Goodwill: Creating and Protecting a Valuable Intangible Asset

In my previous posts on trademarks, I have discussed the fact that trademark rights stem from the use of the mark on certain goods or services—and when licensed or sold, must always be accompanied by the goodwill associated with the products or services. This post discusses the significance of goodwill. 

A Look at Goodwill Through Caselaw

To better understand the technicalities of trademark law, it’s instructive to look into the principles behind the law. And it can be enlightening to look to older cases to get a feel for the bedrock principles behind the law. Back in 1877, the Supreme Court looked at the function of trademarks as a protector of goodwill and why you don’t have an unrestricted right to sell goods under your own name if that name is already being used as a trademark:

the question is not whether the complainant was the original inventor or proprietor of the article made by him, and on which he puts his trade-mark, nor whether the article made and sold under his trade-mark by the respondent is equal to his own in value or quality, but the court proceeds on the ground that the complainant has a valuable interest in the good-will of his trade or business, and, having adopted a particular label, sign, or trade-mark, indicating to his customers that the article bearing it is made or sold by him or by his authority, or that he carries on business at a particular place, he is entitled to protection against one who attempts to deprive him of his trade or customers by using such labels, signs, or trade-mark without his knowledge or consent.

McLean v. Fleming, 96 U.S. 245, 252 (1877).

What Is “Goodwill” Exactly?

As the Supreme Court understood it, the concept of goodwill was paramount to the analytical framework yet tied firmly to the trademark. It encapsulates the experience that consumers have with a particular brand. You put your mark on your goods, customers buy those goods, and if they are satisfied and want more, they seek out your brand again. The trademark symbolizes not just the qualities those customers seek out, but also the reputation of the business. The goodwill is measured by the customer’s willingness purchase those goods from that source again. 

When we talk about protecting a trademark, we are really protecting the goodwill that that trademark has come to be associated with. The goodwill is the reason consumers seek out your products and not those of your competitors. Your trademark is one the tools or means they use to find it.  Therefore, goodwill can mean different things for different products.  It may be an assurance of high quality, but it could also be an assurance of good enough quality at a bargain price. 

Key Takeaways Regarding Goodwill

• Goodwill is the quality or characteristics of your goods or services that keep your customers coming back.

• For your trademark to function properly, those qualities and characteristics must be consistent.

• By protecting your trademarks, you are protecting the reputation that brings your customers back to purchase your products over those of your competitors.

For more insights on trademark protection, see our Trademark Services Overview and Consumer Products Industry Legal Solutions pages.

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