Must I Deal with Trademarks?

How Do I Choose A Good Mark?

Federal, State and Common Law Marks

What is a Trademark?

While the "thing" that serves as a trademark must be used as a way for consumers to identify one brand from another, the consumer need not be able to identify the specific manufacturer. Rather, it is sufficient if the mark communicates to consumers that the goods or services bearing the mark come from a unique source, distinguishable from all the other sources for those goods or services.

Because the government will enforce a company's monopoly interest in a trademark, a trademark is a business asset (often a businesses most valuable asset), which can be licensed or even mortgaged as collateral.

Click here for examples of trademarks.

Rights given to trademark owners:
A trademark owner can exclude all other businesses from using a similar mark on related goods or services. For instance, nobody in the computer industry is allowed to use the word APPLE as a way of identifying themselves, except for Apple Computers, Inc., who was the first to use that symbol to sell computers. What's more, if the trademark is "famous," it's owner has even broader powers to stop companies from using their mark. For example, DISNEY can stop others from using MICKEY MOUSE and DONALD DUCK, even if they are used to sell products or services completely unrelated to cartoons, movies, or comics.  In a nutshell, trademarks are monopolies fostered by the government. They are monopolies over the use of symbols in business.  

If another company infringes your trademark, a court can stop that company from using the trademark, and may make the infringer pay you triple monetary damages, and pay your attorneys fees.  The court can require that the infringing party destroy and/or turn over all infringing goods, packaging or advertising materials.  In fact, a court may be open to doing just about anything you feel is necessary to protect your trademark interests.

What a trademark does:
Trademarks benefit both businesses and individuals. They allow businesses to build an identity and reputation with customers, and thereby grow or expand. Trademarks also allow individuals to be better consumers. In fact, Trademark law is the original consumer protection statute. It ensures that consumers can repeat their positive buying experiences by searching out familiar brand names, and avoid bad buying experiences by steering clear of brands they didn't like.

Service marks distinguished:
A service mark is essentially the same thing as a trademark, only a service mark is used in the sale of services, whereas trademarks are used in the sale of goods. It appears to be common usage to refer to service marks as either trademarks or service marks. However, the reverse is not true; and you cannot refer to a mark affixed to goods as a service mark.

Trade names distinguished:
A trade name is a company name. Some trade names are also used in a way that makes them trademarks as well. For example, ACME Inc. may use the mark, "Widgets R Us" or "ACME Widgets." If they use the former, then ACME remains a trade name only. If they use the latter, then ACME is both a trade name, because ACME it is the name to identify their company, and a trademark, because they identify the source of their products with the word, "ACME."

Trademarks compared with Patents and Copyrights:
The words "trademark," "copyright," and "patent," are often used interchangeably and incorrectly by people. They are all intangible property that can be bought, sold, or licensed, however they each protect completely different interests.

Patents protect new inventions, discoveries and designs, while copyrights protect original works of authorship such as paintings, computer programs, sculpture and architectural designs. Trademarks do not protect creation or inventiveness at all. In fact, a trademarks can be acquired with no creative or innovative input from the owner whatsoever. For instance, when the public spontaneously began referring to "Coca Cola" as "Coke," the new term became a source identifier for the product, and thus automatically a trademark.

Terminology:
People commonly use the term, "trademarking" as a verb (long before verbing nouns became the fashion); for example, "I'm trademarking my name." What they usually mean is that they are registering their name or logo with the U.S. Patent and Trademark Office.

Must I Deal with Trademarks?

1. Choosing a business or product name
Unless you have conducted a reasonable trademark search, you have no way of knowing whether your business or product name is infringing someone else's. If you are in fact infringing another business' trademark, you may be forced to give up your name after years of investing in it. That investment includes not only letterhead and other labeling, but more importantly, the goodwill you have generated that keeps consumers coming back to you when they see your name or logo.  Once customers begin telling others about your company using your business name rather than naming you personally as the service provider, then goodwill becomes vastly more valuable than the printing costs associated with a name change.     

Recently, some courts have said that larger companies who can afford a full trademark search are liable for aggravated or willful infringement if they fail to conduct a trademark search prior to adopting their mark.  When infringement is willful, then triple damages and attorneys fees can be assessed.  These court precedents are likely to expand, and may apply to smaller and smaller companies, given the ease with which technology makes trademark searching possible.
 

2. Keeping copy cats from luring away your customers
Success is always copied. When a business is successful, others will imitate not only their ideas, and market strategy, but very often they will also imitate the trademarks used by the successful company. Start-up companies without a vision often think that being successful enough to be the target of copying is a problem they would like to have. However, few are ready for the competitive challenges they face when they get there. One such challenge is that you can face the abandonment of your mark if you allow copy-cats to flourish, and yet stopping them can be very difficult and expensive, particularly if you have not registered your mark. Thus, to maximize your ability to succeed in future lawsuits, in fact, deter lawsuits altogether, you will want to register your trademark.

3. Contemplating international expansion.
Since the United States is a member of the Paris Convention, an international treaty protecting trademarks and other intellectual property rights, you have an opportunity to receive advantageous trademark treatment in other Paris Convention member countries. The date you register your trademark in the United States carries over to registrations in other countries in the future. In most other countries, the registration date is vital to sorting out who gets to use a mark when two there is conflict over the same mark.

What's more, trademark pirating is a real problem in some countries, and can sometimes be avoided by registering trademarks early on in the United States and abroad. Trademark pirates watch for successful U.S. companies, and then register a successful company's trademarks as their own.  Since most countries give trademark rights to the first company to register (as opposed to the first to use a  mark), a pirate who registers a trademark first will be able to demand compensation when the successful company wants to expand into the pirate's country.  

The vast majority of companies cannot cannot afford to clear and register their marks in every country in which they may do business some time in the future.  Nonetheless, prior to foreign expansion,  consideration should be given to trademark protection abroad.  Furthermore, the timing of your US registration might be influenced by the timing on your foreign expansion.  For more on the timing of registration, click here.

In sum, if you have an inclination toward future international expansion, you are a good candidate for investing more time and money into your trademarks now.

4. Protecting an Internet domain name.
If you are using a domain name, and you don't own a federal trademark registration for that exact domain name, you risk the possibility that someone else with a trademark registration in the U.S. or any other country may already have a trademark registration for your exact domain name (without the top level domain, i.e. ".com" or ".org"). If so, they can ask the domain name registrar to stop you from using the domain name until an arbitrator decides the matter. Typically, the trademark owner wins in these proceedings.  Trademark owners have also been given pre-registration rights for new domain name extensions such as .biz and .info. 

See also:

• Benefits of registration

The less that a name describes the goods or services being sold, the stronger the legal protection that name receives.  For example, APPLE has virtually no logical relationship to computers.  As such, APPLE is a very strong trademark for the company, Apple Computer, Inc..  Meanwhile, a name such as WORLD BOOK for encyclopedias receives less strong legal protection because it describes the product itself - i.e. a source of information about the world and published in book format.  

The strongest names from a legal perspective are those that have no meaning -- i.e. made up words.  You will recognize some of the strongest brands in our society are meaningless except as a trademark - e.g. KODAK, EXXON, XEROX, etc.  

What's interesting is that these famous trademarks are also very effective from a marketing point of view.  Because they receive strong legal protection, in the long run, they also are good from a marketing perspective -- once people get to know them.  

Granted, the first time you hear the name XEROX you have no reason to know that they sell copy machines.  For this reason, many new business owners think they are better off with a name that describes what they do.  They believe it is preferable to have a name that will tell customers what is sold the moment the name is spoken or written.  While there is truth in this thinking, it may be short-sighted.  Without strong legal protection for a name, growing brand awareness is far more costly  and difficult in the longer term.  And the importance of strong branding cannot be understated in terms of maximizing profits for a company. 

One compromise solution for those who insist on a name that relates to their underlying products  is to chose a name comprised of one portion that is either made up or arbitrary, and another portion that is descriptive of what is sold.  " Trademark Edge" does exactly that.  While "trademark" states the subject of our services on this site, the word "edge" contributes a stronger, arbitrary component, which strengthens the overall trademark.  

Click here for more detailed information about choosing a trademark.

You do not need to use the ® symbol in order to provide notice of your trademark rights. You may also use the phrase, "Reg. U.S. Pat. & Tm. Off." or "Registered in the U.S. Patent and Trademark Office." Or, you may place the phrase at the bottom of a page when using an asterisk next to the mark that refers the reader to the phrase at the bottom. Thus the NutraSweet Company could put an asterisk next to their red & white swirl logo, and a phrase at the bottom or side of a page that read: "Reg. U.S. Pat. & Tm. Off." or "NutraSweet is a registered trademark of NutraSweet Co."

Advantages providing notice:
There is no requirement that you use any of the symbols, however there are two important advantages to using them. First, if you ever find yourself in a lawsuit for infringement of your mark, and you haven't used the statutory notice (i.e. the ® symbol), then you won't be able to sue for damages or profits unless you can prove that the infringer had actual notice of your trademark rights.   Second, using the notice symbols will provide notice to the world that you are claiming the trademark as your proprietary right, and will thereby deter others from using the trademark for their own businesses.

Unauthorized use of the ® symbol
Unauthorized use of the ® can result in penalties, unless you can show that the unauthorized use was a good-faith mistake. Inadvertent unauthorized use can occur when the USPTO cancels your mark without your knowledge. It is quite likely that your labels and materials will still display the ® when the cancellation issues, thereby leaving you vulnerable to an attack that you were acting in bad faith and should be penalized for unauthorized use.

The protection available for trademarks under the common law is limited.  Most companies will benefit from registering their marks with their own state or with the federal government. The benefits of registering a mark federally are greater than those offered under state registrations, and federal registrations generally make a state registration unnecessary.  One significant advantage of a federal registration over a state registration is "national priority," i.e. the ability to claim a trademark right throughout the country even when the mark has not been used throughout the country.  However, the process for registering a mark federally is generally more expensive, rigorous and time-consuming than the process for registration within a given state.  

Companies that operate only within one state cannot register for a federal trademark.  Of course, if a company has no plans for expansion outside their state, including no plans for a web site, that company may not have much need for a federal trademark.  You should speak with an attorney licensed to practice law in your individual state if you think a state trademark registration makes sense for your particular business.