Guest post by John Rees, Attorney, Callister Nebeker & McCullough
In today’s challenging economic environment, businesses are looking for ways to improve their competitive advantage. One important way to do this is through branding. Branding consists of sending a uniform message to consumers and customers about the quality of goods and services being offered. At the heart of any branding campaign or program is one or more trademarks.
A trademark is any word, logo, symbol, device or virtually anything else that identifies the source or origin of goods and services. It can be as simple and common as a word, and it can extend as far as sounds, smells and colors. The next time you buy some McDonalds french fries, look at the bottom of the box. You will see a notice indicating that the design of the box is a federally registered trademark. A trademark creates a common theme through a business, and lets others know about what is being offered by the trademark owner.
There are essentially two ways to encounter problems with the use of any trademark. First, by failing to clear the trademark for potential infringement, and second, by failing to take steps to register and enforce the rights available to trademark owners.
Trademark rights accrue at common law. This means that before there were any statutory schemes for registration of a trademark, courts found enforceable trademark rights for the user of a trademark. The first user of the trademark would prevail over a subsequent user of another trademark that was deemed to be confusingly similar to the original mark. Registration of a trademark enhances the rights of the trademark owner, but the general rule that the first to use a trademark prevails is not overridden by trademark registration. Given that trademark rights accrue at common law, before any new trademark is adopted and used, a comprehensive search should be completed to determine if there are any prior uses of an identical, similar or otherwise confusingly similar mark. If there are any such prior uses, then the trademark should be abandoned, and another trademark adopted.
Caution should be used when naming a business. The standard for reserving and obtaining a business entity name from a state agency is much different than the standard for using a trademark in commerce. Anytime a business name is also used to identify the source of goods and services, which is very broad, the name is also a trademark. A business name may be available through the applicable state agency, but the use of the mark in commerce may constitute trademark infringement. There should be little comfort in knowing a state agency has approved the name of a new business entity, if the name has not also been cleared for use as a trademark. Similarly, a domain name may also be a trademark, and the same process should be followed.
Trademarks can develop significant economic value. One report indicated that the Coca Cola trademark was valued between $65 and $85 billion. That did not include the bottling plants, the recipe for the drink, or any other physical assets. It was the value of the intangible intellectual property.
In addition to the number added to a balance sheet, trademarks can create significant goodwill. Consumers frequently choose one brand over another because of the trademark. Competing products may be very similar, but because of the goodwill of the known brand, a consumer will frequently choose the better known product. Trademarks may be protected by filing for and obtaining registration, and by implementing a good trademark compliance program, particularly if the trademark owner licenses the trademark to third parties. Among other things, a trademark compliance program can minimize the risk of losing valuable trademark rights.
When a trademark is used, it is important to display appropriate trademark symbols, and to display them correctly. If a trademark owner fails to correctly display the appropriate notice for a federally registered trademark, no profits or damages may be recovered in any lawsuit for trademark infringement, unless the defendant had actual notice of the registration. Common law trademark symbols may also be used to support the owner’s position that the term or other source indicator is being used as a trademark.
Trademarks are an important means of helping a business paint a picture of the consistency of the quality of goods and services being offered, and how they are delivered. Avoiding potential infringement litigation and protecting valuable trademark rights will help further the strategic objectives of any business.
John Rees is a business lawyer with the law firm of Callister Nebeker & McCullough who helps clients find solutions to their business legal needs, particularly in a complex legal and business environment. He focuses on corporate and intellectual property issues, particularly relating to licensing and doing business on the internet.