Every business owns trademarks, which are used to identify and distinguish a business, product, and/or service in the marketplace. Trademarks may be comprised of words, names, symbols, or devices or any combination thereof. Trademarks often are a businesses most valuable asset. For example, the Coca-Cola brand (the most valuable brand on earth for many years now according to Interbrand) is worth several times more than the company’s tangible assets combined.
Clearing a name for registration with the Secretary of State’s office is not the same as conducting a trademark search and the mere act of corporate formation does not confer any trademark rights. The trademark search and registration (aka trademark prosecution) process can be long (typically 1.5 to 2 years) and complicated. It usually costs several thousand dollars, though the exact cost of trademark prosecution depends on numerous variables, such as: the nature of the mark; whether the mark is in use; for how long the mark has been in use; the type and number of goods on which the mark is in use; and whether the applicant has suitable evidence of use.
There are four basic facts to keep in mind when dealing with trademarks:
- U.S. trademark rights are governed by a system of “priority” or “superiority” — the first person / entity to use a mark in interstate commerce can prevent all others from using an identical or similar mark for identical or similar services.
- Common-law trademark rights (those not associated with any state or federal trademark registration) are geographic in scope and limited to the locations in which the mark has been used. Common law trademark rights are more difficult, and therefore more costly, to prove than rights associated with a state or federal trademark registration.
- U.S. trademark rights also may be obtained by filing an Intent to Use (“ITU”) federal trademark registration application, though the mere filing of an ITU application does not convey any trademark rights; registration must be obtained for trademark rights to accrue.
- Trademark infringement occurs when it is likely that consumers would be confused regarding the source or origin of a product or service. Infringement also exists when consumers would perceive an association between products, or a sponsorship between companies, that does not really exist. This is what trademark professionals refer to as a “likelihood of confusion.”
Investigating a trademark’s availability by conducting a full trademark search before adopting a mark greatly reduces the chances of being involved in a costly trademark infringement dispute. Trademark infringement matters often result in the infringer having to change its mark, including ceasing any and all use of the infringing mark on letterhead, business cards, brochures, products, packaging, phone listings, signage, domain names and in all marketing, advertising, and promotional materials. Further, the infringer also has to bear the cost of purchasing all new materials to associate with its new mark. If a trademark infringement dispute results in federal court litigation, the infringer may be liable for three times the trademark owner’s damages, as well as the trademark owner’s attorneys’ fees and costs of bringing the suit, in addition to having to pay its own attorneys’ fees and costs. Moreover, many insurance policies do not cover trademark infringement lawsuits, even under an “advertising injury rider.”
Once the trademark search process is complete and the mark is cleared (meaning that it’s deemed available by competent trademark counsel), it is wise to federally register the mark. Provided that the mark is used in interstate commerce a trademark owner can protect it in every state in the country simply by federally registering it. It also is wise to pursue federal trademark registration because such registration evidences the mark’s validity and the owner’s exclusive right to use the mark nationwide for the goods / services listed in the registration. A certificate of federal trademark registration serves as a “title” or “deed” to the trademark asset. This is especially important if one plans to sell its business, whether now or in the future, as most purchasers want evidence that the seller owns the assets that the purchaser seeks to acquire.
International Classification System and Recitation of Goods and Services
The Nice Agreement is an international trademark treaty that sets forth 45 International Classifications of goods and services. All U.S. applicants must use this classification system when applying for trademark registration. The PTO charges a $325 filing fee per International Classification. It is important to determine in which International Classes the mark is / will be used before conducting the trademark search, as you want the search to be as accurate as possible.
The PTO initially refuses to register 70% – 80% of all registration applications filed with it. The majority of the refusals to register are based upon the application’s recitation of goods and services (how the applicant describes what it does under the mark). There is a PTO Manual of Acceptable Identifications of Goods and Services on the PTO’s website, with which the applicants must comply whenever possible. It is often helpful for applicants to review the registration records of their competitors to determine what recitations the PTO may accept. However, it is also important to know the PTO examiner’s mantra – “Just because another examiner (or 10,000 examiners) did it, does not mean it was right.” In other words, just because another examiner allowed a certain recitation does not mean that you / your client will be able to use it as well. Additionally, once an application is filed, the PTO only allows the applicant to narrow or clarify its recitation of goods / services; adding to or substantially altering the recitation is not allowed.
Trademarks often are a business’ most valuable assets. Trademarks are the tools that consumers use to identify what they want and distinguish it from what they don’t (i.e., competitors’ products / services). While the search and registration process can be costly, especially for a start-up company, it is always more cost effective to act diligently and pro-actively in the beginning, rather than scrambling to do damage control down the road. Trademark infringement disputes ALWAYS cost more than trademark prosecution; thus, it pays to search, clear and register marks initially rather than to wing it and hope for the best.
This information sheet is provided to you by the Law Office of Lara Pearson, Ltd. for your information only and does not constitute legal advice, nor does it establish an attorney-client relationship.