US Trademarks: The Basics
Authored By: Diana Palchik
Trademark Attorney & Auxana Community Member
Trademarks are important business assets for large and small companies – even startups. A large company may have a larger budget to protect trademarks and also to correct trademark mistakes. Because of the financial constraints that face startups, it is critical to correctly navigate the trademark process at the outset, long before launching a brand. Many startups play roulette with their trademark strategy, mostly due to entering the landscape without an adequate roadmap.
From the perspective of investors and potential acquirers, your product is actually your company and the goodwill associated with its branding, so the goal is to maximize the value of your company’s assets. Trademarks are intangible assets, and trademark-related problems reduce a trademark’s value.
A strong trademark allows a company to prevent others from using confusingly similar marks and thus to maintain its unique branding position. If your mark is infringing another company’s mark, your company is a lawsuit risk, which affects its valuation. Valuation may also be lower for unregistered marks because they are frequently harder to enforce. Because of the timing of the review of a trademark application between filing and registration, trademark applications should ideally be filed ahead of a new brand launch, such as a 12-18 month lead time, or possibly longer.
Trademarks are an important way that consumers identify your company’s products, differentiating them from the products of your competitors. This means that trademarks are a key mechanism of communication with customers in the marketplace. Involuntary rebranding as a result of infringing another company’s mark involves problems beyond the costs of purchasing new labels and ad copy. There is significant expense from loss of goodwill and the effort needed to build new associations in the minds of the purchasing public.
When seeking trademark rights and protection, you should:
- Do your homework. Many smaller companies without trademark expertise attempt to minimize the up-front fees. Up-front is not really the place to try to cost-cut. Most of the time up-front fees are going to be fairly similar if you are getting competent legal advice.
However, it is certainly possible to significantly reduce the likelihood of additional fees. One way to do this is to correctly search and file at the outset so that you are less likely to incur additional fees, such as those associated with responding to a substantive refusal letter from the Trademark Office. Responding to a substantive refusal letter will usually add several thousand dollars of expense. Likewise, if the trademark is not properly filed, additional fees may be incurred in preparing and filing a new trademark application that would otherwise not have to be filed. That can add another several thousand dollars. If the mark was not properly researched and is opposed by a third party with pre-existing rights, this can potentially add tens of thousands of dollars to the trademark costs to fight it out; and of course rebranding carries its own significant costs.
A company that plans on filing multiple trademark applications, due to aggressive product line expansion or other reasons, would do well to learn the right way to perform initial screening searches, as that can reduce legal fees. It is possible for companies to perform their own knockout searches to eliminate candidate trademark names that are clearly unavailable. They can then contact a lawyer for deeper searching only after identifying a name for which no conflict could initially be found.
- Get over the bumps in the road. There are two very common reasons for registration to be refused. One is that the mark is likely to be confused with another mark, and the other is that the mark merely describes the underlying products or services. It is possible to significantly reduce the risk of these types of refusals by conducting proper due diligence concerning competitor marks and, in the case of descriptiveness refusals, simply staying away from certain types of names.
These types of refusals can sometimes be overcome by modifying the goods or services description in the application. Other times, they can be overcome with carefully-crafted legal arguments presented to the Trademark Office; but not always. Unfortunately, legal arguments are not guaranteed to succeed. Preparing them involves lawyer time (i.e., expense) that applicants hope to avoid. Many times an applicant simply abandons the application and looks for a new name. The best time to conduct due diligence of a proposed product or service name is before buying domain names and before launching the product or company. The reality is that most first-choice and second-choice names are already taken. People expect this to be the case with domain names, but seem to be more optimistic about trademarks. Name selection will likely require a list of candidate names that can then be narrowed down by eliminating the ones that turn out to be unavailable or too descriptive.
Working with an experienced trademark lawyer has been statistically shown to substantially increase the likelihood of successfully getting through the examination process.
About Diana: Diana Palchik is the founding attorney of Palchik Law & Consulting. She has been practicing law for over 18 years and has served as in-house counsel in several large corporate legal departments, including Mary Kay, Dell and Texas Instruments. She has served as a board member of a large metropolitan chapter of the Association of Corporate Counsel. Before attending law school, Diana earned a business degree in international business with an emphasis on marketing from a top-ranked business school. In addition to her trademark work, she frequently advises about software-related commercial agreements and services agreements.