Today's big financial news comes straight from the Lone Star State, where financial powerhouse McGraw-Hill
In the suit, S&P alleges that Standard & Pours appropriated for itself a name just a bit too close to S&P's own, causing customers to mistake the Texas coffeehouse for a long-lost subsidiary of the real S&P (shades of the 1998 case of Federal Express
So is this just a case of a Wall Street titan shaking down a small business for some quick cash? Hardly. After all, we're talking about a coffeehouse here, people. And with the exception of success stories like Starbucks
What's more, S&P probably won't even win by arguing "infringement" of its trademark. (For that, S&P would need to prove confusion with the coffeehouse -- not an easy argument to make with a straight face.) Still, S&P does need to sue Standard & Pours, and here's why:
Standard & Pours didn't choose its name by accident. It chose its homonymic moniker precisely because it brought instant name recognition. Accountants call such name recognition "goodwill." And although not as tangible as an office building or a printing press, goodwill does have value. In fact, goodwill makes up 28% of S&P's parent company's assets -- $1.65 billion worth.
Standard & Pours has appropriated for itself a small slice of that $1.65 billion. Under U.S. law, this is called "trademark dilution" -- the act of eroding a famous trademark's distinctiveness, by using it for purposes that the owner did not authorize. Every time S&P permits another company to use its name, or "homo-name," with impunity, the value of S&P's trademark to that name loses value.
So yes, I'm with S&P on this one. It needs to nip this dilution in the bud, before any other "entrepreneurs" try stealing more bits of its intellectual property. Just imagine the "Standards & More" flag store, the "Standard & Poor" thrift store -- or the "Standard & Pours alehouse." Come to think of it, when that case rolls around, S&P might even have a co-plaintiff.
Learn more about intellectual property, and what it's worth to a business, in:
Then check out some high-profile examples of why trademarks are so valuable:
(NASDAQ:GOOG)fumbles the ball on Gmail.
(NYSE:BUD)fights to retain its throne.
(NYSE:KO)boasts the world's most valuable trademark.
(NYSE:PFE)takes a hard line on Vaegra.
FedEx and Starbucks are Motley Fool Stock Advisor picks, while Pfizer, Anheuser-Busch, and Coca-Cola made the list at Motley Fool Inside Value . Whatever your investing style, the Fool has a newsletter for you, and a 30-day free trial to match.
Fool contributor Rich Smith does not own shares of any company named above.