Trademarks: Why They May Not Be Necessary At The Outset, But Naming Is Always Important

Posted on April 17, 2012

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Article Highlights:

  • choosing a name that does not infringe on another company’s name is essential for business success;
  • registering a trademark is often not essential at the beginning, but is extremely helpful if a problem arises;
  • searching to make sure that you do not infringe is always a good idea before you begin to spend money on marketing the trade or service name.

A trademark is a word, phrase, symbol or design that identifies and distinguishes the source of the goods or services of one party from those of others. Many companies form their business and begin using their name without ever thinking about obtaining trademark protection. In certain circumstances, this may be acceptable because it can be true that a trademark may not be necessary at the beginning of one’s business.

Some companies do not want to spend the $1500 and up to file the trademark initially because cash is limited. Additionally, they want to make sure the business will succeed first. Others want to use the mark in commerce prior to filing the trademark application to gain rights in the mark and to test the brand in the marketplace. These are all viable reasons for holding off on the application.

Additionally, a company that uses a trade name builds up certain legal rights in a name. If a later company uses that trade name that creates confusion in the market, the original company may be able to prevail in a lawsuit against the infringer. Such a lawsuit would be bolstered if the original company had a registered trademark. However, the lack of a registered trademark does not prevent a company or person from having rights in a trade name.

However, business owners must be aware that incorporating a company within a state does not equate to trademark protection for the company name. The filing of the formation documents of the company does not mean that the business necessarily possesses the legal right to use a name because federal trademark laws may have granted prior rights in the chosen name to a third party. If this is in fact the case, the third party may be able to ultimately bar your use of the name.

Therefore, prior to choosing the name and beginning to use it in commerce, the company should have a trademark attorney conduct a trademark search to make sure that the name is not confusingly similar with: (a) a business entity registered in the state of formation; (b) a state trademark or (c) a federal trademark. It is always best to try and ensure, to the extent possible, that the name chosen will not infringe on the rights of another during the start-up phase. This will help to avoid a possible cease and desist letter down the road when large amounts have been spent on advertising and marketing with the company name. (Note, however, that a search, no matter how well conducted, has certain limitations and can never be definitive).

Many trademark attorneys, such as my colleague Elizabeth Ritter, will err on the side of caution and recommend that a business not wait on trademark protection in the following instances:

  • The company will be a franchise;
  • The company plans to have locations in more than one state; or
  • Identification of the company name is essential to the business success

Whether or not to file a trademark and when is very fact driven and will depend upon the financial condition of the company, as well as its future plans for expansion. At the very least, businesses should have a trademark attorney conduct a search of the name and should discuss with the attorney if the brand is distinctive enough to even qualify for trademark protection at the outset.

Mike Goodrich
Goodrich Law Firm, LLC

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