This Kat recently suggested that a widely recognized trademark does not necessarily mean a strong brand (using Uber as an example). That raises the question: might such a trademark nevertheless provide a commercial benefit? The answer may be “yes”, at least when unicorns are concerned.

No, this Kat is not asking Kat readers to enter the world of ancient mythological beasts. Rather, we refer to the corporate “unicorn”, the name given to a privately held start-up company with a valuation of more than $1 billion.

More generally, the unicorn has come to describe a privately held start-up that shows rapid growth but, alas, no profits; a company whose financial foundation still depends upon outside private investment, leading to an increasing company valuation after each round of private funding, much to the joy of those investors who got in at the beginning when valuations were much lower as well as to the delight of the fledgling company, who coffers race far ahead of its profit and loss statement. In the unforgettable words from Jerry Maguire-- "Show me the money."

But the unicorn phenomenon has come under pressure as of late. The trigger is recent developments that have occurred when unicorns seek to take the company public via a public offering of shares (i.e., an IPO). At least until quite recently (here, "Silicon Valley Is Trying Out a New Mantra: Make a Profit"), the focus of private investors in a unicorn has been on company growth, not profits. All too often, the unicorn’s motto has been--“Burn, baby burn” (not buildings, but the unicorn’s cash reserves), all in the name of adding more and more customers or the equivalent; profits are for corporate sissies.

It is here that that a well-recognized trademark may play a commercial role.This is because part of the dynamic of multiple funding rounds by private investors is the FOMO phenomenon (“fear of missing out”), i.e., a private investor’s concern lest it fail to get a piece of the investment action in a unicorn. At its heart, FOMO (like so many market phenomena) is driven by psychology.

That said, one of the factors that contributes to FOMO in the context of investing in a unicorn is the name recognition of the unicorn. Greater name recognition of a unicorn will be more likely to channel a potential investor in the direction of that unicorn. As such, greater name recognition may well provide an edge to the unicorn in attracting additional private investors.

Given this, it is in the interest of both the early round investors and the unicorn itself to promote the company’s name recognition as a way of taking advantage of FOMO, lest an investor fail to invest in a company with such a recognized name. But the value of such name recognition has limits, especially when there is a new sheriff in town in the form of post-IPO public discloures (beginning with those dreaded quarterly reports) that reveal little profit or, more likely, losses with no profits in sight.

Cases in point: both Uber and Lyft were widely recognized names (and enjoyed especially high valuations by virtue of the dynamics described above) before their much-ballyhooed initial stock offerings this year, only to see their respective stock prices subsequently plummet when continuing company losses were reported. Their name recognition may well have helped fuel their respective initial offering prices, until commercial reality and the public disclosure thereof came to the fore.

At least these two companies could parlay, for a while, the benefits enjoyed by their high-profile company names and rich valuation while they were still private companies. Pity poor WeWork, which saw that its high company valuation of $47 billion, in part thanks to its strong name recognition in the media and relevant public, come crashing down as it was forced to withdraw its IPO last month in the face of mounting skepticism regarding its business model (long-term obligations in the billions of dollars owing to landlords, on the spending side, against short-term rentals on the income side), as well as questions about its governance.

A well-recognized name and mark can take a unicorn only so far. Just ask WeWork, which seemed to be the quintessential corporate unicorn. Who will be the next unicorn to test the limits of the commercial value of its widely recognized name when the company is offered to the public?

By Neil Wilkof

Picture on left is from the Special Collections, University of Houston Libraries and is made available under the Creative Commons CCO 1.0 Universal Public Domain Dedication

Picture on right is by RaphaelQS and is made available under the Creative Commons CCO 1.0 Universal Public Domain Dedication

The Prime Minister today unveiled plans for an independent six-month review of the Intellectual Property system in the UK. Revealing the publication of "Technology Blueprint" at a major event in Shoreditch, David Cameron outlined how the Government will support high-tech innovation. According to the IPO press-release: "He spoke about how the Government can help make Britain the most attractive place in the world to start and invest in innovative technology companies."

The Press-Release Continues:

Mr Cameron said:

"I can announce today that we are reviewing our IP laws, to see if we can make them fit forthe internet age."

The Blueprint also reveals the Intellectual Property Office will trial a peer to patent project,which will allow people to comment on patent applications and rate contributions to help improve the quality of granted patents.

The six-month review aims to identify barriers to growth within the IP framework, which consists of the rules and regulations covering how IP is created, used and protected in this country.

It will particularly focus on how the IP system can be improved to help the new business models arising from the digital age."

The Press-release continues, noting that Baroness Wilcox also commented on the manner in which the internet has changed the business landscape:

"An IP system created in the era of paper and pen may not fit the age of broadband and satellites. We must ensure it meets the needs of the digital age."

There was also a great deal of talk about IP 'helping' and 'not hindering' companies that operate in highly skilled, technology sectors - with reference being specifically made to rights clearance systems akin to those available under fair use of copyright works in the US.

The scope of the review is stated to include examination of:

• Barriers to new internet-based business models, including the costs of obtaining permissions from existing rights-holders;
• The cost and complexity of enforcing intellectual property rights within the UK and internationally;
• The interaction between IP and Competition frameworks;
• The cost and complexity to SMEs of accessing services to help them protect and exploit their IP.
• The review will also look at what the UK can learn from the US rules covering the use of copyright material without the rights-holder's permission.

The press release notes that "[t]he review will make recommendations on the changes the UK can make as well as the long-term goals to be pursued through the international IP framework." Its report is expected in April 2011.

The IPO has also used the press-release to announce the trial of a "peer to patent project, which aims to improve the quality of the patents by ensuring they are sufficiently new and inventive." It explains:

"Patent examiners cannot be expected to have access to all the information already in the public domain and this project aims to address that.

In the trial selected patent applications would be available for people to comment on and crucially rate each other comments. The highest rated comments would then be submitted to the patent examiner."

The trial follows similar projects elsewhere (most notably in the U.S. and Australia).

IP well and truly in the spotlight.

Peer to Patent here

Beer to patent here (.pdf alert)

Those that are fans of the IPO’s Manual of Patent Practice (and let’s face it, who isn’t?), will be delighted to learn (admittedly slightly later than this Kat was originally intending) that this most informative of publications has recently been subject to the latest round in its thrice-yearly update schedule. For those that have not checked the Manual since the end of September, a helpful summary of the bits that may now be different to the last time you looked can be found here.

A weekend of happy reading awaits...