Trademark Basics for Business Owners and Entrepreneurs

Let’s do a simple thought experiment. Imagine that you surprise your significant other with a gift that is contained in a small box. The box has no lettering, logos, or other outward indication of what it contains or where it came from. The box is, however, a distinctive pale blue color.

Your partner opens the box and discovers that it contains… a few paperclips. (Note to readers: This scenario is for illustrative purposes only. I do not recommend actually trying this.)

How will your partner react? Perhaps with just an eyeroll (if you’re lucky)? With anger, frustration, or disappointment? More importantly, what would explain their reaction? After all, the only notable feature of the box is its color.

Is it possible that the color of the box, by itself, created an expectation in your partner’s mind of what it contained? The answer, of course, is yes — and in very simple terms, that is the essence of a trademark.

Like patents, copyrights, and trade secrets, trademarks are categorized as a form of intellectual property (IP). In this article, we’ll explore the distinctive features of trademarks, as well as how trademarks differ from other forms of IP.

Understanding and appreciating these differences can help business owners leverage the advantages of good trademark management while avoiding costly pitfalls and headaches from common registration errors.

What is a trademark?

A trademark is a recognizable sign that denotes a product or service as coming from a specific source, and legally distinguishes it from all others of its kind. In other words, trademarks are fundamentally “source identifiers”.

What “signs” can be used as trademarks?

Trademarks are typically a word, phrase, symbol, design, or a combination of these elements. That said, trademarks can be anything that identifies the origin of the goods or services of one party from those of another.

For instance, in our thought experiment above, the pale blue box created an expectation in the receiver’s mind — which tells us that in some instances, a color by itself can be trademarked. Indeed, a well-known example of a trademarked color is the orange specifically associated with Reese’s Peanut Butter Cups.

Importantly, trademarks must be used in commerce and be distinctive in order to be entitled to legal protection. We’ll expand more on this below.

What do trademarks really protect?

The most fundamental difference between trademarks and other forms of IP is the public policy underlying the law. Consider that patents, copyrights, and trade secrets all serve to protect the rights of the IP owner:

• Patents
  • Protect: The inventor
  • By: Excluding others from making, selling, using, or importing the invention
    
• Copyrights
  • Protect: The creator of original works of creative expression that have been fixed in a tangible medium
  • By: Giving the creator the exclusive right to reproduce, publish, perform, display, or record the creative work
    
• Trade secrets
  • Protect: The creator of secret information
  • By: Preventing other entities from misappropriating the information

However, trademarks protect both the holder’s rights and the consumer’s safety. By preventing others from using the holder’s product or service without permission, trademarks protect consumers from confusion in the marketplace.

This basic concept is foundational to many of the differences between trademarks and other forms of IP.

What makes trademarks valuable?

Trademarks are inextricably tied to a product or service offered by a specific entity. Therefore, unlike patents and copyrights, which represent tangible concepts and can have independent value, the value of a trademark is associated with the strength of the connection between the trademark itself and the underlying goods or services.

In this sense, trademarks are very much an exercise in brand management, and trademark law contains elements that are similar to laws governing unfair competition.

How to obtain trademark protection

Trademark protection most often refers to federal trademark registration. In the United States, this procedure is administered by the U.S. Patent and Trademark Office (USPTO) and is noted by the “®” identifier.

That said, a trademark does not have to be federally registered in order to be enforceable. In some cases, mere use of a distinctive trademark can grant the user certain common law trademark rights. Most states also offer some form of state-level trademark registration. But a federally registered trademark will offer broader rights and protections at the national level.

What makes a trademark strong?

There are three types of strong trademarks which are usually federally registrable:

1. Fanciful trademarks are invented concepts that only have meaning in relation to the goods or services
   1. E.g.: Exxon, Xerox, Kodak
      
2. Arbitrary trademarks are actual concepts which have no relation to the associated goods or services
   1. E.g.: Apple, Amazon, Windows
      
3. Suggestive trademarks are concepts which have some relation to the associated goods or services, but do not directly state the quality of the goods or services
   1. E.g.: Microsoft, Pinterest

Generic trademarks — which refer to trademarks on the common, everyday names for a product or service — cannot be registered at all. So, for example, you can’t trademark “Laptop” as the brand name for a laptop.

A fifth and final type of trademark, descriptive trademarks, are federally registrable only under specific circumstances. We’ll discuss this in more detail below.

7 common mistakes in federal trademark registration

If you’re planning to federally register a trademark for your business, you’ll want to avoid these 7 common pitfalls through the process.

1. No pre-use clearance

Far and away, the most common mistake trademark practitioners encounter is what I’ve termed the “shoot first, aim later” approach. Here, a trademark owner will decide on a trademark and — out of enthusiasm, a desire for expedience, or both — begin using the trademark without first ensuring that no other entity is already using the mark.

In the United States, trademark law operates on a priority basis; that is, the first company to use the trademark in the United States owns it, not the first company to file an application to register the trademark.

If the owner discovers too late that the mark is already in use, they are at risk of infringing someone else’s trademark, or compromising the work they’ve done thus far to build their brand — and both of these outcomes are costly errors.

To avoid this, applicants should conduct a comprehensive trademark search before applying for federal registration. The obvious place to start is with USPTO’s database of registered trademarks (including abandoned or canceled registrations). Beyond that, you’ll also want to tap into other sources, as some unregistered marks may still have common law rights and are therefore still enforceable.

2. Using a descriptive trademark

Descriptive trademarks merely describe the product or service without distinguishing its source. They’re often considered weak, to the extent that they may not be distinctive, and are therefore not always eligible for federal registration.

Trademarks are evaluated on a “distinctiveness spectrum”: the more distinct the trademark, the greater the protection to which the trademark is entitled. The three types of strong trademarks I identified earlier derive their strength from being distinctive. The value of a trademark is directly tied to the strength of the connection to its related goods and services; however, this connection is evaluated from the perspective of the consumer. Trademarks that are able to produce such a connection without descriptive terminology are inherently stronger, more valuable, and easier to enforce.

That said, a descriptive trademark may become eligible for federal registration if the sign becomes recognizable in commerce over time through use and promotion (also known as “secondary meaning”). For example, American Airlines is a descriptive trademark that has since become associated with a specific origin, and is therefore now registered with the USPTO.

3. Insufficient or no use of the trademark

A mark must be used in commerce, in connection with a specific product or service, in order to be considered a trademark.

For federal registration with the USPTO, the applicant must submit proof of use in the form of a trademark specimen. The USPTO’s requirements for an acceptable specimen can be found here, and depend on what is being trademarked; we recommend consulting a qualified attorney to determine this.

If the mark hasn’t been used in commerce yet, but the applicant has good faith intentions to use it in future, they may file an intent-to-use application with the USPTO. However, the applicant then has a limited timeframe to provide proof of actual use before the registration will be granted. In other words, trademark applicants cannot “hold” or “bank” trademark registrations for defensive purposes.

4. Failing to renew the trademark registration on time

Federal trademark registrations are subject to periodic renewals: Businesses must file a renewal between the 5th and 6th year after registration, and then every 10 years subsequently.

During each renewal, businesses must provide another specimen demonstrating that the trademark is still in use. If they fail to provide an acceptable specimen, the trademark could be canceled.

To assist with the renewal process (as well as enforcement), trademark owners should keep detailed records of how, when, and where each of their trademarks are used.

5. Identifying the incorrect owner on the application

Under U.S. common law, the trademark owner is the person or business entity who first uses the trademark.

If a trademark application is filed identifying an incorrect owner (i.e., a person or entity who is not using the trademark), then that incorrect owner has no trademark rights to register. Moreover, they have no ownership in the trademark that can be conveyed to another party via an assignment.

As such, the only solution in this case is to re-file the entire trademark application with the correct owner.

6. Insufficient enforcement of how the trademark is used

It’s not enough for businesses to simply register their trademarks, as businesses also need to enforce and defend their rights. This includes controlling how, where, and by whom the trademarks are used.

First and most obviously, trademark owners will want to monitor for infringement by third parties, and take legal action if necessary.

Second, a trademark can be genericized when a brand name becomes so overused that consumers stop associating it with the trademark owner. Genericized trademarks may be challenged or even cancelled, which is why trademark owners need to take steps to prevent it by using the trademark as an adjective (e.g., Polaroid cameras, Xerox copiers, Crayola crayons, Clorox bleach, etc.) and never as a noun or verb.

Finally, businesses should control how their trademarks appear when used. For example, many larger businesses will create style manuals that detail how their trademarks are to be displayed. This becomes especially important for entities planning to license their trademarks to merchandise manufacturers, to avoid the issue of bare licenses.

7. The bare license (also known as the naked license)

A bare license is an agreement where a trademark owner licenses their trademark to another entity but, in doing so, fails to retain control over the use and appearance of the trademark.

This can be grounds for cancelling a trademark registration, because a company that doesn’t control its trademarks can cause confusion in the marketplace (as consumers could be misled about the quality of the product or service). In short, the trademark stops effectively identifying the source of the goods.

Businesses planning to license their trademarks should always consult with a qualified trademark attorney first.

Obtaining federal trademark registration: Seek out expert advice

Trademark law can be complex and difficult to navigate successfully. However, the guidance of a qualified trademark attorney can help ensure that you avoid pitfalls and give you the greatest opportunity to maximize the value of your trademark portfolio. The attorneys at Henry Patent Law Firm stand ready to assist you with your trademark needs — contact us now.