Understanding Trademarks for Startups

THE RATIONALE FOR REGISTERING

When building a new business, long hours are often put into creating the right branding for your startup. That branding becomes the backbone of your business, so it is important to ensure your investment in branding is adequately protected.

You can secure that investment by registering your trademarks.

In addition to protecting your brand from use by others, the registration process can also protect you from costly infringement lawsuits that could force you to rebrand.

Registered trademarks can also become important when the opportunity arises to sell your business, since proper trademark protection can greatly increase the value of your brand, and in turn your business.

For some businesses, immediate trademark registration may be a necessity, while others are better served by delaying registration and allocating their resources to other priorities.

It’s essential that startups take the time to understand this key aspect of building a business and ensure they have the right type of trademark protection for their business.

WHAT IS A TRADEMARK?

A trademark is generally a word, phrase, symbol, design, or a combination thereof, used to identify and distinguish the goods of one seller from those of another seller.

Trademark protection prevents other businesses from unfairly benefiting from the effort you’ve made to develop and promote your brand.

In the United States, companies are not required to register their trademarks to obtain protectable rights. You can establish “common law” rights in a trademark based solely on your use of the mark in commerce.

If you choose to register the trademark, a filing can be made at either the state or federal level.

Federal registration provides significant advantages over state registration or relying on common law rights, including:

• A legal presumption of your ownership of the trademark
• An exclusive right to use the trademark nationwide (state registration only protects you within the issuing state and common law rights only exist in the specific area where the trademark has been used)
• Public notice of your claim of ownership of the trademark
• Listing in the U.S. Patent and Trademark Office’s online databases
• The ability to prevent the import of infringing foreign goods by recording the registration with U.S. Customs and Border Protection
• The right to use the federal registration symbol “®”
• The ability to bring an infringement action in federal court
• The use of the U.S. registration as a basis to obtain foreign registrations

The law in other developed countries is similar, but there can be some important differences.

For example, in the U.S., the user of a trademark acquires common law rights simply by being the first to use the mark in commerce, even without registration. In the E.U., however, trademarks must first be registered before receiving any protection.

And, in the U.S., priority for trademark registration is given to the first company to use the trademark in commerce whereas, in the E.U., the first company to file for registration is given priority.

LIMITATIONS

There are some arcane rules that limit what can and cannot be trademarked, so it’s best to verify whether your brand or product name can be trademarked before you start using it.

The law prohibits trademarking words that are so general it would be unfair to others for you to have their exclusive use. For example, “Delicious Food” could not be trademarked, whereas “Dynamo Donuts” would be acceptable as a trademarked brand.

A trademark can also be rejected if it is too similar to that of another business. Infringement is not limited to being an exact copy. Your mark could be rejected if it is sufficiently close to another business’ that it could confuse consumers.

Product features that do something useful also cannot be trademarked. For example, the color of a car can be trademarked, but tinted windows cannot. Colors can even be trademarked for use with a specific product, such as a vacuum cleaner or video console.

Trademarks, by their nature, can only be used for commercial products. That is, products that are sold or transported within the United States in the ordinary course of trade. If your business provides services to customers, then the names, logos, and other marks used in connection with your services are considered service marks.

COMMON PITFALLS

Trademark law can be much more complicated than it seems!

Many new companies make the mistake of assuming that when they incorporate their business or form a Limited Liability Company, they automatically gain trademark protection for the company name. Unfortunately, that’s just not true.

The right to do business under a name is not the same as the right to use the name as a trademark. The only way to have full trademark protection is to register the mark in every jurisdiction where you do business.

Another rookie mistake is relying on the fact that registering a trademark is not required to gain trademark protection and failing to conduct a comprehensive search of potentially conflicting trademarks.

In some cases, this could leave you vulnerable to spending a fortune on legal fees, trying to prove ownership of your trademark and at risk of losing some of the value of your business.

It’s much more cost-effective to trademark your intellectual property as soon as practical. In the United States, you can register a trademark before you start using it, although it’s equally possible even after you’ve been using it for a long time.

AN INVESTMENT IN YOUR BRAND

Your brand is a key asset that will increase in value as your business and its reputation grows. It will distinguish your products from those of your competitors and help you earn market share - and potentially dominate - in a competitive marketplace.

Websites that advertise do-it-yourself trademarks and low-cost packages often tempt startups into doing their own trademark work. This is a big mistake. Imagine being offered a tremendous amount of money for your business, only to discover that you don’t have adequate protection for your brand!

A qualified attorney can help you before, during, and after the trademark application process. They will also help you avoid unexpected hazards and increase the likelihood of obtaining a registration.

By facilitating a comprehensive trademark search for potentially conflicting marks, your attorney could save you from costly legal problems. This involves searching federal and state trademark databases and searching the internet and other sources for “common law” trademarks that are being used for products like yours.

Comprehensive clearance searches are important because other trademark owners may have superior legal rights in trademarks similar to yours, even though they are not yet registered.

During the application process, an attorney can provide advice about what types of marks receive the most protection and help you identify and classify your products.

They will also prepare responses to any refusals issued by the U.S. Patent and Trademark Office’s examining attorney. This will help you obtain optimal protection for your trademark rights.

The cost of a qualified attorney (including the cost of conducting a comprehensive clearance search but excluding any filing fees) might range anywhere from $2,000 for a simple application to over $5,000 for more complicated applications.

Filing fees range from $200 to 600 per class of goods, depending on the type of application you file.

The registration process typically takes between 9 and 15 months from start to finish.

CLOSING THOUGHTS

Your attorney might also identify situations where you are better off not registering your trademark at all.

If you’ve been using your trademark for a while and discover that it’s unfortunately similar to that of another business, your best strategy might be to avoid registering, since that could trigger an infringement suit.

Every start-up is different and the decisions about what, how and when to trademark can get complicated. At a minimum, we recommend working with a qualified attorney to complete a comprehensive clearance search and develop your trademark strategy.

This could involve trademarking just the name of your business, or it might also include trademarking the names of some or all of your products.

Working with a qualified attorney should ensure that your trademarks receive an adequate level of protection and that your resources are allocated in the most efficient manner.