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How much is that trademark worth online?
A Model for Valuing a Trademark’s Ad Positional Right
By: Robert M. DeWitty
Many trademark owners are not aware that their trademarks (or “marks”) possess value as keyword search terms (or “keywords”). Unawareness by trademark owners juxtaposed against high online advertising revenues, valued at over US$30 billion in 2017, means many trademarks are being undervalued in the marketplace.
Trademarks sold as keywords have been held to be a legal right, akin to the right to advertise. However, notwithstanding the online advertising revenues generated in part based on the purchase of trademarks as keywords, trademark valuation models considering the trademark’s use as a keyword are lacking
This paper seeks to develop and present a valuation model based upon a trademark’s use as a keyword.
Many trademark owners are not aware that their trademarks (or “marks”) possess value as keyword search terms (or “keywords”). Registered trademarks are being purchased by non-owners for use as keywords on online platforms. That keywords have value is clear from the fact advertisers are paying for them. That keywords as commodities are growing more popular is clear by increasing online advertising revenues, from $4.1 billion in the 2nd quarter of 2012 to $9.7 billion in the 2nd quarter of 2017. Trademark owners’ lack of awareness of the value of keywords coupled with the high growth in online advertising revenues results in an inefficient marketplace and undervaluing of trademarks and keywords.
Trademarks used in commerce, especially federally registered marks, are awarded a bundle of exclusive rights an owner may commoditize. Included in these rights is the right to advertise using the mark. Trademarks sold as keywords have been held to be a legal right, akin to the right to advertise. However, even in light of the growth in online advertising, when trademarks have been made available for purchase as keywords, this author has been unable to locate trademark valuation models that consider the trademark’s value as a keyword. Many trademarks are being undervalued, some significantly so, because there is no clear-cut model for including keyword use in present-day trademark valuation models. A trademark owner is thus unable to equitably commoditize its mark. Put simply, from the standpoint of a trademark owner, value that should flow to its registered mark is being left on the proverbial table.
Economic Approach for Trademark Valuation
Trademark valuation is presently determined from one of several techniques, including market value, (replacement) cost, and income, with value representing an amount a non-owning party is willing to pay for a mark. A trademark’s total value is an aggregate of the individual values of the distinct and separate rights created when a trademark is used in commerce and federally registered. These rights include the right to reproduce the mark (“reproduce”), the right to advertise using the mark (“advertise”), the right to license the mark (“license”), among other rights (“x”). Thus, a trademark’s total value (TVtotal rights) equals,
Figure 1. A trademark’s total value (TVtotal rights) is comprised of the values of the various separate and distinct rights.
whereby the equation can be written as;
TVtotal rights= TVright to reproduce + TVright to advertise + TVright to license +…. T”x” right, where “TV” is “trademark value”.
Business of Keyword Search Terms
Purchasing keyword search terms for online paid-advertising occurs through privately-controlled online search engine platforms. As detailed in U.S. Pat. No. 6269361, the objective of the keyword sales business model is to provide online marketers the opportunity to secure one of several select advertising positions, the select advertising positions being generated at the top of a search results page following an internet search query. In economic terms, and in practice, the keyword sales model is performed as an auction whereby online advertisers place monetary bids on specific words. The bids represent the value the advertiser places to secure the top position on a search results page. Upon securing the top position, the highest bidding advertiser pays the second-highest bid when that advertisers weblink is clicked by a user. The benefit of being in the top position of the search results page has been documented.
As part of the business of keyword sales, during selection of a keyword to bid upon, advertisers are often shown other suggested keywords they may bid upon. At times, these suggested keywords include registered trademarks.
Legal Status for the Ad Positional Right
Under the Lanham Act, an unlicensed user’s action must constitute a ‘use in commerce’ of the mark for a finding of trademark infringement. The ‘use of commerce’ question for trademarks used as keywords has led to conflicting, seemingly dichotomous, holdings. A Federal Court in New Jersey held that the unlicensed purchase of a trademark in a bid auction for use as an online keyword did not constitute a use in commerce. In contrast, a New York Federal Court held the defendant GOTO.com’s selling of the “JR” trademarks in an online keyword auction constituted use in commerce. Surprisingly, these decisions were made within months of each other. In a landmark case decided several years later the Second Circuit held that Google’s keyword business model created a use in commerce of the Rescuecom trademark when it recommended and sold plaintiff’s mark to non-owner online advertisers. While the decision was not fully dispositive, in giving an excellent discussion of the the keyword selling industry, the Court implicitly set forth the separate and distinct right of ad positional rights in a trademark.
This paper seeks to establish that there is a market for the buying and selling of trademarks as online keywords and use of trademarks as keywords has monetary value. Accordingly, a method of determining the value is needed by trademark owners in order to capture an accurate, overall value of trademarks used as keywords.
APR VALUATION MODEL
We identify the “ad positional right” (APR) as a further separate and distinct trademark right, APR being based on the use of a trademark as an online keyword. As internet use for marketing and selling products and services has increased, APR has grown to be a recognized, though controversial, legal right. APR creates an additional value for a trademark, as:
(1) TVad positional right = TVAPR
to be added with other TV values. The recognition of the APR allows more accurate valuation of a trademark in today’s internet-focused marketplace. A trademark owner will thus be able to more accurately value and commoditize the use of the mark.
A model is required to calculate the TVAPR. The model is based in part on a mark’s similarity to one or more defined words within an industry-identified space, and in part on large data sets that provide information on the mark’s historical performance online.
Applying Semantic Similarity Theory to Trademark
A mark’s similarity to an industry-defined word in an industry-space is an aspect of applied semantic similarity theory, delivering a numerical factor based on the difference between the trademark and the industry-defined word:
Figure 2. A trademark compared to an industry-defined word to result in a value.
As shown in figure 2, a trademark will locate somewhere along the line graph of the defined word, indicating how similar the trademark is to the industry-defined word and resulting in a factor for the mark. The industry, within which the word is defined, is the space from which the word is derived. Different industries, i.e., different spaces, will result in different factors as the same word within various industries may have different, or even non-existent, meanings.
Trademark:Industry Word = factorsemantic similarity
Written in formulaic style, the calculation of factorsemantic similarity is then a limiting equation,
Lim 𝒇(x) = L
substituting the variables,
(2) Lim 𝒇(Trademark:Industry Word) = factorsemantic similarity
𝒇(x)=𝒇(Trademark:Industry Word) = the trademark to defined word ratio.
n=tdmk = registered trademark for which the value is sought.
c=word = the word as defined in the industry space.
L=factorsemantic similarity = the value defining the similarity between the
trademark and the word.
The purpose for determining the “L” value is because trademarks are registered for specific classes of goods or services. The “L” reflects this legal requirement.
Data Sets For Trademarks Historical Performance
Online datasets for the mark are factors of how the mark has fared as a keyword, historically. These values are based on a factor of time, for example, over a month. For purposes of calculating TVAPR, three values are obtained including the average number of online searches using mark, the average number of clicks per online search using the mark, and the average cost per click per online search using the mark. These data are represented as follows:
Dataset 1= Avg. # of searches (for mark)
Dataset 2 = Avg. # of clicks per search (for mark)
Dataset 3 = cost per click (for mark; first advertising position)
The resultant dataset value are then multiplied with the semantic similarity factor to result in the TVAPR for the mark.
TVAPR = (factorsemantic similarity) x (dataset 1) x (dataset 2) x (dataset 3)
The final equation for determining TVAPR is
(3) TVAPR =(Lim 𝒇(Trademark:Industry Word)) x (d.s 1) x (d.s 2) x (d.s 3)
where “d.s.” = dataset
Equation (3) above takes into account the trademark as it performs online for a particular industry online, thus adhering to the legal requirement that trademarks be registered for specific goods or services. TVAPR valuation as calculated is over a set period of time, for example, one month. Determining the TVAPR over a longer period, for example, one year, would require extrapolation techniques.
In its current iteration, the TVAPR application, which is based on equation (3), possesses 24 industry databases, meaning a trademarks valuation can be focused on any one of these industries. Users are able to obtain a auto-generated valuation report, which provides information on the variables used to calculate the monetary valuation.
As an example, we determine the value of the mark EPILL (Reg.No 3215734 / Int. Cl. 009). Using equation (3):
(3) TVAPR =(Lim 𝒇(Trademark:Industry Word)) x (d.s 1) x (d.s 2) x (d.s 3)
Industry: Consumer Electronics
L Value: .33
d.s. 1: 6600 searches/month
d.s. 2: 1 click/search
d.s. 3: $0.34/month
Total Value: $748/month
Further development of the TVAPR application will involve improving accuracy of the “L Value”, notably by creating sub-categories under the industry categories. This will allow more detail to be presented in the auto-generated valuation reports. On the legal front, further research will be performed on the ‘use in commerce’ requirement of the Lanham Act, though we believe a final determination can only be achieved by the higher courts.
 RescueCom Corp. v. Google, 562 F.3d 123 (2nd Cir. 2009) (“... advertisers purchase terms (or keywords). When entered as a search term, the keyword triggers the appearance of an advertiser ad and link”).
 See, e.g., Merck & Co. v. Mediplan Health Consulting Inc., 425 F.Supp.2d 402 (S.D. NY 2006); 800-Jr Cigar, Inc. v. GoTo.com, Inc., 437 F.Supp.2d 273 (D. NJ 2006); Edina Realty, Inc. v. TheMLSONLINE.com, No. 04-4371 (D. Minn. Mar. 20, 2006).
 See IAB Internet Advertising Revenue Report 2012-First Six Months' Results (October 2012), https://www.iab.com/wp-content/uploads/2015/05/IAB_Internet_Advertising_Revenue_Report_HY_2012.pdf (accessed 29 December 2017), and IAB Internet Advertising Revenue Report 2017- First Six Months Results An industry survey conducted by PwC and sponsored by Interactive Advertising Bureau (IAB) (October 2017),https://www.iab.com/wp-content/uploads/2017/12/
IAB-Internet-Ad-Revenue-Report-Half-Year-2017-REPORT.pdf (accessed 29 December 2017).
Commodity, Ballentine’s Law Dictionary (3rd ed. 1969). See also, Gordon V. Smith & Russell L. Parr, Trademarks-The Legal Underpinnings, Intellectual Property: Valuation, Exploitation, and Infringement Damages, (2005).
 But see, How to Calculate Your Domain Name’s Value (March 10, 2016), (https://www.hover.com/blog/find-out-domain-name-value/).
 Gordon V. Smith & Russell L. Parr, Trademark Licensing, Intellectual Property: Valuation, Exploitation, and Infringement Damages (2005).
Author’s note: Registration is not required for establishing common law trademark rights. However, in general, common law marks often do not often possess the breadth of rights as registered marks. Thus our attention, for purposes of this paper, is focused on registered marks.
 US Pat No. 6,269,361 (filed May 28, 1999) (issued July 31, 2001).
 Edelman et al., Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords, The American Economic Review, 97:1 (2007).
 Brooks, Nico,. The Atlas Rank Report: How Search Engine Rank Impacts Traffic (2006).
 See, Rescuecom Corp v. Google, 562 F.3d 123 (2nd Cir. 2009) (providing a detailed discussion of the keyword sales business model).
 15 U.S.C. §1114(1)(a).
 Id., (“Adwords is Google’s program through which advertisers purchase terms (or keywords). When entered as a search term, the keyword triggers the appearance of the advertiser’s ad and link. An advertiser’s purchase of a particular term causes the advertiser’s ad and link to be displayed on the user’s screen whenever a searcher launches a Google search based on the purchased search term. Advertisers pay Google based on the number of times Internet users “click” on the advertisement …”).
 As trademarks are registered based on the mark per se and associated goods or services, we assert an accurate TVAPR should reflect the registration requirement of being focused on particular goods or services. The particular goods and services are reflected herein as specific industries.
specialist with more than 15 years of experience in the industry of intellectual property.
Mr. DeWitty’s practice focuses on the prongs of rights acquisition, pre-litigation
strategies, and IP litigation at the state, federal, and administrative levels. Robert’s
experience includes serving as a legal consultant in the World Intellectual Property
Organization (WIPO), serving in the US Patent and Trademark Office, and holding the
position of Intellectual Property Specialist at The Hong Kong Polytechnic University
(Hong Kong SAR).
Robert is an avid sailor and golfer.