Legal
CHOOSING & PROTECTING YOUR
COMPANY'S TRADEMARKS.

by Lawrence R. Jordan & Holli Hart Targan

   Your company has a hidden asset. The asset is as valuable as your merchant portfolio, but rarely is noticed, much less protected. Yet, it has the potential to distinguish you from every other guy out there selling merchant services. That asset is legally referred to as "intellectual property". This article will describe the intellectual property rights surrounding trademarks, and what you can do to safeguard them.
   When you think of the word property, visions of real estate or tangible products float in your head. Everyone knows that stealing such tangible products from the rightful owner is against the law. What you may not realize is that the law protects intangible objects, such as your name and logo, as well.
   If your name and logo obtain trademark status, you have the exclusive right to use that mark with a certain type of goods and/or services. You also have the right to get a court order stopping a competitor from using an identical mark or a similar mark that is "likely to cause confusion." Accordingly, the law will allow the use of two identical marks in totally unrelated businesses (such as CADILLAC for both cars and coffee).
   However, the law will not protect all product and service names. A name must be sufficiently "fanciful" to be protectable. For example, KODAK is protectable because it is entirely fanciful (it does not tell the consumer anything about the goods or services it represents, unless the consumer already knows something about the company.) In contrast, the same company could have used a name like "Photographic Film & Equipment Company in Rochester, New York." That would not be protectable, because it merely describes what the company does.
   Examples of marks that courts have found unprotectable (because they are too descriptive) are:

  • Gold Card (for premium level card services)
  • Flowers by Wire (floral delivery)
  • Imported Auto Parts (foreign automobile parts)

   The best way to build a strong trademark is to choose one that is sufficiently fanciful to gain legal protection. That's what the owners of the following well-known marks have done: POLAROID, CLOROX, EXXON, and XEROX.
   For most companies, the art of picking a trademark is choosing one that is sufficiently descriptive to tell your customers what you do, while being fanciful enough to earn full legal protection. This selection often involves both the marketing and legal departments. DICTAPHONE (used with dictating machines), FIRST FEDERAL (used by a bank), PARK N FLY (used with airport parking services), and SAVINGS SHOP (used with banking booths in malls) have successfully struck this balance.
   Once you have selected a mark, it is imperative that you determine whether others in your industry, or related industries, have registered or are using the mark. You'll want to start with a search. There are a number of ways to do this search. You can search the on-line database of the U.S. Patent & Trademark Office ("PTO") by going to www.uspto.gov, and then follow the prompts to trademark searches. This search will reveal, with a high degree of accuracy, the marks registered or pending application with the U.S. PTO.
   In addition, (and preferably), you should search one of the private databases for state and common law marks, as well as federally registered marks. You should arrange for a search on a private database through your legal department or outside counsel. The cost of a search can range from $100 - $1,000, depending on how many potential conflicts are found, with the norm being around $500.
   Why look for information about state and common law use? Because the U.S. trademark system has three tiers of protection:

  • The highest level of protection is registration with the U.S. PTO in Arlington, Virginia (more about this later on). This federal registration is available to marks which are used in interstate commerce (i.e., used across state lines or between the U.S. and a foreign country), and which otherwise meet the requirements of the federal trademark act.
  • Registration with one of the 50 state trademark offices. These offices are run by each state and have authority to register intrastate marks. That is, marks that are used within the state's boundaries, but not outside the state. A good example of an intrastate mark is a mark used by a purely local business, like a barbershop or a local vegetable stand.
  • Even if you don't register your mark, it may still be protected under the common law theory of unfair competition. Under this doctrine of law, a business is not allowed to use the trademark of a competitor in a way that is likely to cause confusion. If you can prove that you have used a name or logo so much that customers identify that name or logo with your business, you have common law trademark rights. However, without a registration it is difficult to prove how well known your work is. Another weakness of common law marks is they are only enforceable in jurisdictions where they have been used. For example, if you have extensively used and advertised an unregistered mark in Michigan and Illinois, you might be able to stop a competitor from using that mark in those two states. But your common law protection extends only to those two states, and not beyond. By contrast, a registration with the U.S. PTO would allow you to stop infringement in all 50 states, even though you'd only used it in two.

   Once you have completed the trademark search, you should have it analyzed to determine whether any of the marks found in the search would be infringed by your mark. Typically, this analysis is done by an experienced trademark attorney.
   If your trademark attorney opines that your mark is likely to be registered, the attorney can help you prepare and file an application with the PTO. There are two types of federal applications: one for marks already in use, and one for marks which you have "a bona fide intent to use." The latter are called "ITU" applications.
   Both types of applications are handled similarly by the PTO. The only significant difference is that the ITU applicant need not submit samples showing use of the mark in commerce (rather, the applicant signs a statement that it has a bona fide intent to use the mark in commerce within six months after approval by the PTO). Incidentally, the PTO has a simple procedure for converting an "ITU" to an actual use application, if you start using your mark during the application process.
   The PTO filing fee is $325 per "class". Each type of product or service with which you use a mark counts as a separate "class". For example, a computer program sold to the financial services industry might be registered in Class 9 (which includes electronic goods, such as computer hardware and software) and Class 36 (which includes financial services).
   It takes the PTO up to one year to examine and issue a final ruling on a typical application. The good news is that applications are given priority based on the date of filing; all other things being equal, an earlier filing will prevail over a later filing.
   Once the PTO issues a registration, you should use the "" notice with your mark. This symbol tells both your customers and potential infringers that you own a duly registered mark. Prior to registration, you should use the "TM" notice with your mark. This notice announces that you claim your common law trademark rights.
   The total cost of obtaining a U.S. registration varies, depending on the complexity of the search, the number of classes involved, and the amount of attorney advocacy necessary to shepherd a mark through the PTO. Most U.S. marks fall in the $2,500 - $3,000 range, including search, PTO, and attorney fees.
   Once issued, U. S. registrations are good for ten years. They are renewable in perpetuity, so long as you continue to use the marks in interstate commerce. However, failure to use the mark can result in "abandonment". At the least, you must file an affidavit with the PTO, between the fifth and sixth anniversaries of registration, swearing that you continue to use the mark.
   The marks can be transferred along with the goodwill of your business. A trademark is therefore a valuable and long-lasting asset of your business. Choose and protect it wisely, and you will benefit for many years.