Article: Is Your Company Name Legal?

The core of naming a business lies in understanding trademark law. Trademarks help consumers identify the makers of good or services. Often, the name of your company may also be used as a trademark to identify your company's goods or services.

Trademarks Explained

The Purpose of Trademark Law

How does trademark help a consumer to identify a good or service? Consider this situation: a consumer wants to buy Calvin Klein Inc. jeans, and in doing so, she wants to know that they're designed or endorsed by Calvin Klein Inc.

The consumer has in her mind certain associations with the Calvin Klein business, based on advertising and her experiences with the company. For instance, when she bought a pair of their jeans in 1995, the zipper didn't work and the company replaced them without question. She also knows the brand's advertisements, which associate images of youthful hip people with the clothes. So when she sees Calvin Klein products, this consumer thinks of quality customer service and a hip image.

Trademark law allows Calvin Klein to stop other companies from using the Calvin Klein name or logo on products that are produced by someone else. If another company were allowed to freely use the Calvin Klein name, this could injure Calvin Klein Inc. How?

another company could sell at a lower cost because it could take advantage of the advertising by Calvin Klein without having to spend any money for such recognition
another company could offer good or services of lesser quality, which consumers would then associate with Calvin Klein Inc. -- thinking it was the source of the bad products or service, and
another company could make more money by either selling more goods at a lower price, or selling products at higher prices. Either way, they'd enjoy much lower overhead, as they wouldn't have to pay to produce and deliver high quality product, good customer service, and advertising.

These examples are the heart of trademark infringement.

When considering if there is "trademark infringement", the main question a court considers is whether the average consumer would be confused as to the source of the good or service.

What is a Trademark?

A trademark is a word, phrase, symbol or design, or combination of words, phrases, symbols or designs, which identifies goods or services. A service mark is the same as a trademark, but it identifies and distinguishes the source of a service, rather than a product.

Normally, a mark for goods appears on the product or on its packaging, while a service mark appears in advertising for the services. A "tm" on a product indicates unregistered trademark rights and an "®" indicates a registered mark. It is illegal to place an "®" on a mark that does not have national registration.

There are different types of trademarks, which are legally classified as follows:

arbitrary or fanciful,
suggestive, or
descriptive.

Trademark registration is generally not granted in:

generic words, phrases, symbols or designs;
immoral or scandalous words, phrases, symbols or designs;
false, misleading or mis-descriptive words, phrases, symbols or designs; or
surnames.

Why and How Would You Register a Trademark?

You may apply for registration of a trade mark or service mark after your company has used the mark to identify a product sold or service performed "in commerce" -- or for advertising and/or sale to customers.

You are not required to obtain national registration of a trade or service mark. Trademark rights arise upon use in commerce -- with or without national registration. However, national registration expands and protects your trademark rights, giving your company a presumption of first use of the mark in association with particular goods or services.

Obtaining full registration of a mark usually takes up to several years due to the slow response rate of the USPTO, which generally replies to correspondence once every six months.

What Do You Have When You Have a Trademark?

Having national trademark registration allows you to prevent others from using the same or a similar mark with similar products or services. It gives you the presumption of first national use of the mark in the United States.

To explain it another way, a mark allows a company to ensure their customers know which products and services they make, through use of a word, phrase, symbol or design -- their trademark.

Trademark rights mean that Calvin Klein can sue another company that uses its mark, and stop that use as in the example above.

Domain Names and Trademarks

Having trademark rights is also important with regard to current law and domain names.

You cannot register a domain name that is not also a trademark with the US Patent and Trademark Office. The domain name by itself is considered a mere an address.

Thus, it's very important to use your domain name as a trade or service mark, in order to ensure retention of the domain name. Owners of trademarks have priority of ownership of domain names in most cases.

Naming A Company

If you're naming a company, you should consider the trademark implications of your choice.

Search

At a minimum, check the Internet and the USPTO database of registered trademarks, to ensure that you don't pick a name that's already been registered by another company for a similar type of good or service -- this could cause confusion to consumers.

If you really want to be sure, you should have an attorney do a full search; as trademarks do not have to be registered, other companies may have priority rights over marks that aren't listed in the database. If you do pick a mark that's close to another company's mark, be aware that you may lose the ability to use that name at some point in the future.

Trade Names

The name of a company is a "trade name" -- the name under which a company does business. A trade name can be the legal name of the corporate entity, and it can also be the fictitious or assumed name the company uses to do business in a state.

Both the actual company name and the fictitious business name are trade names. Neither name, by itself, is a trade or service mark.

Relationship Between Trade Mark and Trade Name

Although the name of a company, in and of itself, is not a trademark, the name of a company may become a trademark if the company decides to use the same name in association with the sale of a good or service.

The USPTO will not register mere trade names. If the company decides to call a good or service by the same name, then trademark rights can overlap with trade name rights. For example, the Coca Cola Corporation has the same name as its major product, and therefore both the company name and product name enjoy trademark protection.

Trade Name Registration

If you choose to have an attorney help you choose your company name with a full trademark search, make sure that search also includes a review of state trade name registrations for similar names.

Trade name registrations are the state databases of company names that have been registered to do business in each state, including corporations and fictitious business name registrations. It's wise to request inclusion of these names in your full trademark search.

One you've selected your name and used it to incorporate or form your corporate entity, you'll also need to register to do business in any state in which you have an office -- in addition to the state in which you formed your entity.

If you discover that another company already uses your name in that state, you may register to use another name in that state only -- a fictitious or assumed name, sometimes called a "dba" or "doing business as" name.

Conclusion

Naming a company is a complex and thoughtful decision. In fact, smart naming may require more research than you would complete if you were naming a child. However, with careful thought, you can lower your risks and choose wisely.

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Copyright ©2002 Judith Silver. All rights reserved. Readers are cautioned not to rely on this article as legal advice as it is no substitution for a consultation with an attorney in your state. Based on jurisdiction and time, the law varies and changes.

Judith Silver is an attorney with Silver Law, Inc. She is also the founder and CEO of CoolLawyer, Inc., a digital legal forms company serving e-commerce and technology companies.

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