General Practice, Solo & Small Firm DivisionMagazine

 
Volume 17, Number 3
April/May 2000

CHOOSING & DEFENDING A TRADEMARK

BY LISA E. CRISTAL AND VICTOR F. DEFRANCIS

A client comes into your office to tell you he wants to open up a retail store in the area, and needs your legal assistance to do so. You assure him that you will jump with him through all the legal hoops necessary to open his business. You will prepare documents necessary for incorporation or registration of his business with the state; obtain any necessary city or state retail licenses; negotiate and draft the lease for the retail space; enter into supply contracts; and order a trademark search on the name the client has chosen for the store.

Wait a minute. A trademark search? What does the law of trademarks have to do with a nascent retail store? Quite a bit, in fact. In recent years, more and more companies, large and small, have come to recognize that trademarks can be among the most valuable assets they own. Famous trademarks, such as KODAK, COCA-COLA, COMPAQ, and MARLBORO, have been valued in the tens of millions of dollars. Now, with the explosion of information and sales on the Internet, companies are becoming more aware of the importance of "branding"-creating unique identities for products and services in a crowded marketplace-and more aggressive than ever about registering and protecting their trademarks.

But wait, you say. We are talking about a small store, not MICROSOFT. The truth of the matter is that the heightened attention to trademarks in the marketplace generally makes it more likely than not that you will be confronted with a trademark issue at some point in your practice.

What Is a Trademark?

A trademark, broadly defined, is a word, name, symbol, or device adopted and used by a company to identify its goods and distinguish them from those of others. Trademark law originated in response to a perceived need to protect consumers by providing them with assurance that when they purchased a product bearing a particular mark in the marketplace, they could be certain that the product came from the same source as when purchased previously.

In other words, trademark law was not built upon the premise that a company's investment in its brand should be safeguarded. Trademark law developed to protect the public, not the trademark owner. In general, then, the best vantage point from which to examine any trademark issue is the potential consumer of the goods or services.

Although the term "trademark" is often used generally to refer to trademarks, service marks, trade names, certification marks, trade dress, and collective marks, the distinction between each of these terms should be understood. Trademarks, which may be words, designs, sounds, colors, or even scents, identify and distinguish a party's goods from those of another. Service marks are used to identify and distinguish a party's services from those of another. A service mark does for services what a trademark does for goods. A trade name identifies and distinguishes companies, partnerships, and businesses and their goodwill. Trade names are not registerable under the federal law, although they are protected under common law. Trade dress is defined as the overall impression of a product or its package. This can be a combination of shape, color, design, and/or words. Trade dress can be a product's packaging, labeling, or the design or configuration of the product itself. The trade dress of a product is protectable only if it is inherently distinctive or has acquired secondary meaning, and if the design's primary purpose is to distinguish and identify the goods, rather than being merely functional. Trade dress can be registered as a trademark.

Collective membership marks such as AAA, KIWANIS, and GIRL SCOUTS indicate membership in a group. Certification marks "certify" that the products or services offered by a third party meet, for example, a standard of quality, regional origin, or production by union members, even though the actual sources of the products or services may be unrelated. Examples of certification marks include the GOOD HOUSEKEEPING and FLORIDA CITRUS ASSOCIATION seals of approval.

Some Trademarks Are Stronger Than Others

Any trademark attorney will tell you that all trademarks are not created equal. The stronger the mark, the better the owner's ability to defend the mark successfully and to stop third parties from using similar marks. Over time, courts have come to recognize that trademarks fall within four broad categories, depending on their distinctiveness. Each category provides a different level of protection for the mark owner. Fanciful or arbitrary marks, falling into the first category, are the strongest types of marks. They are protectable without proof of secondary meaning, or a showing that the consuming public has come to identify the trademark as used with a particular product or service and relies on the mark to distinguish the product or service from those offered by others.

A fanciful mark, like KODAK or EXXON, is not a word that has meaning in any language; rather, the owner invents it for the sole purpose of being a trademark. An arbitrary mark is a word, picture, or symbol that is in use but bears no relationship to the goods or services to which it is applied (APPLE for computers, IVORY for soap). From a legal perspective, as an identifier of the source of goods or services, the marks that are inherently the strongest are those that are arbitrary or fanciful.

Suggestive marks, falling in the second category, include terms that require the consumer to exercise some imagination to draw a conclusion as to the nature of the goods or services, such as COPPERTONE for tanning lotion or CATERPILLAR for tractors. Suggestive marks, although not as strong as fanciful or arbitrary marks, also are protectable without proof of secondary meaning.

The third category on the spectrum of distinctiveness is descriptive marks, such as VISION CENTER for an eyeglass store. Descriptive marks identify a characteristic or quality of a product or service, such as color, function, ingredients, or size. Unlike fanciful, arbitrary, or suggestive marks, descriptive marks are not registerable or protectable unless secondary meaning can be proven. Secondary meaning can be proven through evidence of extensive advertising and sales or through a consumer-recognition survey.

The final category on the spectrum of distinctiveness is generic terms. A generic term is a common name of a particular class of goods or services, like computers or retail sales, that does not identify the source of the goods or services or distinguish them from those offered by others. These terms can never be registered or protected as trademarks.

The Trademark Search

Returning to the example of the client who wants to open a retail store, should that client be concerned about trademark law in naming the store? Absolutely. No one would advise a client, for example, to open an electronics store featuring computers and related equipment and call that store COMPAQ without anticipating an objection from the Houston-based computer maker.

It would be just as foolhardy, however, for the client to invent an arguably more distinctive name without conducting a search to determine if that use is likely to infringe the rights of a third party. In fact, about the only name that a client in such a position could use without the potential for infringement would be a generic term such as ELECTRONICS STORE or ELECTRONICS SHOP-which, although serviceable, are not particularly catchy from a marketing standpoint.

Although a client might resist incurring the cost associated with a trademark search, it is certainly far less expensive to conduct an adequate search prior to opening the store than to be forced to change a name in the face of an objection by a third party months or even years down the road. Those costs could include changing stationery, signs, official documents, marketing materials, and the like, not to mention the potential loss of goodwill resulting from adoption of a new name that is unfamiliar to loyal customers.

What, then, does a search entail? Trademark searching is generally a two-step process. The first step is a preliminary search of marks that are registered or applied for in the Patent and Trademark Office, and marks that are registered on any of the state registries. This search is useful in "knocking out" proposed trademarks that are identical or nearly identical to marks that are already federally registered for the same or highly similar goods. If such identical trademarks exist and are in use, it is safe to conclude that the proposed mark is unavailable, and there is no reason to run up costs by conducting a more comprehensive search. These preliminary searches can be done through proprietary databases such as Dialog and Trademark Access. Also, the Patent and Trademark Office recently placed the federal trademark database on the Internet at www.uspto.gov/tmdb/html/.

Once the preliminary search has shown that there are no identical or nearly identical registered marks, a comprehensive or full search is usually necessary. These searches, typically performed by professional trademark research firms such as Thomson & Thomson, CCH, or Corsearch, cull potentially conflicting marks, brand names, slogans, business and corporation names, and Internet domain names from hundreds of proprietary databases, and provide a much more complete analysis of third-party registration and use.

Comprehensive searches are organized into categories: federal trademark registrations and applications; state trademark registrations; common-law listings; and, increasingly, Internet domain names. The marks listed in the federal trademark registrations should correspond to the marks uncovered in the preliminary search. State registrations also are listed in the comprehensive search. Trademarks may be registered in every state, the District of Columbia, and the Commonwealth of Puerto Rico. State registration provides few, if any, of the advantages of federal registration, and usually it is not recommended for a company that is contemplating sales of products or services beyond a purely regional market. A state registration, however, may reflect use of a trademark in a particular state.

It would be a mistake to consider the next portion of the comprehensive search, common-law references, any less serious or significant than the corresponding federal or state registrations. An often unappreciated principle of trademark law is that rights in trademarks arise from use, not registration. Many companies do not register trademarks that they are using. Simply because these marks are not registered, however, does not mean that the rights of the common-law trademark owner can be ignored. It is because these common-law uses are not disclosed in a preliminary search that the comprehensive search is so critical to clearing a trademark.

Common-law references are considerably more cryptic than federal or state registrations. A common-law reference may include, for instance, an excerpt from a newspaper article merely stating that a company has introduced a product under a particular name. Such an article may provide even less information, listing only the name of a company and its location. This limited information makes it difficult, if not impossible, to determine whether the reference will result in a potential conflict with the mark under consideration.

The explosion of information on the Internet has further complicated the trademark search process because many of the Internet references listed in a search report are as obscure as the common-law references, if not more so. Many search reports now list second-level domain names, such as www.companyname.com, that incorporate the trademark under consideration or a close variation thereof.

Moreover, some search firms are developing proprietary trademark search engines that will scour the web for references in much the same way that the database of the Patent and Trademark Office is analyzed-for marks appearing in connection with goods or services similar to those under consideration. Since the costs of setting up a website are relatively low in comparison with other forms of advertising, many start-up companies are launching their initial marketing and advertising efforts on the Internet. These minimal marketing efforts by small start-ups-start-ups that may, in fact, never evolve into significant market players-may begin to surface as references on the trademark search.

If your client's proposed store name clears the search, it is available for use. If it is likely that the shop will offer retail services in commerce, it may be wise to apply to register that name in the Patent and Trademark Office. The importance of a trademark registration goes far beyond placing third parties on notice of an owner's claim of right in a particular mark. A federal registration is constructive notice of the registrant's claim of ownership of the mark, and is prima facie evidence of the validity of the mark, the registrant's ownership of the mark, and the registrant's exclusive right to use the registered mark in commerce in connection with the goods or services covered by the registration (15 U.S.C. §§ 1057(b), 1072). Moreover, a trademark registration may become incontestable upon the registrant's filing an affidavit or declaration stating that the mark has been in continuous use in commerce for five consecutive years since the registration issued. Once this occurs, the registration becomes conclusive evidence of the validity of the registered mark, of the registrant's ownership of the mark, and of the registrant's exclusive right to use the registered mark in commerce (15 U.S.C. § 1115(b)).

If federal registration is impracticable or too costly, state registration may be an option. Although state registration provides few, if any, of the benefits of federal registration, it will put your client's mark on the radar screen, and other parties will be more likely to encounter it when they conduct trademark searches.

On the Defense

Unless they police their marks, trademark owners risk losing them. In fact, our vocabulary is littered with the carcasses of once famous trademarks that are now common names for a particular class of goods. At one time, it was possible to ask for ASPIRIN brand pain-relief tablets at your local drugstore or to keep your coffee hot in your THERMOS brand insulated container. Now these two terms, along with others such as cellophane, escalator, kerosene, trampoline, and zipper, are commonly used to identify such items.

Typically, the first step trademark owners take in an infringement situation is to send a cease and desist letter. Consider a slightly different hypothetical: Your client has come to you not for advice about trademark selection or use, but about an objection he has received from a third party concerning the name of his retail shop.

In evaluating the position of the client who has received such an objection, it is important to keep in mind the principle underlying trademark law in general: "likelihood of confusion." (Owners of famous trademarks may also seek to protect their marks under the doctrine of trademark dilution; see 15 U.S.C. § 1125(c).) Generally, the test for infringement is whether the word, term, or symbol used by the defendant is "likely to cause confusion, or to cause mistake, or to deceive" as to the origin, sponsorship, or approval of goods (Lanham Act § 32, 15 U.S.C. § 1114).

To determine whether the public is likely to be confused by the use of two marks, courts have developed a multifactored test, often referred to as the "Polaroid" factors, due to the famous case of Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir. 1961), in which the Second Circuit set out eight such factors to be considered and weighed when determining whether a likelihood of confusion exists between marks. Each of the other circuits has since adopted a similar test (See "The Polaroid Test," page 27).

By evaluating the factors in the Polaroid test, you will be able to determine whether the objection your client has received has merit. If the trademark owners' claim appears to have merit, and your client has acted in good faith but does not wish to contest a potentially costly infringement defense, you may want to request that the trademark owner assist with your client's costs of changing to a noninfringing trademark.

But before your client begins to use a new trademark, conduct a search. It is well worth it in the long run.

Lisa E. Cristal is a senior attorney and Victor F. DeFrancis is an associate at Fish & Neave, New York, New York.

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