Friday, October 29, 2010

Busting Trademark Myths: Part 1 of a Three Part Series

There are a number of myths that exist with respect to trademarks generally and certain trademark rights. Those misbeliefs have the potential for financially devastating young companies and killing new brands right from the gate. Understanding key aspects of trademark law is essential for building strong foundations for companies and their brands. Just as business owners take time to create business plans, they must also take time to understand trademark rights and then, once they do, grab their brands by their horns and not let go.

Myth 1 Busted: The Best Trademarks Are Those That Describe Our Products Because They Save Us Money on Advertising.

Unfortunately, that is generally wrong. Although marketers love descriptive marks because they can “sell” products with little advertising budget, marketers fail to appreciate that descriptive marks are not immediately legally protectable. Meaning that competitors may also use that descriptive "trademark" without trademark infringement. The reason there’s no trademark infringement is because consumers generally don't perceive descriptive terms as source identifiers (or trademarks) but rather as descriptors about a product or service.  Accordingly, all competitors are free to use those same descriptive terms to promote their products. 

Turning descriptive terms into legally protectable trademarks usually takes many years and big advertising budgets! And some descriptive marks never reach trademark status. Think about that for a minute. A company can use a descriptive term as its "mark" for many years to later discover that it has no trademark rights at all. Even worse, its competitors can freely use its “mark!” Even if descriptive terms do acquire trademark rights (i.e., McDonalds and TV Guide) those rights are limited. For example, competitors may still use trademarks consisting of descriptive terms in a descriptive sense. Take for example the case of Whirlpool’s “Whisper Quiet” trademark for dishwashers. That mark was registered with the U.S. Patent and Trademark Office under section 2(f) of the Trademark Act. Meaning that Whirlpool admitted in its trademark application that its mark “Whisper Quiet” is a descriptive term – but has acquired trademark status through use. Although Whirlpool can stop competitors from using the term “Whisper Quiet” as a trademark, it likely can't stop competitors from advertising that their own dishwashers are "whisper quiet” too.

The better approach to selecting brand names is to select names that are at least suggestive of the products or services. For example, Grey Hound for bus transportation services, Die Hard for batteries and Close-Up for toothpaste. Then simply add “descriptive” wording to the mark (i.e., “Die Hard Batteries” and “Close-Up Toothpaste”). That simple.

Myth 2 Busted: Whoever Uses A Certain Trademark First Is ALWAYS Entitled To Exclusive Rights.

Unfortunately, that is not the case. 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).

For example: Company launches product and brand name XYZ in the North East on January 1, 2010. Company decides to accept an attorney’s advice not to seek federal trademark protection and simply “TM 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. On January 1, 2012, Company decides to launch its product and brand name XYZ nationally. Unfortunately for Company, another company launched the confusingly similar trademark XYYZ for the same 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.

Had Company secured federal trademark registration prior to any third party uses of confusingly similar marks, Company would have had the exclusive right to expand nationally with its trademark XYZ.

Myth 3 Busted: Selected Marks Are Available For Use And Registration As Long As There Are No Other Competing Marks With The Same Spelling.

Wrong. A mark is available for use and registration only if there are no other marks considered confusingly similar. For example, Company selects the mark HIGHWAY (word only, no design element) for its transportation and logistics services. Company searches the United States Trademark Office database and finds the registered mark HI-WAYS with a design of a highway for transportation services. Although the marks are spelled differently and the selected mark HIGHWAY does not have a design element, the mark HIGHWAY would likely not be registrable and would likely be considered infringing of the registered mark HI-WAYS and design because the literal elements of the marks are phonetically similar and they convey the same connotation and because the parties services would likely compete within the transportation services field.

Stay tuned for my next post where I’ll bust three more trademark myths, including myths about domain names and "exclusive" rights granted by federal trademark registrations.

4 comments:

  1. Roger, great information in this post. Your blog is a valuable resource for many of my colleagues who are launching new businesses in 2011. Thanks for the great insight!

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  2. Michelle,

    Many thanks for your comment and for stopping by my blog. As you know with your blog - www.michellebeckham.wordpress.com - it's good to receive feedback.

    -Roger

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  3. Great post. You should also check out our take on 8 dangerous myths about trademark registration http://trademarkmyths.com

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