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iness owners are unaware that this valuable asset may not
be fully protected by incorporation with the Secretary of
State, by state trademark registration or even by filing
a fictitious name registration. In fact, federal trademark
registration (Lanham Act 15 U.S.C. 1072) are constructive
notice of one’s rights to the use of a name and if
one fails to check the federal register prior to adoption,
then that business does it at the risk of infringing a federal
trademark registration.
Under
Federal Trademark law, a federal registration may take precedent
over the state laws if an infringement arises as a result
of two business using the same or similar trade name or
trademark. Recently, I settled a trademark infringement
suit resulting from the adoption of a corporate and product
name that infringed an existing federally registered mark.
Three months after my client was incorporated and started
to sell his product, he received a cease and desist letter
from the trademark owner. At that time, my client had in
inventory over $25,000 worth of products bearing the infringed
trademark. Fortunately, by the time suit was filed and I
was retained, the inventory had been reduced to $5,000 and
we were able to work out a settlement which included a phase
out period for depleting the remaining inventory. If a federal
trademark search had been done prior to incorporating or
the use of the trademark on the product, my client would
have avoided the expense of litigation plus the expenses
involved in changing their name and trademark. Furthermore,
the client lost the goodwill that had been built up using
the infringed name.
Another
similar situation involved a service business which was
incorporated in Missouri fifteen years ago. Three years
after incorporation, another company in another state obtained
a federal trademark registration for the same mark covering
the same services as the Missouri company for trademark
infringement. After extended litigation, the Missouri company
was left with the right to use its name within a five-mile
radius of its original store and incurred $24,000 in legal
fees. In addition, the Missouri company had to compete with
the local franchisees and was unable to expand beyond the
five-mile radius. A federal registration of the name when
the Missouri company started business may have prevented
the subsequent complications.
Before
adopting a business name or trademark, a business, whether
it is a sole proprietorship, partnership or corporation,
should do the following research in order to avoid creating
a potential infringement.
FIRST:
The business owner should review available literature to
determine what trademarks or business names are being used
in the area in which the business owner is doing business.
This would include reviewing the Yellow Pages and the business
section of the White Pages of the telephone directory plus
local newspaper advertisements.
SECOND:
A call to the Secretary of State office should be made to
have the corporate records, fictitious name registrations
and state trademark records checked for the name chosen.
THIRD:
A trademark search should be done to determine if there
are any federal trademarks or applications existing that
could present a problem to the use of the chosen name. The
federal trademark search should be reviewed by an attorney
familiar with trademark law in order to properly evaluate
the results of the search. In addition, if the search indicates
that the name is available, then the business owner should
consider federal trademark registration to further protect
its rights.
In conclusion, a business builds its reputation under a
chosen trade name and/or trademarks. These names are business
assets that add value to the business and can be sold or
assigned to others along with the business. If a business
loses the right to use that trade name or trademark, then
it must re-establish its reputation under a new trade name
or trademark. As a result, the chosen trade name or trademark
are valuable business assets which a business should seek
to protect in order to protect the investment being made
to establish a profitable business.
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