In the first two installments of this three part series I introduced a scenario that I have seen time and time again. A client will come into my office holding a cease and desist letter from another company demanding that the potential client immediately cease using their company name in commerce or face a law suit. The potential client is most often upset and truly confused as to why they can’t use the name – after all the state of Colorado said it was OK. The unfortunate situation is due to the interaction of the rules regarding entity/trade names and trademark law. However, there are things you can do to protect yourself to make sure that you will be able to use your name in commerce and prevent others from using the same name.
If you have read the other installments of this article, you may have noted that I refer to trademark rights as a right that may “trump” your right to use a certain name in commerce. This is due to the fact that trademark rights not only authorize you to use the mark in commerce, but also they allow you to exclude
others from using the mark as well. For a bit more detailed description of trademarks and the benefits of federal registration, please see our Control Protect & Leverage Part III posting from June 12. For our purposes, I am going to discuss certain aspects of trademark law that are pertinent to our discussion.
Trademark rights arise from an individual or company’s use
of a mark to identify their goods and services in commerce. Most commonly, you can think of trademarks as brands, brand names, or product model names. However, company names in certain circumstances may also be trademarked. In trademark law it’s the companies use and the first date that they used the mark that is important. Additionally, you have to continue to use the mark to have rights in it. In general, a mark is most likely to be deemed abandoned if you haven’t used it in the last 3 years.
When we talk about trademarks we always discuss them in the context that they are used. For example, SPAM for processed meat. Incidentally, Hormel Foods, LLC, the maker of SPAM not only has a federally registered trademark for SPAM regarding processed meat, they also have federal registrations for SPAM covering poultry, deviled luncheon meat spread, retail gift shop services, educational and entertainment services, magnets, jewelry, playing cards, pens, pencils, note cubes, mugs/insulated beverage containers, tennis balls, golf balls, money banks, toys and entertainment services, namely participating in automobile races. So far Hormel has 6 separate federal registrations for the word SPAM.
In a broad sense you can lump trademarks into two different categories 1) registered marks and 2) unregistered marks, which are also referred to as common law marks.
Common law marks arise when the mark is associated with goods or services in commerce. A common law mark is identified by the superscript TM which appears after the mark. In general, the protection of a common law mark extends to the areas that it is actually used. Therefore if you are not selling or advertising in a certain area you do not have the right to exclude someone else from using the mark in that area.
Basically, there are two jurisdictions for registered marks: State Marks and Federal Marks. Since trademark rights arise from use and not registration, you do not have to register the marks to be valid – you could rely on common law rights. However, registered marks do receive some extra added benefits over common law marks. If you are selling goods or services in a particular state you may be eligible to register a mark in that state. State marks are governed by the law in that particular state, so each will be different. In general, a lot of state statutes grant protection on a state wide basis regardless of whether you are actually using it just in one city or town or throughout the whole state. If you are selling goods or services in interstate commerce (at a minimum you have to have sales between 2 states) you may be eligible for a federally registered trademark. Federally registered trademarks are nationwide in scope. Therefore your protection applies to the whole nation even if you are just selling goods or services between two states: Colorado and New Mexico for example.
Trademark infringement is judged on a standard that is called “likelihood of confusion”. There are many different factors to determine whether one mark infringes the other, but for ease of discussion it can be boiled down to: whether a reasonable person upon seeing both marks, would conclude that the products or services came from the same individual or company or that the products or services were somehow affiliated with each other
. Therefore, the marks need not be exactly the same and they need not be used on the exact same products or services to create a likelihood of confusion. If it is deemed that your use of the mark infringes on another mark you could be forced to stop using the mark and in some cases you could be liable for damages to the other party.
Given the above discussion of trademarks, it should become apparent how another company could come in and prevent you from using your company name. If 1) they have trademark rights that extend to the geographic area that you are selling your goods or services in, and 2) their use predates
your use, and 3) if the marks and goods/services are close enough to cause a likelihood of confusion, you could be infringing on their mark.
Given the potential risk to business owners could be very costly, most business owners appreciate some strategies they can take before hand to reduce the chance that someone will come down the road and allege trademark infringement. If you are looking a launching a product or service, seek out a trademark attorney to conduct a clearance search, even if you aren’t planning on registering you trademark immediately. This will help minimize the chance that you will be infringing on some other already existing product or service. Secondly, when forming a new corporation, LLC, partnership or when filing for a trade name, take a quick trip to the United States Patent and Trademark office web site www.uspto.gov to
do a search of federally registered trademarks. While this isn’t a foolproof method, it will definitely alert you to clearly obvious situations where the mark might already be taken by someone with a nation wide scope of protection. Lastly, you can prevent others from coming into the market with a name or product name that causes a likelihood of confusion with your products or services by registering your mark either on the state or federal level. State and Federal registrations will pop up on clearance searches and can help in cutting down on infringers. Additionally, state and federal registration can be a good tool in getting infringers to comply with cease and desist letters before having to resort to litigation –as they can show independent 3rd party verification of your right to use the mark (however there are a small number of states where a state registration only indicates a parties “claim to ownership” and does not confer any substantive rights to the mark itself).
While, not everything can be fool proof, business owners can do a lot to help prevent a situation where they have the rug yanked out from underneath them and are forced to change a product, service, or company name years down the line after they have spent substantial time, money and effort establishing name recognition for their business or products. The best rule in business – never get caught with your pants down!