Valuing a Trademark: How Much Is A Trademark Worth?
Updated January 9, 2023
When appraising a business, the valuation is typically based on revenue, profit, and assets. The calculations can be similar if you’re appraising a popular trademark that generates high revenue. Generally, the revenue of that brand will travel with sale of the trademark.
But for the owner of a little-known or dormant trademark, a totally different process is required to figure out how much your trademark is worth. With an “unused” trademark, revenue is not a factor, so you have to derive the price solely from the inherent value of the trademark registration itself.
This article will tell you how to value a dormant, low-revenue, or “idle” trademark.
As an experienced trademark attorney and trademark broker, I’ve put a lot of thought into how to appraise trademarks. I’ve also brokered many actual trademark transactions through my trademark marketplace, Communer, which has given me insight into how much money buyers are willing to spend on trademarks, and why.
The inherent value of a trademark registration, if we assume it’s not attached to a thriving brand, can be calculated using the formula below:
Trademark Valuation Calculation
+ Cost of Typical Trademark Attorney’s Fees and USPTO fees
+ Value of Owning Trademark Rights 12 to 18 Months Early
+ Cost of Rebranding after Six Months * Risk of Failing to Reach Registration
+ Value of the Trademark’s Marketability (“X Factor”)
+/− Number of Sellers vs. Number of Buyers
− “Used” Status Value Drop (Buyer Can’t Choose Own Name)
− Lost Payment Flexibility (Committing Funds Up-Front Instead of Paying Later)
I consider all of the factors in the above valuation calculation to be either constants or variables. Constants are factors that don’t change on a case-by-case basis and thus don’t have to be recalculated for each trademark. Variables are factors that are specific to each trademark.
Factors That Add Value to a Trademark
The first three expressions in the equation are relatively easy to measure. When someone buys a trademark, they avoid these costs every time, making them easy to factor into what somebody should be willing to spend to purchase a trademark.
Cost of Typical Trademark Attorney’s Fees
This factor is the easiest to value because it’s generally constant across industries. The cost of a typical trademark attorney’s fees, plus the USPTO’s filing fees, can be considered a never-changing constant for trademark valuation purposes. Depending on the number of trademark classes you’re filing for and whether you’re filing applications for both a name and logo, the typical trademark registration process costs about $250-$1,000 for the government fees alone. A trademark attorney’s professional fees will range from about $400 to $4,000, depending on the attorney’s rates and the level of service required.
Buying a trademark means a purchaser avoids these attorney’s fees, directly contributing to the value of the trademark.
Value of Owning Trademark Rights 12 to 18 Months Early
The trademark application process in the U.S. typically takes about 12 to 18 months, and that’s when the USPTO isn’t experiencing delays. This second factor in a trademark’s valuation will vary by industry and an individual company’s circumstances. But those circumstances can be estimated and you can come to an average for each industry, so I consider it a constant rather than a variable.
A viral software application on Apple’s App Store will benefit greatly from being able to kick off copycats early on. A fashion brand may derive tremendous value from being able to seize control of its social media handles from squatters before it formally launches. For brands in these industries, owning a trademark sooner has a high value and thus makes a trademark’s valuation higher.
On the other hand, a local dentist’s office can probably afford to wait a year before owning a registered trademark because it’s not an important part of their go-to-market strategy. The benefits they derive from trademark registration are less urgent.
This means that, all else being equal, a registered trademark in the dental industry is worth less than a registered trademark in the software or fashion industries. Businesses in the latter industries benefit more from owning a registered trademark immediately rather than waiting.
Loosely, we could say the value of owning a trademark early ranges from about $0 to $5,000 depending on the industry.
Cost of Rebranding after Six Months * Risk of Failing to Reach Registration
The third factor also varies by business and industry, but isn’t very hard to calculate either, so I consider it a constant. If a founder applies to register a new trademark, there’s a certain chance that they will be unsuccessful. If you multiply that chance of failure by the cost of failure, you can add that number to the total value of buying an existing trademark registration.
In other words, a buyer can estimate how much money their company will lose, on average, due to a failed trademark application. Because buying a registered trademark eliminates this potential loss, the buyer can add that averaged loss to the value of purchasing a trademark.
Without digging too deeply into it, let’s assume a typical business that files a trademark application through an attorney has a 70% chance of success and a 30% chance of failure. Based on my experience as a trademark attorney, this is not an unreasonable assumption. My assessment of a client’s chances of reaching registration rarely exceed 85%, and many of my clients elect to move forward with filing their applications when I tell them I think they have a 60% chance of reaching registration.
The cost of failure is much harder to estimate, and will have a wide variance depending on the situation. For the typical small business, let’s assume that having a trademark application rejected after six months of waiting will cost around $15,000 in total. This includes legal costs for a new trademark application, buying a new domain name and migrating the website over, designing a new logo and changing all branding materials, and changing the design of the company’s products. This also includes lost customers due to the confusion caused by a name change, and due to having to start over with search engine optimization (SEO).
30% of $15,000 is $4,500. This is the averaged cost of having to rebrand if a new business’s trademark application is rejected. Because buying an existing trademark avoids this risk, a potential trademark buyer can add that $4,500 to the value of purchasing a trademark. Again, this will vary by industry and even from business to business, but you can use this formula to guess at the correct number.
There is one value-creating factor that truly varies from trademark to trademark. Because of this, it must be calculated completely from scratch for each trademark appraisal. This is why I refer to it as a variable rather than a constant.
Value of the Trademark’s Marketability (the “X Factor”)
This is the hardest factor to calculate, and the one with the widest variance. Just like determining whether a performing artist has the “X factor,” it’s somewhat subjective and different people may have very different opinions on the same trademark. And just like with the “X factor,” experts will be more likely to agree with each other than laypeople. When comparing two trademarks for sale in the same industry, this factor will be the primary determinant of the difference in value between the two trademarks.
Marketability is best determined by somebody who has a good knowledge of branding and possibly of the industry in question as well. Is it a “good” or strong trademark? Is it easy for consumers to spell, pronounce, and remember? Is it similar to another brand in that industry or to a gross word? Will your website show up in the top search engine results for this phrase relatively easily, or is it such a non-distinct trademark that you’ll be buried on the third page for the first two years? Does it sound like it would reasonably be a brand name for your type of product, while also being versatile enough to allow you to expand into other types of products? Is the name too descriptive or made up of words that are too common to ever let you stand out in your industry?
These are some of the questions that can help determine a trademark’s marketability. This factor can make the difference between a $2,000 trademark and a $15,000 trademark. A particularly bad name can even have a negative effect on a trademark, making it worth less than the costs involved in trying to register a new trademark.
In addition to being the hardest factor to measure, Marketability is also the easiest factor to overvalue, especially if there are no third party trademark brokers involved. A trademark seller is usually going to be biased when appraising their own name because they’ve grown attached to it and likely came up with the name themselves.
While marketability can have a large effect on the final value of a trademark registration, it is simply not as important as sellers often think it is. When it comes down to it, trademark registrations are a fungible commodity and their value has a ceiling.
To put it simply, no brand name is that good. Yes, a great name can, in rare circumstances, double a trademark’s value, and a terrible name can make a trademark worth $0. But that’s about it. It’s extremely unlikely that the brand name you registered is so brilliant that it’s worth ten times the average brand name in your industry.
Factors That Can Add or Reduce Value
Number of Sellers vs. Number of Buyers
Sometimes, for reasons known or unknown, there are a ton of people trying to sell trademarks in a particular industry, but very few people trying to buy trademarks. Clothing is a good example. There are many failed clothing brands for sale on Communer. But most people who start clothing brands want to come up with their own name, not buy somebody else’s.
Sometimes we also have tons of people asking us if there are any trademarks for sale in a particular industry and we have very little, if any, inventory. Vitamins and supplements are a good example of this. Any time we list a vitamin trademark for sale, it gets scooped up quickly.
This is why we rarely have more than one vitamin brand for sale on Communer at a time, but we currently have over 60 clothing trademarks for sale. This kind of disparity between supply and demand has a huge effect on the value of a trademark, often greatly increasing or decreasing it.
Factors That Reduce the Value of a Trademark
The last two factors — the negative ones — are relatively constant and aren’t hard to factor into a trademark’s value.
“Used” Value Drop (Buyer Can’t Choose Own Name)
The clientele for trademarks is very different from the clientele for full businesses. Buyers of full businesses are business investors while buyers of trademarks are business founders. Investors looking to buy businesses are willing to pay a premium for reduced risk, and a strong, already-registered trademark is part of that package.
In contrast, a typical business founder wants to come up with their own name for their new venture; they would usually prefer not to buy an existing name from somebody else, even if it’s riskier. To be able to use a name they pick themselves, they would actually be willing to pay a premium in the form of an increase in risk and potential cost.
That doesn’t mean a typical founder is unwilling to buy an existing trademark; it just means existing trademarks have reduced value for founders. That value reduction varies from founder to founder, but in my experience the reduction is about 25% of the inherent value of the trademark. Of course, many founders don’t even know how to buy a trademark, further reducing the demand for used trademarks.
Lost Payment Flexibility (Committing Funds Up-Front Instead of Paying Later)
Consumers generally pay a premium in order to spend less money up front, and so do founders. Sure, a founder may see a registered trademark listed for $10,000 and understand that between legal fees, risk factors, and time saved, they will be saving money if they buy this trademark rather than trying to register a new name. But trying to register a new name will only cost about $1,000-$3,000 up front. The founder has limited funds and they could put that $7,000-$9,000 difference to good use by spending it on marketing or product development.
That increased spending on the company could even make up for the cost of waiting an extra 8-16 months for their trademark to reach registration, by increasing sales and brand recognition early on. And yes, if the founder’s trademark application is rejected six months after filing, it will probably cost them much more than $9,000 to rebrand, but at that point they’ll hopefully be doing well enough in sales that they can afford to take the hit.
Alternatively, the founder who filed their own trademark application may find out after six months that their business isn’t doing well enough to continue pursuing. In that case, they won’t have to spend any money on rebranding if their trademark application is rejected. They’ll likely see this setback as the last straw that leads them to close the business. And if they do manage to reach registration for their trademark, they can list the trademark for sale again and recoup some of their losses.
A very low-budget business may not even be able to afford $8,000 for a new trademark. Plenty of businesses start on smaller budgets than that, including JPG Legal. When I first founded JPG Legal, I had a $5,000 budget, and almost all of it went toward Google Ads.
In brief, the high up-front cost makes a registered trademark less valuable, probably by around 25%.
The Trademark Value “Floor” and “Ceiling”
When valuing trademarks in most industries, after we combine all of the factors above except for marketability, we end up with a “floor” value of about $2500-$6000. This is the inherent value of a registered trademark before the “X factor” of marketability is counted. If you own a trademark registration and you’re not sure how much it’s worth, you can expect it to be worth at least around that much.
You also shouldn’t assume it’s worth much more. As I mentioned before, even an amazing name is probably only worth about twice as much as an average name. Following that logic, it’s very unlikely that your trademark registration is worth more than about $12,000. Trademarks are fungible; most brand names and logos could be replaced with thousands of alternatives with little effect on the success of a brand.
Yes, a really bad trademark can cost you hundreds of thousands down the line, either through a late-stage rebranding or through legal costs. Imagine how many companies Whole Foods threatens and sues every year for using the term “whole foods”, an arguably generic term.
Even important considerations like SEO-friendliness and pronunciation only boost a brand’s value so much. There are lots of good names that somebody could buy or register on their own that would be good for SEO and easy to pronounce, meaning a buyer is not going to be willing to spend too much extra money to check off these boxes in their name search.
Most people trying to sell their trademarks are not aware of the above-mentioned floor and ceiling. They assume that simply by owning a trademark registration, they’re entitled to tens of thousands of dollars at a minimum, and hundreds of thousands if they think it’s a “good” trademark. Hopefully some of them will find this blog post and realize their mistake.
What If the Trademark Comes with a Matching .Com Domain Name?
Inclusion of a domain name can make it much harder to assess how much a trademark is worth. As most people know, very good domain names don’t have much of a ceiling. Some of them sell for millions of dollars, based purely on marketability rather than existing businesses attached to them. In other words, they’re completely different from trademark registrations.
If you have one of these $100,000+ domain names, you probably know this already and it’s unlikely that you’re going to bother to list your trademark on a US trademark exchange. You should be listing it on a domain name marketplace like Sedo or BrandBucket because your main product is the domain name, not the trademark.
However, there will be many cases where the domain name attached to a trademark is worth about $1,000 to $15,000. You may even have the receipts to prove it because you paid good money for the domain name. In a situation like that, you should do your best to figure out the value of your domain name, multiply it by about 1.15, and then add that value to the value of your trademark.
That extra 15% in value accounts for the reality that it’s usually very valuable to have a registered trademark and a matching dot-com domain name. Many businesses spend thousands for new domain names from so-called “brand marketplaces,” only to find out later that they will never be able to own that name as a trademark in their industry. Knowing that you can buy a domain name and be guaranteed to own the trademark for that name is a huge boon for somebody starting a new business (or renaming an existing business).
Let’s be clear though: If you didn’t pay thousands of dollars for your domain name, then it’s probably not worth thousands of dollars. Very few valuable domain names are unregistered and available to scoop up, so if you bought it for $12 on Name.com, it’s probably not worth much more than that.
So How Much Is My Trademark Worth?
All of the factors discussed in this article should lead to a rough valuation of your trademark. This valuation should most likely be between $0 and $12,000 for a trademark that doesn’t include a matching .com domain name.
While a formal valuation from a trademark broker may still be necessary, hopefully this article has given you a better sense of what your trademark might be worth if you decide to sell it. If you’re ready to take the next step and list your trademark for sale, you might want to check out my IP marketplace, Communer.
If you want to see a few examples of valuations for real trademarks that have been sold on Communer, check out my second post in this series about valuing trademarks on the Communer blog.
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