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Posted August 8, 2013.
I am the trademark police. I’m here to tell you about some common misunderstandings and mistakes I encounter when dealing with trademark-infringement targets.
First, some background: Usually, the name of a business is a trademark, and the names of product and services usually are too. When I contact a target, its usually because one of the target’s trademarks is confusingly similar to the older trademark of one of our clients.
A common come-back I get from targets is that they got their business name registered as a corporate name (either by forming a corporation or an LLC), or they were able to register a matching domain name (e.g., acme.com), or they registered the name as a trade name, or they got some kind of permit or license in that name.
None of those things create trademark rights or insulate you from a trademark-infringement claim.
Indeed, unfortunately, most lawyers who set up companies (again, corporations or LLCs) never warn their clients that doing so does not take care of the trademark angle. If that company name will be used in business, it’s a trademark.
You need to get the company name (and product and service names) cleared as a potential trademark by having the name checked by a trademark attorney against trademarks already in use. This is called “clearance.”
Another common come-back is that the target’s trademark isn’t the exact same as my client’s trademark. Sometimes the difference is plural versus singular words. Sometimes the trademarks include different merely descriptive worlds (compare ACME FURNITURE to ACME FINE FURNISHINGS). Sometimes, the two companies use different logos despite nearly identical wording.
Understand that, as with horseshoes and hand grenades, too close can kill you in the world of trademarks. Trademarks don’t have to be identical to be infringing.
The issue is whether the trademarks, and the goods and/or services they cover, are sufficiently similar such that consumers are likely to be confused. For example, if someone opened a fast-food joint called “McRonald’s,” you can bet McDonald’s would successfully shoot that down.
There is no simple, do-it-yourself test for how similar is too similar. The legal test is a multifactor analysis that requires special legal training to apply and upon which reasonable minds can disagree in some cases.
A fall-back argument I get sometimes is that my client and the target are not in the same geographic marketplace. Sometimes that separation does put off the day of legal battle, particularly when both companies provide services rather than sell goods.
Yet, the target often does not realize that it will be forced to switch trademarks when the trademark enters the target’s marketplace. Indeed, as the Internet pulls us all closer day by day, eventually geographic separation may not be a defense at all.
The last-ditch position I encounter with targets is not an argument but, instead, an outlook. Often targets ignore the legal letters and calls and assume or hope that, if and when they get sued, they can just make a name change and the problem will go away.
Sometimes trademark owners do go away. Usually they don’t go away, but perhaps their business flags, or perhaps they are just not willing to pay the litigation cost of protecting their trademark.
But understand that a target may not be able to get by with a promise of an eventual name change if a lawsuit is filed.
Some trademark owners will demand money in addition to a phase-out of trademark usage. These owners usually are mad that their expensive lawyer letters were ignored, and filing suit is expensive. Once suit is filed, the expense shoe is on the other foot, with the target having to pay money to hire a lawyer to investigate and prepare a defense. A plaintiff can use that potential cost to force a settlement payment from the target.
In addition, usually the trademark owner is bigger and has more money than the target. It often can afford to fight a while, which gives it leverage to threaten expensive litigation as a way to leverage a settlement payment out of the target.
Also, the trademark owner may require that the target make changes right away. That may involve destroying inventory and recalling products, which can be both expensive and embarrassing.
Regardless, if your business has had any success, you’ve hopefully build up some goodwill − some customer recognition. A name change will wash that goodwill away.
The best solution is to avoid having the problem. When naming a business, or a new product or service, have trademark clearance performed before you commit to the name. You might spend anywhere from several hundred to several thousand dollars on that clearance, but that pales in comparison to what you’ll lose and pay if the trademark police come knocking on your door.
Written on August 8, 2013
by John B. Farmer
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