching.
What made your trademark great was your associated products and services, and that’s what your customer base wants you to stick to.
As for external forces (like changes in market taste), great care is required in altering your product and service offering.
On the one hand, you should never abandon those products and services that made your customers love you and your trademark.
On the other hand, to attract new customers, a business must strike a careful balance in increasing its offerings while staying away from popular causes of the day.
It’s one thing to offer a sugar-free alterative to attract diabetic clients, but it’s very different to change your offerings based on political views and feelings.
Where trademark owners make the mistake of becoming political or preachy, rehabilitation is possible.
Rehabilitation of goodwill usually involves getting back to basics – getting back to the goods and services that made your customers love you in the first place.
Remember the definition of a trademark (above).
Nowhere in our definition do we address feelings and popular causes of the day.
Our definition does however, focus on goods and services your patrons recognize.
Goodwill is critical to a trademark’s success, and should always be front of mind for any business.
When it comes to selling your businesses, ultimately the goodwill will either raise or sink your sale price – it’s your choice.
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Any patents, trademarks, or technologies referenced in this article are owned by their respective owners.
Questions regarding this article can be directed to Tapas Pain.
Pnc IP Group are licensed lawyers and registered patent and trademark agents with a history of serving the greater York Region, greater Toronto area since 2003.
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These articles and opinions do not express or constitute legal advice.
