Trademarks: Valuable Assets That Must Be Protected

October 08, 2013

Trademarks represent valuable assets of a business.  A company’s good will, reputation, and product line are at risk, if not legally protected.  A trademark can be a product name, a service name, a business name, a logo, a character, or a domain name.  A trademark can be either a word, phrase, or design, or a combination, which distinguishes an owner’s goods or services from those of its competitors.

Unlike copyrights or patents, trademarks can last indefinitely if the owner continues to use the mark to identify its goods or services.  A federal trademark registration is good for 10 years, with10 year renewal terms.  However, a declaration must be filed during the sixth year after the date of original registration, certifying that the trademark is still in use in commerce.  A renewal must also be filed every 10 years following the registration.

Trademarks can be registered with the state or federal government.  State registrations are effective only within the state, whereas federal registrations cover the entire country.  In order to obtain a federal trademark registration, however, there must be some use of the trademark in interstate commerce.

Federal registration can be extremely valuable.  It allows you to use your trademark and stop most imitators, as you roll out your products and services across the country or on the Web.  Specifically, you can prevent anyone using an identical or confusingly similar trademark (for similar goods/services) after your trademark has been registered.  Federal registration also puts others on notice of your trademark, giving you the right to a strong set of legal remedies, such as recovery of damages, attorney’s fees, and possibly triple damages.  If you use your Web domain name also as a trademark, registration helps to protect against someone taking away your domain name, and against cybersquatters registering, trafficking in, or using a confusingly similar domain in bad faith.

To avoid rejection in filing a trademark application, you must choose carefully.  Trademarks that are descriptive – – – words that merely describe the goods or services or a feature of them, normally cannot be registered.  Trademarks of geographic terms or surnames, or generic words are also likely to be rejected.  The strongest trade names, least likely to be rejected, are “fanciful” trademarks, which are essentially made up words (i.e., Exxon, for gasoline, Kodak, for photographic supplies), and arbitrary trademarks that have nothing to do with the product or services (i.e. Amazon, for book selling, Camel, for cigarettes, and Apple, for computers).  Also favored and acceptable are “suggestive” trademarks, which suggest attributes of, but don’t describe, the goods or services (i.e. Champion, for sporting goods, Chicken of the Sea, for tuna fish, and Jaguar, for a car).

It is important to note that a trademark registration only covers the goods in a particular class.  The same trademark can be used by someone else on goods in a different class, without conflict.  Thus, the term “Champion” can be used as the name of spark plugs, and also be registered separately by another as a trademark of sporting goods.

In evaluating a trademark application, the Trademark Office carefully scrutinizes applications.  Applications will be rejected if a conflicting trademark is found.  The key test is whether there would be likelihood of confusion, that is, whether consumers would be likely to associate the goods or services of one party with those of another party by the use of the mark.  The principal factors considered in reaching this decision are the similarity of the trademarks and the commercial relationship between the goods and services.  The trademarks do not have to be identical, and the goods and services do not have to be exactly the same, for the Trademark Office to reject a mark.

Many erroneously believe that registering their company’s name with the State Corporation Commission protects the name.  A corporate name issued by the state is not a trademark, and does not create any trademark rights.  In addition, “trade names” that can be registered at the local Circuit Court level are not trademarks.  Only a trademark allows you to prevent others from using a confusingly similar name for similar goods or services.

Another common misconception is that registration of a Web domain name protects the company.  All that a domain name registration does is rent usage of the domain name for a period of time.  A domain name registration (usually from an entity such as Network Solutions or Register.com) does not create trademark rights.

If you possess a registered trademark, you should place the trademark symbol ® adjacent to the right side of the trademark.  You cannot use this symbol if your mark is not registered.  This is a federal offense, and grounds for refusing registration later.  By placing the trademark symbol ® next to your trademark, you further protect your rights by (1) putting the world on notice that you are claiming that trademark as your property (and not as a generic or descriptive term that others are free to use), and (2) paving the way for recovering profits and damages from anyone who infringes your trademark.  If you have not registered your trademark, you should place the letters “TM” next to your trademark.  This shows the world that you are claiming trademark rights in your mark, but have not yet registered.

To properly protect your logo, product name, etc. initially, you should go to a trademark lawyer with a short list of five to ten potential trademark candidates.  The lawyer can advise you on the comparative strength of each, and do preliminary clearance research on the potential candidates, in order to identify the best for registration.

If you fail to conduct trademark clearance research, you are taking a big risk.  You gamble on creating good will in a name you may later be forced to drop.  You might even have to pay damages to someone else, not to mention substantial attorney fees you will incur in later examining and defending the demand for a name change.  Also, if you ever intend to sell your business or product line, being able to convey solid trademark rights will be important to the prospective buyer.

Many business transactions arise where trademark rights play an important role.  The transfer of trademarks from one corporate owner to another may be necessary in a corporate reorganization, a corporate structuring for tax purposes, or in a sale of your business.  Regardless of the reason, you must be careful in any transfer of trademark rights, and take the following minimum precautions: (1) a transfer must be accompanied with the good will associated with the trademark.  If this does not occur, the trademark may be destroyed; (2) to be effective, any assignment of registered trademarks should be recorded with the United States Patent and Trademark Office, using special forms and procedures, and (3) for a security interest to be legally effective in a trademark, the security interest must be recorded with the United States Patent and Trademark Office.

This has been a brief overview of trademark law.  We encourage you to set an appointment or call to discuss your specific issues or questions.