After years working in the corporate field, tradeonlinemarket decided to quit, and start his own business. Peter’s expertise was web design and development. Peter chose “Saga Web Design” for his business name.
Peter’s first year in business was tough. Being the new kid on the block, he found it somewhat harder to win over clients than he had first imagined. But Peter was determined to make his business a success. Gradually he acquired several large corporations as clients.
By the end of the 2nd year his business was solid and profitable. But Peters bubble was about to burst. Peter receives a registered letter in the mail and discovered he was the recipient of a cease and desist letter from a lawyer representing a business in an adjacent state called “Saga Consultancy Inc.” The letter stated that Saga Consultancy Inc, Inc. has registered the Saga name as a federal trademark, and that Peter is to stop using the Saga name in his business immediately or face a lawsuit for trademark infringement.
Can Saga Consultancy Inc., be stopped? The answer is… it all depends.
To help us understand Peter’s chances better, let’s take a look at trademarks and terminology. In everyday plain English, the term “trademark” is used to refer both to marks used for products, and to marks used for services.
Strictly speaking, a trademark only refers to the basis of a product. Trademark names are placed either on the product itself or on its packaging. In contrast, a mark used to designate the source of a service is referred to as a “service mark.” Service marks usually appear in advertising for the service. What’s more, while the name of a business (also referred to as, its “tradename”) by itself will not qualify for trademark protection. However, the moment the tradename is used in advertising; it is considered to be a service mark and may qualify for protection. Interestingly, a trademark can be many things. For instance, it can be a name, a logo, an advertising slogan, or even just a word.
Side point: In this article, the terms “trademark” and “mark” are used as trade offs, and can refer to both marks identifying merchandise, and marks identifying services.
Back to our story…
In the case of Peter, who has the greater right to use the Saga name? Saga Web Design… or… Saga Consultancy Inc., The answer can be found in the old saying, “possession is nine-tenths of the law.” That is, the first party to begin using a trademark in its business usually gains superior rights to the mark, at least in the geographical area in which it is being used. But that’s all. You don’t need to seek federal registration for a trademark mark in order to begin using it, and you don’t need to seek federal registration of your “mark” in order to acquire rights in it.
As the Saga Consultancy Inc., lawyer suggests, the significance of having superior right to a name is that it will generally allow the owner to prevent others from using the mark, or at least limit the use of it by others. More importantly, a superior right in a trademark will entitle the owner to file suit for infringement of the mark. In such lawsuits, a prevailing trademark owner will be able to obtain a court order to prevent the infringer from ongoing use of the mark in its business, and in some cases he or she will also be able to recuperate financial damages caused by the infringement of the other party.
FEDERAL REGISTRATION – WHAT IT’S WORTH?
So here’s the bottom line. If first right of use of a trademark can hold sway over the right to use the name, does the lawyer’s remark about Saga Consultancy Inc., (federal registration of the Saga name) carry any weight? Yes, indeed. Simply put, the major benefit of federal registration is this: if a disagreement arises between two companies or businesses as to who is the true owner of a mark, the company and/or business that has federal registration of the mark is alleged to be the owner of the mark and is entitled to use the mark nationwide.
In the case of Peter, this means that even if he was using the Saga name first, and the Consultancy firm sometime later started using the mark in another state, but sought federal registration for the name, the consultancy firm would have the right to expand its market using the name nationwide. Nevertheless, Peter will still have the right to use the mark in his own geographical area for as long as he desires, but he may be prevented from expanding his use of the mark outside the area for which it is now being used.
Another reason for seeking federal registration of a trademark is that federal trademark laws make available the right for you to reserve a trademark name for future use, by officially filing an “intent to use” application in the Patent and Trademark Office and stating that you have a genuine intention to use the mark in business. The filing date of the application is then deemed to be the date of the first use of the name.
With this in mind, it is always a good idea to register a mark, prior to its use. If you have an otherwise valid mark, the only requirement for federal registration is that the mark is used commercially in another state of the country, which simply means that the owner of the mark has used it in the sale of goods or services in another state. Moreover, if federal registration is not an option, it may still be possible to register the mark with your state. Registration of a mark with the state represents legal notice to businesses throughout the state of the owner’s claim of ownership.
UNCERTAINTY & MISUNDERSTANDING
The matter of ownership rights in a trademark doesn’t end with the topic of first use. Even if Peter and the consultancy firm are both using the same trademark, there may not be any infringement if the dual usage is unlikely to result in public misconception as to the source of the companies’ merchandise or services. The reality of such misconception is based on the extent to which the merchandise and services compete with one another. For example, in our scenario, if the consultancy firm filed suit against Peter for infringement of the Saga name, a court would probably rule that there was no infringement, for two reasons.
(1) The first reason is that the consultancy firm and web design services do not compete for the same customer dollar unless of course, if the consultancy firm is a web site development firm. And (2) has to do with the geographical areas in which Saga Consultancy Inc., and Saga Web Design do business; Peter’s company does business in Los Angeles, and the consultancy firm does business in the Las Vegas Nevada area. The fact that there is no overlap between the geographical areas in our example makes the possibility of confusion as to the source of the two products or services even less likely. So under these conditions, Peter can feel safe in standing his ground and refusing the lawyer’s demands to stop using the Saga name.
The same applies when an individual or company applies for federal trademark registration; the Patent and Trademark Office will not register a trademark if it believes that the use of the mark for the applicant’s manufactured goods or service will result in a misunderstanding in the mind of the general public about the trademark, and more importantly, the source of each of the goods or services associated with the mark.
CHOOSING A TRADEMARK
In taking into account a range of possibilities for the name of your business or company, there are important criteria to keep in mind:
1. Will the name infringe on anyone else’s rights?
To find out the answer to this question, you should always do a trademark search before you settle on a name. The reason for is, as mentioned above, if you begin using a mark that already belongs to another person or company, you run the risk of having to discard the mark, after having committed much time, money and effort in establishing its use in your business.
2. How much protection will the name be given under federal trademark law?
ROCK-SOLID AND WEAK TRADEMARKS
The degree of protection that an anticipated trademark will be given depends in large part on the relative strong point or weakness of the mark itself. As it turns out, in choosing “Saga” as a trademark, Peter chose a strong trademark for his business. The more distinctive a mark is, the stronger it is likely to be, and the easier it will be to gain legal protection for it. In comparison, the more evocative the mark is, the weaker it is considered to be legally. Illogical names, that don’t mean anything, like Enron, or Saga, are considered to be very distinctive, and much stronger than names that simply depict the merchandise or the geographical area that the company is located in. There’s nothing wrong with using a geographical name in a business’s name it’s just that it is much more difficult to stop others from using a similar sounding name in their business than if you had called your company something like Microsoft, for example.
However, even a weak mark can oftentimes turn out to be strong, if it has a secondary meaning. “Secondary meaning” means that the general public no longer looks upon the name to just be somebody’s last name, or just a geographical description, but that the name has acquired another meaning, associated with the owner’s product or service; to the general public, the name now “means” the merchandise or service.
How strong would Peter’s trademark have been if he had called his business “Peter’s Web Design,” instead of using the Saga name? After all, owner’s names are commonly used to name business and generally, every person has the right to use his or her own name in their business, unless the name has already acquired a secondary meaning. However, personal names, like geographical names and descriptive names, are considered to be very weak marks, and often will not be given strong trademark protection, unless it has acquired a secondary meaning. Examples of companies with marks that have acquired secondary meanings are Sears, Pennies and KFC.
There are cases of course, where a trademark may be so well-known, and so established both locally and internationally, that its owner may be able to prevent others from using the name even if the goods or services do not compete, if the owner can show that others’ use of the name would dilute the strength of the mark. One good example of this is the Virgin trademark of Sir Richard Branson.
It’s true to say that if you are contemplating naming your business right now, this by itself is a crucial reason to stay away from the temptation to give it a name shared by an already famous company. Corporations with famous trademarks are generally speaking, extremely protective of their trademarks, and won’t hesitate for a moment to file suit to protect its name and mark. Even choosing a mark with a similar sounding name will cause the user of the copied mark, at the very least, to receive the type of letter that Peter received from the lawyer representing Saga Consultancy Inc. So, in conclusion, a preliminary trademark search, some ingenuity, coupled with federal registration a business owner could develop a trademark which gains strong protection and is of lasting value to the owner.