The following is an edited transcript of my video Recent Study Shows How Companies That File Trademarks Are More Profitable.
Trademarks generally track the economy. If you look at the annual number of trademark application filings at the USPTO, you’ll see that it increased almost every year over the last 20 years except for recession years.
There was a study published in Management Science Magazine called “Valuation of New Trademarks”, which showed that filing of trademarks significantly predicts the following year’s returns for publicly traded companies.
This was based on a significant amount of data collected from the Trademark Office and from publicly traded companies. The study found that companies that file lots of trademarks are more likely than other companies to perform well the following year, and that investors haven’t really picked up on this, that the stocks are undervalued once you understand this correlation.
For example, a quote from the study states, “We also show that new trademark intensity contains important information about firms’ future profitability, and that even financial experts such as analysts do not appear to fully understand the value relevance of this signal in their forecasts.” The quote that encapsulates its all says that “Our evidence suggests that new trademark activities represent intellectual property that contributes substantially to firm value, but are undervalued by investors at the time of their registrations. This is reflected in high subsequent profitability, analyst forecast errors, and abnormal stock returns.”
In a nutshell, what the authors are saying is companies that are building, investing in, and protecting new brands perform better. They become more valuable. And in my 20+ years of working with companies to protect their trademarks, I can tell you the same thing. Companies that are growing and investing in their trademark protection are more likely to be successful.