Why Companies That Own Trademarks Have Higher Revenue?

A recent study, “Intellectual property rights and firm performance in the European Union” conducted jointly by the European Union Intellectual Property Office (EUIPO) and the European Patent Office (EPO), sheds light on the significant impact of intellectual property ownership on business success. Analyzing a substantial sample of over 119,000 companies across all 27 EU Member States, the research reveals a strong correlation between owning intellectual property rights and better financial performance, particularly in terms of per-employee revenue and average employee compensation. Notably, trademark ownership emerged as a key driver of overall better business performance compared to patents and designs.

The study highlights some striking statistics: a significant disparity exists in trademark ownership between small and medium-sized enterprises (SMEs), where only 9.21% of SMEs hold trademarks, compared to 46.12% of large companies. Furthermore, companies with trademarks have, on average, 117.19% more employees, generate 23.32% higher revenue per employee, and offer salaries that are 20.9% higher. The information and communication sector leads in intellectual property ownership at 14.79%, while the transportation and storage sector records the lowest level of ownership at 5.2%.

The study acknowledges that just because companies with trademarks do better financially does not prove that trademarks are the key behind their success. Other things like company strategy and management quality might be involved. Nevertheless, the strong positive link between trademark ownership and economic performance is undeniable.

But why might trademark registration contribute to enhanced financial outcomes? Several key factors are generally believed to play a role:

• Building brand equity and recognition: a registered trademark provides exclusive rights to use a brand name or logo, fostering brand recognition and loyalty among consumers. This strong brand identity translates into increased customer trust, repeat business, and ultimately, higher sales.

  
  

• Competitive advantage and market differentiation: in crowded marketplaces, a unique and protected trademark helps a company stand out from competitors. This differentiation can justify premium pricing and attract a larger market share.

  
  

• Deterring infringement and protecting market share: trademark registration offers legal recourse against counterfeiters and businesses attempting to unfairly capitalize on a brand’s reputation. This protection safeguards revenue streams and prevents erosion of market share.

  
  

• Facilitating expansion and licensing opportunities: a registered trademark is a valuable asset that can be leveraged for business expansion into new markets or through licensing agreements, generating additional revenue streams.

  
  

• Attracting investment and enhancing company valuation: companies with strong, protected brands are often seen as less risky and more valuable by investors. Trademark registration can thus contribute to a higher company valuation and make it more attractive for funding.

In conclusion, while the EUIPO/EPO study avoids definitively stating that trademark registration causes higher revenue, the compelling evidence strongly suggests a significant and positive relationship. By establishing a unique brand identity, securing a competitive edge, and safeguarding market share, trademark ownership appears to be a crucial element in the success and financial well-being of modern businesses. For companies looking to build lasting value and achieve sustainable growth, investing in trademark registration is not just a legal formality, but a strategic imperative.