Seth Godin’s view on trademark law was recently brought to my attention by one of my Canadian trademark lawyer tweeps. After that, I came across two recent blog posts on this issue on the Likelihood of Confusion Blog and Duets Blog.
Seth Godin’s view on trademarks, as it pertains to seeking federal trademark protection, has already received much attention. Probably more than it’s worth. For that reason, I won’t spend too much time here, since I do have better things to do with my time than acknowledge - what I believe to be - complete rubbish.
Many brand owners understand that securing federal trademark protection (in some cases on a global basis) has many benefits and can be the prudent thing to do. Some are minimal benefits while others could potentially be the difference between product success and failure, not to mention business success.
Some time ago, Seth Godin posted the following comment on his blog:
Some lawyers will get all excited and encourage (demand!) that you register your trademark. This involves paying a bunch of money, filing a bunch of forms and earning an ® after your name instead of the ™. While the ® does give you some benefits by the time you get to court, it doesn't actually increase the value of your trademark. And you can wait. So, when you come up with a great name, just ™ it.
Just “TM it” he says. In some instances, that may very well be good advice. In other instances, however, that advice may kill a product and brand name. To provide such general advice is - in my opinion - careless and quite frankly simply naïve and dangerous. I must say that those that offer contrary views to the norm may stand to make money by doing so. If you watch the cable “talking heads” shows, you know what I mean.
In my opinion, below are four examples as to why the blanket advice of just “TM it” is simply bad advice.
1. Federal Trademark Registration May Allow For Geographic Expansion. Trademark rights in the U.S. (and some other countries) are geographic in nature. Meaning that trademark owners generally only secure trademark rights in those geographic regions in which marks are used (absent securing federal trademark protection).
Consider this: Company launches product and brand name in the North East on January 1, 2010. Company decides to accept Seth Godin’s advice of not seeking federal trademark protection and simply “TMing it.” As of the product launch date, there were no other similar marks on the market (or filed for at the U.S. Trademark Office) that would pose any barriers to the mark’s use. And that’s just great news! On January 1, 2012, Company decides to launch its product and brand name nationally. Unfortunately for Company, another company launched a confusingly similar trademark for a related product in March 2010 in California. That company has since expanded aggressively from Western United States through the Midwestern and Southern parts of the U.S. Since trademark rights are geographic, Company will likely be barred from expanding into those geographic regions in which the second company has commenced use of the confusingly similar mark.
Oops! So much for “TM it” advice. Had Company sought trademark protection by filing an application in January 2010 or beforehand and secured registration, Company would have had the legal right to stop the second company from using the brand name once Company moved into the other company’s markets. However, because Company relied upon “TMing it” advice, Company must now either change its name and start over or adopt a new name for those regions in which second company has secured common law trademark rights. That sounds costly. Also sounds like Company received bad advice with respect to protecting its intellectual property. You be the judge for Company. Was taking the “TMing it” advice worth it? Might that advice have killed the product and possibly the Company too?
2. The Power of Intent-To-Use Trademark Applications. The filing of a federal intent-to-use trademark application gives trademark owners priority of rights over subsequent users. Filing of intent-to-use trademark applications places subsequent users on constructive notice of the filer’s intent to use the mark.
Consider this: Company plans to launch a product and product name on January 1, 2010. In anticipation of launch, Company files an intent-to-use trademark application on September 1, 2009. On November 15, 2009, another company launches a competing product under a confusingly similar mark. On January 1, 2010, Company launches product. Company secures its registration on March 1, 2010. Company then learns of the other’s company’s use of the confusingly similar mark. Too bad for Company, however, because the other company started to use its mark first. Right? Wrong. Because Company filed its intent-to-use application BEFORE the other company began use, and because Company’s application matured into a registration, Company may take action against the other company and claim priority of rights. Why? Because Company filed an intent-to-use trademark application with a filing date (September 1, 2009) that pre-dated the other company’s date of first use (November 1, 2009). In sum: earlier filing date trumps later use.
Had Company listened to just “TM it” advice, it would have been the junior user, since it used the mark after the other company. If the other company brought suit against Company (the “junior user”) for trademark infringement, Company would likely be required to cease all use of the mark and re-brand its product.
Oops! Listenining to the “TM it” advice sounds dangerous. Doesn’t it?
3. Incontestability. Once a trademark has been federally registered for five years, a trademark owner may file an affidavit with the U.S. Patent and Trademark Office that states that the mark has been in continuous use for the products listed in the registration for the five years since registration. Once the affidavit has been filed, and accepted, the trademark registration becomes what is known as “incontestable.” An incontestable trademark registration cannot be challenged on certain grounds by third parties, including the trademark’s validity, registration and ownership. Although there may be certain limitations to an incontestable registration, such as priority issues, an incontestable registration is still an extremenly valuable aset to its owner. In an infringement action involving an incontestable trademark, the opposing party cannot argue that the incontestable trademark is invalid on certain grounds, including the mark is infringing or merely descriptive. However, an incontestable trademark and its registration may still be challenged on certain other grounds, such as abandonment, genericness and that the registration was obtained fraudulently.
Consider this: Company launches product and brand name in January 2010. Company takes the advice of simply “TMing it” and not seeking federal trademark registration. On January 1, 2016, Company learns of another company using a confusingly similar mark. Company sues. The other company defends the suit on the basis Company’s mark is merely descriptive, thus lacks distinctiveness. The Court agrees.
Note that “marks” that are considered to be merely descriptive of certain features or characteristics of the associated products are not considered source identifiers at adoption, and may never receive trademark protection status, since consumers would generally not perceive descriptive terms as trademarks. Question: If a term is merely descriptive of a feature of characteristic of a product (and it has not obtained secondary meaning) how can there be trademark infringement?
Oops! So much for Seth Godin’s advice to just “TM it.” Had Company secured registration, the defendant likely would not have been able to successfully defend the suit on the basis of non-distinctiveness. Company may have won the case.
How's that “TMing it” advice sounding to ya?
4. Valuation of a Business at Time of Sale. Ok, the owners of Company decide that after four years it’s time to sell Company and move onto the next venture. One of the questions a buyer would ultimately ask is “is the intellectual property protected?” Part of the purchase process is to conduct due diligence on Company. If the marks have not been protected and if patents have not been secured, the dollar value attached to the sale of Company may be lower than had Company protected its intellectual property.
Consider this: Due diligence uncovers another company’s trademark registrations for - what the buyers believe to be - confusingly similar marks. If Company is the senior user as against this registrant, and if the other company’s registrations have not become incontestable, Company – or the buyer – will likely have to bring a cancellation action against the third party registrant. Perfect. Litigation. Litigation costs! Either way, the purchase price has now likely declined due to uncertainty. How about if the third party’s registrations had become incontestable? Those registrations are protected from cancellation on the ground of likelihood of confusion. What’s the value of Company down to now?
Oops! So much for the “TMing it” advice…again.
Although there are instances when recommending federal trademark registration may not be appropriate, making a blanket statement that brand owners not consider federal trademark protection from or before brand name launch is – in my opinion – down right reckless. Even if Seth Godin is right about the future of intellectual property, we are currently living in the present, not future. In my opinion, companies should still play by today’s rules, not by those rules that may never apply.
What do you think?