Apple: the world’s most successful company, with an estimated worth of three-quarters of a trillion dollars. It’s no wonder that would-be tech entrepreneurs around the world are sitting around in black turtlenecks, jeans and New Balance sneakers, poring over Steve Jobs’ biography and trying to work out how they might emulate his success in their own start-ups.

However, the tale behind the name of Apple Computer (now Apple Inc.) also contains two valuable lessons in brand development and management for start-ups. The first is about how to pick a brand name that works, and the second is a cautionary tale about the importance of clearing your brand name early with your long-term strategy in mind.

Why the name Apple is so “apeeling”

According to Steve Jobs’ biography, the name for Apple Computer was chosen on something of a whim. Jobs had just returned from a visit to an apple farm as part of his ‘fruitarian’ diet, and needed to decide on a name for his new company in order to file the business papers. He settled on Apple because “it sounded fun, spirited, and not intimidating”[1] and (perhaps more importantly for Jobs), it meant the new company would appear in the phone book ahead of his old employer, video game company Atari.

Even if he wasn’t fully aware of it at the time, this last-minute choice was a marketing agency’s dream. It represents everything a great trade mark should be: distinctive, memorable, perfectly capturing the friendly, minimalistic feel of the brand. Compare this to some of the other names Jobs was considering, like the straightforward, highly descriptive name Personal Computers Inc. It tells you what the company does, but it doesn’t express anything else, and it would be very difficult to obtain and maintain registered monopoly rights in such a descriptive name.

All of this sounds like the newly formed Apple Computer had inadvertently stumbled upon the perfect name. The only problem was…someone else had got there before them.

Upsetting the Apple (Corps) cart

Apple Computer’s trade mark troubles started in 1978, when it was sued for the first (but certainly not the last) time by Apple Corps Ltd (the Beatles’ business holding company) for trade mark infringement. The suit was eventually settled for $80,000 three years later, with both parties agreeing to a settlement agreement containing a seemingly innocuous reciprocal agreement: the Beatles would not produce any computer equipment, and Apple Computer would not enter the music industry. You know what they say about hindsight….

Sure enough, Apple Corps sued Apple Computer again in the late 1980s for violation of the 1981 agreement on the basis that a number of Apple’s products were capable of music playback and creation. The case was settled in 1991, for a significantly larger sum this time, and Apple Corps reserved the right to sue Apple Computer for use of the Apple trade mark to sell creative works, the principal content of which is music.

Fast-forward again, this time to 2001 and the release of a little something called the iPod (the iTunes Music Store opened the following year). Apple Corps sued again in 2003 for violation of the 1991 settlement agreement. The dispute was settled for good in 2007, when Apple paid an eye-watering $500 million for all worldwide rights to the name Apple, which it then licensed back to Apple Corps for use in its record and business holdings.

Lessons from Apple

What takeaways does this four decade-long feud hold for start-ups planning to launch a new brand or product?

  • Firstly, brands are valuable. Pick a name that is distinctive and memorable for the market you are operating in. Avoid choosing a name which directly describes your products if you want strong monopoly rights in your brand, although allusory references are fine (and often desirable). Register your brand name as a trade mark and police its use to maintain that value.
  • Secondly, do your homework. Clear your trade mark for use over all your goods and services, not only in the space in which you are currently operating, but also bearing in mind where you might want to expand in the future. If you’re not able to completely clear your trade mark for use, you may be able to reach a commercial arrangement, as Apple did. But be warned, any arrangement is likely to cost, and unlike Apple, most companies won’t have a spare $500 million to make the problem go away!

If you’re a start-up preparing to launch a new product or brand, speak to a member of our IP Team about our new IP Essentials package, which provides high-value advice and assistance to start-ups for developing and protecting your IP.

[1] Walter Isaacson, Steve Jobs (2011), Simon & Schuster.