A Necessary Expense: Why Every Small Business Needs to Trademark its Brands

Dec 20, 2014

Small business owners frequently write off obtaining a federal trademark registration as an unnecessary expense. Many believe that a trademark is a luxury, one only large, litigious companies can put to proper use. This is certainly an easy mindset to fall into, especially for business owners who have worked hard to limit themselves to “must buy” expenses, but to do so is to mischaracterize what a trademark really is. This failure to obtain to trademark registration for critical branding, such as the company and/or product names, keeps small businesses from obtaining benefits they have already earned and really deserve.

A trademark is not only an offensive tool, an additional means to bring law suits against competitors, but also a defensive tool that can protect you from law suits and ensure that you have the greatest advantage possible if you end up in the court room. Equally critical is that federally registered trademarks can result in lowering your legal expenses in the event you end up in court. Simply put, for an ongoing business it is not uncommon that the cost of properly trademarking its brands eventually pays for itself.

It’s no secret that branding is a very important aspect of building a small business. The establishment of a strong brand creates an identity for your business for clients and potential clients alike to make use of your services or purchase your goods. But it is important to remember that branding comes with a significant risk. The greater your brand has been built up, the greater the incentive for competitors to attempt to piggy-back on the consumer good-will you have earned.

In the intellectual property field, we have encountered first hand countless horror stories of stolen branding and copycat naming. One such story involved a software company which failed to obtain trademark protection for the name of the company, their brand, and a competitor stole the domain name for the company name. The company whose name was stolen relied heavily on the internet for soliciting customers, and because they lacked the resources to bring a lengthy law suit based on their prior common law trademark rights (priority you’re given for using a name first but which lacks many critical and valuable advantages of federal trademark protection), they had no choice but to change their name and begin the branding process all over again. This software company lost valuable time, resources, and consumer good will, all from a problem which could have been avoided if a federal trademark registration had been obtained prior to the establishment of the brand.

With the proliferation of Internet company reviews, having a federal trademark registration can really protect your business from copiers (regardless of whether they are accidental copiers) even if they are in another state. For example, imagine that Mr. Frank Barber opens a men’s hair salon called “All the Cuttings” in Ohio but decides against obtaining a federal registration. Years later Ms. Cindy Dye opens up a woman’s hair salon in Texas called “All the Cuttings”. Unfortunately, customers of Ms. Dye are unhappy and make many negative postings about “All the Cuttings”. Some potential customers of Mr. Barber may decide not to visit his salon due to online reviews without realizing that they apply to another store. Even worse, although Mr. Barber opened his shop years prior to Ms. Dye, a court could still decide that Ms. Dye has rights to the name in Texas which prevents Mr. Barber from stopping the operation of Ms. Dye’s salon to stem the tide of negative online reviews. This could make selling Mr. Barber’s salon to an investor for possible expansion or franchising problematic and may even prevent a sale to a subsequent owner who only wants to maintain Mr. Barber’s current operations. If Mr. Barber had obtained a federal registration in a timely fashion he would have been able to force Ms. Dye to change her salon’s name – even if Mr. Barber did not find out about her salon until it had been in business for years.

The United States Patent and Trademark Office lists numerous benefits of trademark registration, including the presumption of notice to infringers, the presumption of validity of the registration, and the ability to recover money damages from infringers. What all this legalese means, in practice, is that trademarks registrants often do not even need to take infringers to court to stop them from infringing. Instead, because these legal benefits carry a significant advantage should the infringement suit go trial, trademarks registrants are often able to stop infringers through nothing more than a cease-and-desist letter.

Trademark protections also extend to domain names, adding further protection to the branding of trademark registrants. In the above example, the software company struggled because it could not afford to try to have the domain name taken from the infringer. For holders of federal trademark registrations, domain names will be enforced as if they are an infringing use of the trademark, and so a cease-and-desist letter will often be enough to stop an infringing domain name registration. If the infringer refuses, a trademark registrant would be able to bring a trademark infringement suit or could even bring a less costly arbitration suit (a Uniform Domain Name Dispute Resolution Policy dispute) with ICANN, the company responsible for assigning internet protocol numbers and managing all domain names. A federal trademark gives companies several options on protecting potential domain names for their brands that would otherwise be very difficult to enforce.

As you have seen, trademark protection can allow your brand to be more secure by threatening infringers as needed and by lowering legal costs when protecting your brand – whether by stopping third parties from copying or defending against allegations that you are not entitled to your brand. Additionally, the trademark application process can in some instances help protect your from infringing other trademarks. Although small business owners may not consider it when selecting a brand name, selecting a brand name always raises the possibility that you may be infringing the use of a previous user, who would attempt to sue you as a competitor attempting to piggy-back on their mark. Should this happen, you might open yourself up to lawsuits, and either be forced to rebrand or to pay monetary damages. Applying for a federal trademark can be a good way to avoid such a risk, even if you expand nationwide. The USPTO thoroughly searches its entire trademark database when reviewing an application, and publishes the trademark to allow senior users to protest your application. This allows you to know if other users exist, and allows them to stop registration without making you defend your mark in federal court. While there may still be some senior users with common law rights, a trademark registration can help lessen fears that that a senior user will surface and sue, though that remains a small possibility. Even if such a user did surface, they would likely be restricted by a court to a small geographic area, and so they would not be able to halt your use.

With these guarantees, your brands and company can be made much more valuable. This can create another significant benefit, as trademarks can be freely bought and sold, both within the same industry or to users in other industries. Should, for example, a foreign company want to use your mark in the US because they use it abroad, or should another US company want to take over your brand and the established consumer good will, you would be able to sell it for a significant sum. Essentially, federal trademark protection turn your brand into a significant legal asset, which can increase in value and increase your company’s worth.

In addition to the benefits listed above, it should also be noted that a federal trademark registration has some more narrow advantages as well. These advantages are designed to benefit companies doing business internationally, and so include the right to file a trademark in other countries and the ability to deposit a copy with United States’ customs officials to prevent importation of counterfeit goods. For most small business owners, these benefits may seem insignificant, but they can offer further protection should your company continue to grow.

To obtain a trademark, we recommend clients consult with us prior to selecting a mark, as we can help ensure that the mark is trademarkable and will be afforded strong protection. However, we typically help clients who have already selected and perhaps have even begun using their mark. It is never too late to seek trademark protection for a mark, but it is best to get protection as soon as possible for your brand. We apply for the application directly with the USPTO, and guide our clients through the entire trademark process, both in obtaining a trademark and in maintaining the mark after registration.

With the advice of experienced counsel, the trademark process can be a relatively straightforward process. Compared to other types of legal protections it can also be a relatively inexpensive process which ensures that your brand and your business can be protected from lawsuits and infringement. At this point you are aware of experienced counsel that can make the trademark process accessible and assist in preparing the most advantageous federal trademark application for your brands. For all of the above reasons, federal trademark registration should be considered a necessary purchase for every forward-thinking small business.