Business Owners Need Federal Trademark Rights

Ten years ago, back in 2004, an interesting and somewhat unexpected story surfaced about Microsoft’s intellectual property portfolio. A man by the name of Rich Tanenbaum, who is the founder of Savvysoft, had been told by Microsoft to stop using the name TurboExcel for his own software. This in and of itself would not have been much of a story except for the fact that this news item exposed the almost incredible fact that Microsoft did not have a federally registered trademark in the United States on the name Excel.

Every company, no matter how large or small, has valuable intellectual property that can be protected. Frequently, however, many companies choose not to take the steps necessary to protect this intellectual property, which leaves the property vulnerable, weak or perhaps even non-existent in time. Generally, however, it is the so-called “Little Guy” that leaves the door open for the larger, IP sophisticated companies. This story demonstrated that even giant corporations can have intellectual property lapses. Apple has also had similarly famous lapses with respect to various “i” products, such as the iBook, which they had to acquire from a company that already had the rights to use that name commercially.

Is there anything one can do to stop competitors, large or small, from using your trade name even if you do not have a federally registered trademark? The answer is yes, although it is certainly far and away preferable to have a federally registered trademark.

While it is indeed almost unbelievable that Microsoft did not have a registered trademark on the name Excel, under Section 43(a) of the Lanham Act, which is codified in the US code at 15 USC 1125(a), there is no need to have a federally registered trademark in order to file a trademark infringement lawsuit.

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Trademark infringement is not about protecting marks, it is about protecting consumers. Certainly, giving a trademark owner a right to sue to protect consumers does provide protec- tion for the mark, but that does not change the central focus of the trademark laws. The way the trademark laws approach protecting consumers is by prohibiting even the likelihood of consumer confusion. This being the case, an individual or corporate entity can file a trade- mark infringement lawsuit even in the absence of a registered trademark.

This is not to suggest that a federally registered trademark does not have significant advantages. Obtaining a federal registration makes the mark much stronger, which will bolster any claim that is made for any resulting potential consumer confusion. For that reason it should come as no surprise that Microsoft finally did apply for a trademark on the name Excel. The application was filed on April 12, 2004.

In legal terms, due to the overwhelming popularity of the Excel line of software consumers would all but certainly believe Microsoft was the source of any product is being sold by that incorporates the term “Excel” into the name. So even without a federally registered trademark Microsoft was going to be fine, but that is only because they had spent so many millions of dollars getting the public to associate Excel with Microsoft. For the small business that pursues the use of a name and chooses not to pursue a federal trademark registration the outcome is almost certainly going to be very different.

It is critical that companies, both large and small, take proper precautions with respect to the names they use in business. With a federally registered trademark it is usually extremely easy to get a competitor to stop using a name or symbol that you own the rights to use commercially. Without a federally registered trademark it is still possible, but much more difficult and far from guaranteed. What that means is in order to prevail you should anticipate paying lawyers far more than you would like to secure the rights to your unregistered trademark. So for goodness sakes, get a federal trademark!

But deciding to apply for a federal trademark registration isn’t the end-all-be-all. Frequently a name or mark is selected for a business without a trademark search ever being done. That can be extremely costly if it is later learned that some other individual or company has been already been operating under that name or mark. Even in the situation where no trademark infringement liability attaches, the second comer will need to stop using, give up on any good will already developed and move on. This can be quite costly, just in terms of recalling and revising advertising campaigns, letterhead, business cards and the like. The best advice is, therefore, to always do a trademark search and file for a United States Trademark.

Unlike patents, which can be quite expensive to obtain, even if you hire an attorney to prepare and file a trademark application you can normally have the application prepared and filed for under $1,000, including the government filing fee. As long as you haven’t picked a trademark that is too close to something already existing, and you file the trademark application properly from the start, the post filing cost to obtain the trademark is normally on the order of $500 to $700. So for $1,500 to $1,700 you can lock up your trademark with respect to the entire United States. The enormous strength of a federally registered trademark makes this investment a no-brainer for businesses.

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Still, some businesses will choose to pursue state trademark rights, which in my opinion is a mistake. Yes, they are much cheaper than federal trademark rights, but they are extraordinarily weak. For example, most people are surprised to learn that if they obtain a state trademark in one state they are not even granted the right to use the trademark throughout the entire state. This is because a federal trademark that is acquired by another party after you obtain your state trademark registration will freeze your use of the state trademark into the currently existing geography at the time the federal trademark is acquired.

For example, let’s say you operate your business in Syracuse, New York, so you decide to obtain a state trademark in New York, which seems logical. But then I decide to start a similar business in Leesburg, Virginia. Instead of obtaining a state trademark registration I apply for and obtain a federal trademark registration. My federal trademark registration can cover your exact trademark and would give me rights across the entire United States everywhere except in Syracuse, New York. In fact, if you attempted to expand outside of Syracuse, New York, say to Rochester, New York, I could stop you even though you have a New York state trademark. Therefore, you want to acquire a federal trademark, which will give you rights to the entirety of the United States.

For more information on this topic I recommend these articles:

Gene Quinn Gene Quinn is a patent attorney and a leading commentator on patent law and innovation policy. Mr. Quinn has twice been named one of the top 50 most influential people [...see more]

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Join the Discussion

10 comments so far.

Mark Nowotarski
January 6, 2014 08:58 pm
Trademarks protecting the consumer is literally true. I’ve been learning about the world of on-line knockoffs, and the key source of consumer hazard is counterfeiters who misrepresent who made the inferior item and then sell it through the original item’s online listing (e.g. Amazon) to unsuspecting consumers. Just take a look at the one star ratings of otherwise high quality products and you can find the damage knockoffs cause. (Example of Olloclip knockoffs http://amzn.to/1lLAs1I) When the trademark owner vigorously enforces it’s trademark rights, consumers are protected.
Anon
January 6, 2014 06:56 pm
I agree, trademark law definitely has its interesting distinctions from patent law. (although I would add that patent owners have to be diligent in policing their rights – for multiple different reasons – innately to the particular patent, so as to be able to obtain the benefits of the patent right and globally as patent rights in general are in danger of ‘being lost’ or greatly diminished (you cover this in other discussions).
Gene Quinn
January 6, 2014 04:49 pm
Anon-

I agree. There is no doubt that the net effect is a significant benefit to the trademark owner. But to enjoy that benefit the trademark owner has to remain vigilant. The benefit doesn’t attach in the same way a patent does.

Perhaps there is another article here that discusses the need to police— or lose— a trademark.

-Gene
Anon
January 6, 2014 01:27 pm
I think the real world effects of trademark law would indicate that both Gene and Seth are correct (in some aspects).

The law protecting a firm’s reputation, goodwill and market (to Seth’s point) is based fully in protecting the consumer (Gene’s point). That is why trademark rights must be tied to a consumer product and any transfers in gross will void the protection. If only drawn to the business of the mark owner, naked transfers would be allowed.
Gene Quinn
January 6, 2014 12:20 pm
Seth-

I don’t really care whether you agree with me or not. I am, however, correct. The purpose of the law is to protect consumers.

For example, if a trademark owner is harmed but there is no consumer confusion then the trademark owner cannot prevail under 1125(a). It is that simple.

As far as protecting the mark’s owner in terms of reputation and good will, that is certainly a byproduct of the trademark laws protecting consumers.

-Gene
Seth TeBeest
January 6, 2014 11:38 am
Gene,

I disagree with your statement that “trademark is about protecting consumers.” While the law uses consumers as a measuring stick for determining infringement, the purpose of the law is to protect the mark owner. Consumers cannot bring an infringement suit when they are confused. Nor does a mark owner assert the consumer’s rights when claiming infringement. All rights accrue to the owner of the mark. The law protects the mark owner’s reputation, good will, and its market from competitors.
Gene Quinn
January 5, 2014 12:18 pm
Michael-

I also wonder whether you also complain to television stations, radio stations, newspapers and magazines when they have advertising you disagree with?

-Gene
Gene Quinn
January 5, 2014 12:12 pm
Michael-

I wonder how much you might be willing to contribute to IPWatchdog.com personally? You do realize this is my business, right?

It is extraordinarily disingenuous of you to criticize me. I would expect more from an attorney.
Michael Zall
January 5, 2014 09:55 am
Perhaps always present, but not noticed by me, it seems somewhat ingenuous for an attorney that stresses the importance of a well written provisional applications to accept advertisements for PROVISIONAL APPLICATIONS FOR $149!
You cannot prevent such businesses, but it you do not need promote it.
Dan Ballard
January 4, 2014 02:50 pm
Gene, a business owner can, as you know, register its trademark rights with both the federal and state trademark offices [the former if the mark is used in interstate commerce]. The state registration is very inexpensive and allows the mark owner to assert a dilution claim if the mark is famous within a state. This is, I think, a very useful tool for such locally famous marks.