Part I: What’s a Trademark and Why is it Important for My Business?

One of the most important aspects of any business is its brand, that is, its goodwill, its commercial impression and reputation. From a legal perspective, a company’s brand is an intellectual property asset protected in part under state, federal and international trademark laws.

Trademarks can be the single greatest source of intangible value for a company. For instance, in 2011, Forbes estimated the value of certain well-known trademarks, including Google- $44.3 billion, Microsoft- $42.8 billion, Bank of America- $30.6 billion.

Our law firm represents clients with business formation and ongoing business matters, and a client’s intellectual property strategy for its brand, particularly with respect to trademarks, is critical for the continued operations, growth and success of the business.

This is the first part of a series of comments regarding the importance of trademarks and the practical business and legal considerations for companies seeking to build, protect and market their brand.

What is a trademark?

People often believe that a trademark is limited to the name of the company; however, trademark rights may be established in a name, a sound, a phrase, a design (e.g., company logo) and so on. For instance, the word mark “Aflac,” the Aflac duck mascot drawing, and the duck quacking sound “Aflac,” are all registered trademarks owned by the Aflac insurance company. “IBM,” the Nike swoosh, and McDonald’s catch phrase “I’m Lovin’ It” are other well-known trademarks.

Why is a trademark important?

A trademark’s primary function is to identify the source of particular goods or services and to distinguish them from a competitor’s product. This benefits both the consumer, who relies on marks to reduce their costs of making purchases and is assured consistent quality of goods, and the owner of a trademark who relies on the mark to advertise and promote products and avoid confusion within its clientele.

For clients starting a new business, the selection of their name and logo is (and should be) a critical part of the formation process. Careful attention must be placed in the selection in order to choose a mark that will (a) facilitate the creation, evolution and marketing of the brand, (b) avoid refusal by the reviewing registration agencies, and (c) avoid third party infringement claims.

The same principles apply to existing businesses seeking to develop a new line of products or services under a new name. In addition, existing business with registered trademarks must monitor and enforce their trademarks in cases of unauthorized use or infringement in order to maintain protection.

How can I secure my trademark rights in the US?

In the U.S., trademark rights are acquired through actual use of the mark in commerce in connection with the owner’s respective goods or services.

There are two primary mechanisms for securing the protection of a trademark: common law protection and federal registration with the U.S. Patent and Trademark Office (USPTO). A third option, state trademark registration, is also available but is limited in its effectiveness because the protection only covers the territory of the state, and a federal registration may subsequently issue for a mark registered by another party.

How do I acquire common law trademark rights?

Under common law principles, trademark rights are acquired and maintained by actual use of a mark to identify a single source. Non-registration does not impact state or federal common law rights in a mark, so much so that even a “refusal by the PTO to register a mark does not preclude the owner of the mark from his right to use it.” Additionally, protection for nonregistered marks has been codified in the Lanham Act for inherently distinctive marks that have been used in commerce.

In order to acquire common law rights, the mark must be used in connection with sales of particular goods or services, and are viewed in conjunction with those goods or services. Inherently distinctive marks are immediately protectable upon adoption and first use, however marks that are merely descriptive of the goods or services in question do not accrue rights until a secondary meaning has been acquired.

How do I obtain federal trademark registration?

A mark determined by the USPTO to be sufficiently distinctive or unique as to indicate a single source of the goods or services will be registered on the Principal Register (as opposed to the Supplemental Register, which is comprised of marks that may be capable of indicating a single source but fail to do so at the time of application). A mark on the Principal Register serves as prima facie evidence of the registrant’s exclusive right to use the mark.

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The date of first use cited on the registration application is presumed to be the actual first date of use. Additionally, registration creates nationwide constructive notice of a registrant’s claim of ownership of a mark, and any subsequent adoption of the same mark by another cannot be said to have been in good faith. However, in order to recover in an infringement action, an owner must still provide a form of actual notice in conjunction with the mark, e.g., the ® symbol. [Note, the “TM” symbol is used in situations where you are using a mark in a trademark manner but have yet to receive federal registration.]

Once a mark has been registered on the Principal Register and in use for five continuous years, the mark becomes “incontestable” if supported by an affidavit from the registrant attesting to the five years of continuous use. Only on a claim that a mark is later abandoned, registration was obtained fraudulently, that a mark is being used to misrepresent the source of the goods or services, or if the mark becomes generic can an owners right to the mark be contested. Finally, registration also gives the owner of a mark the right to record the mark with the Bureau of Customs in order to stop the importation of goods bearing an infringing mark.

Bottom line, a strong trademark helps to build a brand by generating value through goodwill. It also prevents others from using someone else’s protected trademark (or a mark that may be confusingly similar) in an attempt to pass off on that trademark owner’s goodwill or create a false impression of affiliation or endorsement, and it protects against litigation from third parties that may claim that mark infringes on their mark.

Whether you are looking to start a new business or a new product line or service under a new name, or if you have current marks you would like to review and ensure they are being used properly, or if you have any potential infringement issues, please feel free to contact us for assistance.

Stay tuned for the next post in this Insight Trademark series discussing issues with applying for trademarks through online commercial service providers.