Leggo My Logo: What Small Businesses Should Know About Trademarks
by Stephen Elias
Copyright © 1992 Nolo Press
This article originally appeared in the Summer 1992 issue of Nolo News and is
adapted from Trademark: How to Name Your Business, Products and Services, by
Kate McGrath and Steve Elias (Nolo Press).
You may copy this article as long as you include this copyright notice.
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In 1994, Nanette incorporates in California as Maverick Fashions, Inc.,
intending to open a small clothing boutique under that name. The California
Secretary of State approves the name because it is not deceptively similar to the
name of any other corporation registered in California. Six months later, the
business opens, with great success. The Maverick name appears on the business
sign and in advertisements, brochures and the Yellow Pages.
A month later, Nanette receives a stiff letter from Madonna's attorneys, claiming
that Maverick is a federally registered trademark used as an umbrella name for
all of Madonna's enterprises, including a brand of lacy lingerie, and that
Nanette must immediately "cease and desist" from using the name. Nanette is
confused. She thought her corporate registration meant she could use the name to
identify her business. Not. Assuming the letter speaks the truth, Nanette will
have to find another name quick.
Nanette's mistake is typical. Most small business owners assume their business
name is theirs to use in any way they wish. The confusion comes from the fact
that a business name has two entirely different qualities, depending on how it's
used. It is a tradename when used as the formal name of the business (on checks,
invoices and letterhead), and a trademark or service mark when used by the
business to market its products or services.
In Nanette's situation, her name was cleared for use in California as her
tradename, but not as a service mark to be used in connection with her retail
clothing service. When a business name is used as a trademark or service mark, a
whole new set of principles, collectively known as trademark law, apply. Small
business owners need to know these rules--both to avoid legal trouble and to take
advantage of the marketing edge a distinctive trademark can give a small
business.
A trademark is any word, phrase, design, slogan or symbol (including
nonfunctional unique packaging) that serves to identify a specific product brand.
Examples: Xerox photocopiers, Kodak film and cameras, Exxon gasoline and
automotive products, Nike sport shoes, Apple Computer's rainbow apple with a bit
missing; the red Coca Cola logo.
A service mark is any word, phrase, design or symbol that identifies a specific
brand of service. Examples: McDonald's fast food service, Kinko's photocopying
service, ACLU legal service, Blockbusters video rental service, the UPS logo
(postage delivery service) the U.S. Postal Service's eagle in profile (postage
delivery service); CBS's stylized eye in a circle (television network service),
the Olympic Games' multicolored interlocking circles (international sporting
event).
As a general rule, the first business to use a trademark or service mark owns
it--and can stop others from using it. There are two ways to qualify as a first
user:
- Be the first to actually use the trademark or service mark in the
marketplace.
- Apply to register the trademark or service mark on the federal principal
trademark register (discussed below)
Actual use usually takes priority over registration in case of a conflict between
marks. For instance, had Nanette used the Maverick service mark before Madonna
did, Nanette would win the dispute even if Madonna federally registered the mark
first.
The degree to which the law lets you stop others from using a trademark or
service mark depends on how distinctive (strong) your mark is. Marks are
distinctive for two reasons:
- They are inherently memorable because they are contextually arbitrary,
unusual, unique, evocative, surprising or otherwise effective in setting the
product or service off from others
- They have become memorable through use--that is, customers have come to
associate the name with the business.
The ability of a mark to stand out in a customer's mind--its distinctiveness in
the trademark context--comes from a number of different characteristics.
Distinctive marks include:
- Coined (made-up) terms such as Exxon, Kodak or Rackafrax.
- Fanciful or surprising terms--words that are common in one context become
distinctive in another. This usually occurs when the term is imaginative,
unexpected or arbitrary as it's used, such as Apple computers, Cherokee clothes,
Time magazine and Double Rainbow ice cream.
- Evocative or suggestive terms, such as Greyhound bus lines, Suave shampoo and
Jaguar cars.
Trademark law doesn't allow a business to monopolize commonly-used words or words
that many similar businesses might use to accurately identify the services or
products they provide. For example, most adjectives (soft, fluffy, tasty,
accurate, fast, easy, tough, reliable) are available for anyone to use. Common
words don't do a good job of distinguishing one product or service from others
anyway.
As a general rule, the owner of a legally strong trademark or service mark can
keep others from using it or something so similar that its use would create the
likelihood of customer confusion. In Nanette's situation, Madonna's lawyers would
have argued, successfully, that Maverick is a strong mark because it is
suggestive of Madonna's qualities without describing them outright and that
Nanette's use of the mark in connection with clothing would be likely to confuse
customers into thinking that Madonna had something to do with the store.
But what if Nanette had used the name on a line of fruit preserves rather than a
clothing business? Madonna's lawyers might have a more difficult time, because
the likelihood that customers would think of Madonna's Maverick when buying
Maverick strawberry preserves would be low.
But if a mark is very strong, its owner can stop other businesses from using it
even on very different kinds of good or services. For example, Madonna adopted
the Maverick mark in 1992. If the mark is so well known by 1994 that a
substantial portion of the public automatically thinks of Madonna whenever they
see the word, Madonna might be able to stop use of the word even on non-competing
goods, such as Nanette's preserves. The moral: Don't mess with really famous
marks.
Before you use a name to market goods or services, find out whether or not any
confusingly similar marks already exist. Look at:
- The federal trademark register or state trademark registers, which list
registered marks.
- Resources that list names being used for the particular type of product or
service offered by your business--such as the Yellow Pages, Gale's List of
Tradenames, or trade magazines. (Remember, marks don't need to be registered to
be legally strong.)
You can make this inquiry, called a trademark search, by computer or in a large
business library. You can also pay a trademark search firm to do it for you.
If your mark is legally strong and no one else is using the same mark or a
confusingly similar one, you may be entitled to register the mark with the U.S.
Patent and Trademark Office. To register, you must be using the mark across
state, international or territorial lines or in a way that affects commerce
across those lines. A mail order business, a bed and breakfast that advertises
out of state and a concession at a location heavily visited by tourists would all
qualify for registration.
Owners of federally registered trademarks have many important advantages,
including exclusive nationwide ownership of the mark and official notice to all
would-be later users of the mark that the mark is already taken.
Get a complete description of
Trademark: How to Name Your Business &
Product by Attorneys Kath McGrath and Stephen Elias.
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Last updated: December 31, 1997; Version: 1.6