When you're competing with other companies for customers, brand identification is critical. Customers have to be able to tell which products and services are yours and which are your competitors'. Trademarks help them make the distinction. If your brand grows strong enough that customers are willing to pay more for your offerings than those of other companies, you've developed a brand monopoly.
What Trademarks Are
A trademark is something that identifies one company's products and distinguishes them from products made by a different company. A brand name can be a trademark, but so can a logo, a design, a phrase -- even a color scheme or distinctive sound. To use an example recognized around the world, the name "Coca-Cola" is a trademark of the Coca-Cola Co. "Coke," when used to describe a beverage, is also a trademark. The shape of the Coke bottle is trademarked, too, and so is the company's "dynamic ribbon device," which is the stripe that appears on Coke cans and other marketing materials. The list goes on and on.
A company's trademarks are legally protected. Once a company has established a trademark, no other company can use it. Trademark protection applies only to the identifiers used to market products, however, not to the products themselves. If you're a plumber and you call your company "Dancing Raccoon Plumbers," for example, your competitors can't use that name or a logo of a dancing raccoon to sell plumbing services. But they can still offer the same plumbing services you do. Trademarks do not have to be federally registered to be legally enforceable, but registration provides greater protection.
What Makes a Monopoly
When people think of a monopoly, they tend to think of "asset monopolies," which occur when one company has total control over the supply of something -- or at least a large enough share of the supply that it can dictate the price. If your company owns, say, the only bulldozer within a 300-mile radius, you effectively have an asset monopoly on bulldozer services. If people need something bulldozed, they have to pay your price; if they can't or won't pay it, they'll have to get the job done without a bulldozer.
Brand monopolies occur when one company's products have achieved a high enough status that the company can charge a premium for them simply because of the name. This can be the case even if the product itself is no better than competitors' products. It may even be worse. A brand monopoly, in other words, usually exists without an asset monopoly. Think about a white T-shirt made by a famous designer that sells for $50. It may be no different from a white T-shirt you can get at a department store for $5, but because of the strength of the brand, the manufacturer can dictate the higher price. That's a monopoly power.
How They Relate
It's fair to say that you must have trademarks if you're going to establish and maintain a brand monopoly. Your company can't really charge a premium for your particular plumbing services or for the use of your specific bulldozer if someone else out there is using the same names, logos and symbols as you are. But trademarks in no way guarantee that you'll achieve a brand monopoly. Brand monopolies are built through the quality of your products and services as well as your advertising and marketing efforts.
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