What Small Business Owners Should Know About Trademarks
Trademark law has always been one of the areas of intellectual property law that I find most interesting. When I learned about it in law school, I was struck by how different trademark law is from other forms of intellectual property. Unlike patents, which protect technological innovations, trademarks protect something much less tangible. Unlike copyrights, which concern expressive works themselves, such as art and music, trademarks serve to identify the business behind the mark.
Imagine a business that spends years developing a reputation for providing an excellent product or service. Eventually, customers begin to associate the business's name or logo with a certain level of quality. The name itself now has value. Trademark law prevents a competitor from “freeloading” off of this goodwill by adopting a confusingly similar identity and unfairly benefiting from the reputation that someone else spent years building.
But there is another side to trademark law that makes it particularly interesting. Trademark law does not exist solely to protect the owner of the mark. It also serves an important consumer-protection function. Trademarks allow consumers to quickly identify the source of goods and services. This promotes efficiency in the marketplace by allowing consumers to make purchasing decisions confidently and without confusion.
A Trademark Can Be Almost Anything
Another fascinating aspect of trademark law is the extraordinary variety of things that can potentially function as trademarks.
Most people hear the word "trademark" and immediately think of a company name or logo. Those are certainly the most common examples, but trademark protection can extend much further. Depending on the circumstances, trademarks can include words, phrases, symbols, product packaging, colors, sounds, and even scents. What matters is not necessarily what the mark is, but what it does: does it identify and distinguish the source of particular goods or services?
That is why companies have been able to seek trademark protection for everything from distinctive colors to short sequences of musical notes. In the right circumstances, virtually any feature capable of functioning as a source identifier can potentially become part of a company's brand.
This raises a practical question for small and medium-sized businesses: Is trademark registration really necessary if you aren't running a nationally recognized brand?
In many cases, it is at least worth considering.
Trademarks Aren't Just for Household Names
Small business owners sometimes assume that trademark registration is something reserved for major companies with nationally recognized brands. But a trademark can become an important business asset long before a company becomes a household name.
For a local business, there are several reasons to think about trademark protection.
1. Finding a Problem Early Is Better Than Finding It Later
One of the most important trademark decisions happens before registration: selecting a brand that the business can actually use and protect.
Imagine operating under a name for several years, investing in signage, a website, advertising, social-media accounts, packaging, and customer recognition, only to receive a cease-and-desist letter alleging that your name infringes someone else's trademark rights.
At that point, there are no good options. You can defend against the claim if you believe the assertion is dubious. You can change the company name, signage, and branding. Either approach will likely involve significant legal expenses.
For that reason, trademark clearance should be considered early in the branding process. A proper clearance analysis can identify existing marks that may present a problem before the business makes a substantial investment in a particular identity.
The federal registration process provides another level of review. The U.S. Patent and Trademark Office examines an application and can refuse registration if, among other things, the proposed mark is likely to cause confusion with certain existing federally registered or pending marks.
That examination is not a substitute for a comprehensive clearance search, nor does obtaining a registration guarantee that nobody else can assert rights against you. But addressing trademark issues proactively is generally far preferable to discovering a conflict after a brand has become established.
2. Federal Registration Can Strengthen Your Position
Trademark rights can arise from use even without federal registration. But federal registration can provide significant additional benefits.
Among other things, registration can provide important legal presumptions concerning ownership and the validity of the mark, place the mark in the USPTO's public database, and provide rights that can extend beyond the geographic area in which a business is currently operating, subject to important limitations and any preexisting rights of others.
Those benefits can be particularly important for a growing business.
A Cape Cod business, for example, may begin with a single location and a primarily local customer base. But the Internet has blurred traditional geographic boundaries. A local retailer may sell products throughout the country. A service business may begin serving clients remotely. A successful restaurant or retail concept may eventually open another location.
Thinking about trademark protection before that growth occurs can help avoid having the business's brand become an obstacle to its expansion.
3. Trademarks Become Particularly Important if You Want to Expand or Franchise
A strong brand can eventually become an asset in its own right. If a business wants to franchise its business, license its name, expand into new markets, or eventually sell the company, intellectual property ownership can become an important part of the transaction.
After all, a franchisee is not simply paying for instructions on how to operate a business. A significant part of what the franchisee is buying is the right to operate under an established brand and benefit from the goodwill associated with it.
The same principle applies outside of formal franchising. If another company wants to manufacture products bearing your brand, open a location using your name, or otherwise license your identity, clearly established trademark rights can become an important component of the deal.
4. Registration Signals That You Take Your Brand Seriously
There is also a less technical benefit. A federally registered trademark allows its owner to use the ® symbol in connection with the goods or services covered by the registration. By contrast, businesses may use "TM" to identify a claimed trademark even without federal registration.
The ® symbol is small, but it communicates something meaningful: the owner has taken formal steps to identify and protect the brand as an asset.
For a growing business, that can contribute to a broader impression of an established and professionally managed brand. More importantly, it signals to competitors and others in the marketplace that the business considers its intellectual property worth protecting.
When Should a Small Business Think About Trademark Protection?
Not every business needs to file a federal trademark application the day it opens its doors. Trademark strategy should reflect the value of the brand, the nature of the business, its geographic reach, and its plans for the future.
But there are several points at which the issue deserves serious consideration.
If you are choosing a new business or product name, investing significantly in branding, selling products online, expanding geographically, adding locations, developing a franchise model, licensing your brand, or building a business that you may someday sell, trademark protection should be part of the conversation.
For small businesses, the most valuable trademark advice often comes well before there is a dispute. It is much easier to investigate a name, identify potential conflicts, and develop a protection strategy at the beginning than it is to unwind years of investment in a brand after a problem emerges.
Cape Cod is home to countless businesses that have invested significant resources, time, and energy in building valuable reputations in their communities. That goodwill may not appear as a piece of equipment sitting on a balance sheet, but it can nevertheless be one of the most valuable things a business owns.
