Trademark Law Basics, Part 1: Why Register a Trademark?

elcome to the first part of the CDAS “Trademark Law Basics” series. Over the next month, CDAS attorneys will be explaining the legal and practical basics of trademarks on our IP, Media and Entertainment Law blog. We will also curate the entire series on the CDAS Trademark and Brands Practice Group page.

Just like your own name and face defines your personal identity, your trademark is your company’s identity. Trademarks are protected by U.S. federal law because they help consumers to recognize your products and services, and because they help business owners large and small to benefit from the customer goodwill they have worked hard to create.

The costs of registering a trademark with the United States Patent & Trademark Office (PTO) are just like any other startup expense – although they can be surprisingly low for what you get out of a registration. A good trademark attorney experienced with trademark practice (which the PTO itself recommends anyone serious about trademark filings get) understands that when every dollar counts, entrepreneurs must think about the long-term savings and long-term risks associated with every dollar spent. Just like your rent, wages and benefits, technology investments, insurance and marketing, your trademark attorney can help you ensure that the costs associated with protecting your trademark are predictable and that your name remains yours to use for as long as you are in business.

A trademark is also a potentially significant asset. The brand identities of the largest American companies—including relative newcomers like Facebook, H&M and Red Bull—are valued in the billions. As you assess the risks and costs involved in your business plan, pause to consider the value that your own mark provides. For most small businesses, developing a brand without proper trademark protection is “penny-wise and pound foolish.” Before you decide to go ahead without a registration, consider the costs of lost customer goodwill, and in re-developing your brand identity, packaging and promotional materials should you find out that your mark is not yours to use. When you are planning your IPO or high profile acquisition, you’ll be glad you made the investment!

More immediately, there can be significant and often unexpected legal costs involved in:

• Opposing subsequent attempts by others to register or use your mark.
• Attempting to overcome insurmountable rejections from the PTO due to a prior existing registration.
• Responding to a “cease and desist” letter if a competitor objects to your use of the mark, even unjustifiably.
• Responding to a lawsuit alleging that your mark infringes another registered mark – the cost of defending your unregistered mark in court can be prohibitive to a small business, even if you are likely to win.

If you are registered, the PTO, in a way, “does the work for you” by screening for and typically barring subsequent conflicting registrations and establishing your priority of use from the date that you file. Your registration also provides nationwide protection and a presumption of validity in a lawsuit against anyone who adopts a confusingly similar trademark in a trademark application, in the marketplace or even as a domain name. After five years on the registry, a trademark owner also has the option to file a “declaration of incontestability,” which significantly limits the grounds on which a registered mark may be challenged by a third-party.

Running a search early has the benefit of identifying potentially conflicting marks or anticipating possible claims before you have sunk a lot of money into the mark.

You do gain some rights just by using your mark (and you do not need a registration in order to use a mark in the U.S.), but registration carries a number of tangible benefits. It establishes your presumptive right to use the trademark throughout the U.S. (even if you are using it only locally), to oppose or challenge subsequent conflicting registrations, to bring infringement claims against third parties who use confusingly similar marks, to license the use of the mark (which can result in the generation of substantial royalties), and to apply for seizure of counterfeit goods by customs authorities. The filing date of the application establishes this “constructive” (legally recognized) priority of use and the rights that come with it, whether or not you are already using your mark (for example, if you file an “Intent to Use” application, discussed in a separate section of this overview). A trademark often serves as collateral for loans.

A federal registration is required in order to use the ® symbol, and it saves money in having to prove in a lawsuit that your trademark is valid. It serves as a bar to a dilution action brought under common law and state dilution statutes. Also, an infringer cannot say that it did not know about you: registration at the PTO is considered “notice” that an infringer ignores at its peril. In a lawsuit, a registration also opens the door to higher damages awards and reimbursement of attorney’s fees in certain exceptional cases.

Note, however, that trademark rights are territorial, although registration in the U.S. can provide some helpful advantages when filing applications in foreign countries. And while in some places you can register across multiple countries at once (for example, with a Community Trade Mark that covers the 27 countries of the European Union), the registration applies only to countries where a registration exists. The various states in the U.S. also maintain registries, and the cost and standards for registering there are often lower, although the benefits are not as great as a national registration with the PTO.

A trademark attorney can discuss with you the costs and benefits of filing in particular countries and states based on the needs of your business plans, your goals and your budget. For foreign filings, CDAS maintains a network of trusted agents around the world who can assist with filings before whichever country’s trademark office in which you choose to file your mark.

A Quick Word About Domain Names

The PTO does not view domain names as a “use” for trademark purposes. Thus, when you file an application, the PTO will not notify you if someone is already using your mark as a domain name. But that person may still have common law rights against you if they are using the domain to sell goods and services. Even if you prevail, the costs associated with defending against this kind of prior use claim can be significant. A full vendor-provided search (such as through Thomspon Compumark or CT Corsearch, as developed by an experienced trademark attorney) can identify confusing domain names, so that you can steer clear of such pitfalls before it is too late.

On the other side of the coin, if you register your mark, you will receive protection under federal law against “cybersquatters” who race mark owners to the internet and hold your mark hostage when you take your business on-line – statutory damages for cybersquatting on a federally registered trademark can total up to $100,000. The World Intellectual Property Organization and National Arbitration Forum also provide a mechanism, established by ICANN, for quickly resolving claims of trademark infringement against registered domain names.

Look out for part two in this series, Why Should I Conduct a Trademark Search?, next week. If you have any questions about this article, please contact an attorney in the CDAS Trademark and Brands Practice Group.

Materials on CDAS.com are provided for informational purposes only, do not constitute legal advice, do not necessarily reflect the opinions of CDAS or any of its lawyers or clients, and are not guaranteed to be complete, correct, or up-to-date. CDAS.com is not intended to create an attorney-client relationship between you and CDAS.