Law Offices of Ronald D. Jackson

Intellectual Property Law

Why Trademark Searches Make Good Business Sense

Truths and Consequences of Trademark Law

Disclaimer: This is not legal advice.

Without a trademark search, you risk spending thousands of dollars promoting a business name that you are not legally entitled to use. You could lose your name, and sometimes, your business. To lessen the risks of this happening to you, read these truths and consequences about trademarks.

Truth:

A trademark is a name, word, slogan, symbol, or design that a business uses to identify its products and distinguish them from others. A service mark is the same thing except it identifies services. For example, the word "Microsoft" and the slogan "Where Do You Want to Go Today" are both registered trademarks of the Microsoft Corporation.

Consequences:

In the United States, federal and state laws protect trademarks. These laws have two basic purposes: to protect consumers against confusing merchandizing, and to protect trademark holders from unfair competition. Thus, think of trademark laws as protection for brand names. Violation of these laws, willfully or innocently, will make you vulnerable to legal liability. A federal court could issue an injunction (which prevents you from using the trademark). It could require you to either forfeit your profits from an infringing product or pay your opponent's lost profits. In addition, you could be forced to destroy, at your expense, any infringing materials. In willful cases, the court could even order you to pay the lawyers for the other side! So, considering these laws before investing money in the promotion of any product or service name is important.

Truth:

Not all trademarks are created equal.

Consequences:

The law provides better protection for so-called strong marks than for weak marks and no protection for some marks. A fanciful or coined trademark is a strong distinctive mark, and receives the highest protection from the law. For example, IBM's use of the word "ThinkPad" for a notebook computer is an example of a fanciful mark. It is a made-up or creative word that bears no inherent relationship to what the product is. On the other hand, an inherently weak mark is one that describes or suggests the function of a product or service. For example, Iomega's use of the term "Ditto" suggests what the product is a software backup drive. However, remember: trademark laws protect a weak mark. In fact, the laws strongly protect some so-called weak marks, for instance, in the case where consumers associate a descriptive term with a particular company's product. In such cases, courts say that the mark has "secondary meaning." Other so-called "generic marks," such as common terms, surnames or geographic names may not have any protection. Unless, of course, they have established a secondary meaning. For example, by itself "Philadelphia" or "Cheese" is not entitled to trademark protection. However, the combination of these common words as in "Philadelphia Brand Cream Cheese" is a registered trademark. So, the first step to avoiding trademark infringement is being careful about what words you use to identify your business, products or services. Choosing a name that is similar to a strong trademark in use may be asking for trouble. Keep in mind that a couple of things are important in determining whether the law protects a trademark: (1) whether the trademark is "distinctive," (2) when the trademark was "first used" in business, and (3) whether the trademark is "confusingly similar" to other marks.

Truth:

Just because your state allows you to register a corporate or business name does not give you the right to use that name as a trademark.

Consequences:

Oftentimes, a company will use its corporate name as a trademark for its products and services. Microsoft is an example. Yet simply registering a corporate name does not give you any right to use that name as a trademark. Oregon and Pennsylvania, like most states, allow a business to register a corporate name if no other business has the same or similar name. Before allowing a name, the state will conduct a corporate name search. However, do not get confused: This type of search is not a trademark search! The state does not examine relevant trademark records during its search. You have the legal responsibility -- not the state -- to ensure that the name you use does not violate anyone's trademark. Whether you have the right to use your corporate name as a trademark is a matter of trademark law. It has nothing to do with corporate law. Therefore, you can face an unfair competition claim or trademark infringement action when using your state approved corporate name to identify your own products or services.

Truth:

A business can have superior trademark rights although its trademark is not registered with any state or the federal government.

Consequences:

Oftentimes, another business will have superior — albeit unregistered — rights to yours. This occurs, because a business can have "common law" trademark rights. These rights come about by using a trademark. In general, the first business to use a mark in a particular market area has priority over newcomers. It does not matter that the business that first used the mark did not register it. This concept of "first use" is paramount, because by using a mark a business can preempt others from using or registering the mark. A federal trademark registration can solidify your common law rights, but it cannot preempt someone else's common law rights. Also, unlike a federal trademark registration, a state trademark registration does not give you ownership rights in a trademark. A state registration puts people on "notice" of your claim to use; it does not invalidate someone else's common law rights in a trademark. Hence, one of two things is important in establishing priority to use a trademark under state and federal law: the date of your first use of the mark or your federal registration of the mark. Finding these unregistered but superior trademarks can be a problem, but failure to find them can result in a bigger problem. This is why it is important for a trademark search to go beyond the official records and databases. The goal is to identify who out there is using a mark that is the same or similarly confusing to the one that you want to use for your product or service.

Truth:

Federal registration of a trademark can give a business a tremendous competitive advantage in the marketplace.

Consequences:

The best protection for a trade or service mark is federal registration. With federal registration, a business can get the right to exclude all others from using the mark everywhere except in areas where someone else has a preexisting common law right. To illustrate, lets say X Company does business in Pennsylvania and in 1995 starts marketing a computer word processing program by the name "PerfectWriter." Even if X Company does not register the name, it gets common law rights in the name "PerfectWriter" in its geographic market area, Pennsylvania. Now let's say in 1998, Z Company decides to market a word processing program in Oregon with the same name "PerfectWriter." Except, Z Company applies for and gets a federal trademark for the name. That federal trademark will give Z Company the right to use the name not only in Oregon but also in the entire United States except Pennsylvania. So, although X Company was first, Z Company's federal trademark will prevent X Company from expanding its product nationally. X Company probably cannot use the product name "PerfectWriter" on the Internet to market outside Pennsylvania without risk of a federal trademark infringement claim.

Truth:

Internet business activity is the source of many trademark disputes.

Consequences:

Doing business on the Internet, with its capacity for widespread distribution, has increased the risks of trademark infringement disputes. There are many contexts for trademark challenges on the Internet. These disputes often arise over the use of product and service names, logos and slogans. Also, with the rise of commercial activity on the Internet, there has been a rash of trademark disputes over Internet domain names, those ubiquitous "www.yourname.com" addresses. These disputes are not limited to so-called "famous" names. In a domain name dispute, relevant laws, rules and dispute resolution policies favor the party that holds a federally registered trademark. The mark does not have to be famous. It is wise to conduct a trademark search before during business on the Internet.

Truth:

A trademark owner can lose a trademark if it does not challenge unauthorized use of it.

Consequences:

Never think that your business is too small or that your use of a trademark too inconsequential to be the subject of a trademark infringement lawsuit. The law requires that a trademark owner take steps to protect its mark from misappropriation or misuse. A business that fails to protect its trademark from infringement can lose it. So, businesses with a lot invested in trademarks are ever watchful for the ever-slightest incident of infringement. There are companies that provide trademark monitoring services. These companies report potential infringement to subscribers. Chances are good that if a business suspects that you have committed trademark infringement, you will hear from its lawyers.

Truth:

The fact that you innocently used a trademark or was unaware of someone else's rights is no excuse.

Consequences:

Trademark disputes happen to real people, to honest business people, every day. Often the recipient of the dreaded "cease and desist" letters are people and businesses who had no clue that they were doing anything potentially wrong. However, at the point they get the threatening letter, whether they did any thing wrong is not as relevant as what they are going to do to deal with a pending trademark infringement suit. By failing to do a trademark search, you raise your risks of being sued for trademark infringement or dilution. Trademark searches do not cost much. A combined national, state, and common law search will cost a few hundred dollars. It is money well spent, because it will cost you a whole lot more to deal with a trademark infringement lawsuit. You wouldn't buy a house without a title search. Don't use a name for your business, product or service without doing a trademark search.

Truth:

Conducting a trademark search is no guarantee. A thorough trademark search reduces your business risks; it cannot eliminate all risks.

Consequences:

A trademark search is not foolproof. So, keep a proper perspective, and do not expect a search to do things that it can't do. Due to the nature of trademarks, a trademark search cannot be foolproof. Recall that "use" is the primary way that a business acquires trademark rights. Therefore, a thorough trademark search may not discover a business that uses an unregistered mark, and it cannot identify a business that begins to use a mark after your search but before you use it. In both these situations, the other "undiscovered" business may have superior rights than you because it first used the mark. Despite these inherent drawbacks, a trademark search is your best inoculation from an infringement claim. It is like taking a flu shot. Although it cannot guarantee that you will not catch the flu bug, it can substantially reduce your chances. At a minimum, a trademark search can save you a hassle; at most, it can save your business. Reduce your risks: If name recognition is important and you plan to invest money promoting a name, invest in a thorough trademark search. Make it a part of your business insurance strategy. It is an ounce of prevention that just might save your business.