Talking Trademarks – 5 Things Every Business Owner Should Know

Talking Trademarks – 5 Things Every Business Owner Should Know

1. What are Trademarks?

The term “trademark” includes any word, name, symbol, or device, or any combination thereof—

(1) used by a person, or

(2) which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this chapter,

to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown.

2. What is the Purpose of Trademarks?

• Protect consumers- Coffee example
• Value to rights holder

3. Are some Trademarks Better than Others?

• Yes, not all created equal

i. Fanciful

ii. Arbitrary

iii. Suggestive

iv. Descriptive

• Things to avoid

i. descriptive

ii. geography

iii. surnames

iv. foreign languages

4. How Close is too Close to Another Trademark

• Need to understand likelihood of confusion test
• Very flexible
• Not strict
• How close are the two marks – Slight change in spelling not enough
• How close are the Goods/services, sophistication of consumer, trade channels, etc

5. Do I Need to Register a Trademark to have one?

• NO
• Use in commerce
• Benefits of registration

Bonus – why hire an attorney for a TM?

• Single filings, with some study, not the end of the world to do yourself
• But these rights last forever (in theory), if there is any complexity at all, get advice
• Attorneys can help with future plans, contingent plans, scope of your registrations, and practical advise
• Worthy investment

“May It Please The Internet” is a podcast brought to you by: RevisionLegal.com

Intro Voice:

This is May It Please The Internet, a podcast brought to you by Revision Legal, lawyers who represent businesses that make money online.

John:

Hey everyone, this is John Di Giacomo, and this is the Revision Legal Podcast, May It Please The Internet. And today we are talking about trademarks and I am joined by my partner, Eric Misterovich. Eric, how are you today?

Eric:

I’m doing great, John. How are you?

John:

Pretty good. Today, we’re talking about trademarks and really five or six things that every business owner should know about marks and it probably makes sense to start with what is a trademark? So Eric, what is a trademark? How do you explain this to clients?

Eric:

Talking trademarks and explaining what they are and how they work, it’s something we’ve been doing for a long time. I have my own script that I do. You probably have yours. But the first thing is what is it? And there’s a legal definition. It’s a word name, symbol or device, or a combination of all of those factors that’s used, and used in commerce to identify the source of goods or services.

My little script that I always give is if I have my kids and I’m in the grocery store, and I need to buy coffee, it’s a ticking time bomb with these kids. Anything can happen at any time. I’m in a rush. I’m quickly scanning the aisle and I’m looking for that Starbucks, the green goddess. I trust that coffee, I trust that trademark because I know I’m going to get the coffee that I want when I see that. And if someone else was allowed to use a logo that looked a lot like that Starbucks logo, I could be tricked into buying terrible coffee. That is ultimately what trademarks do, is they are telling you where these products come from, who is making them, who is the source behind them.

John:

That’s a great description. Although Starbucks is disgusting and I cannot believe that you would use that as an example. But when I describe this, I describe it as lowering cognitive search costs, which is just a fancy way of saying that the next time you go to grab a Sony TV, you know that you are getting a Sony and not a Sorny. And it is basically attempting to prevent against consumer confusion in the marketplace and building fences around the goodwill that you’ve built in your brand.

And that’s really the purpose is to protect consumers. And it is to provide some value to the rights holder so that they can protect the goodwill and have an incentive to reinvest in that brand, and to make it better and to build really great products. Because again, the next time that somebody goes to grab for that product, they know exactly what type of product and what the quality standard of that product is and what they’re getting. And when we’re talking about trademarks, there are some that are better than others. And there’s this idea of the spectrum of distinctiveness. Producer Mark, can you add some chorus to that or some reverb. Spectrum of distinctiveness, which is a spectrum that tells you whether a mark is a good mark or a bad mark. And Eric, talk about that. What is the spectrum of distinctiveness?

Eric:

They’re not all created equal. Some are better than others. And like at the top end, you have things that are called fanciful marks. And these are trademarks that are really made up. They’re made up words like Instagram. That wasn’t a word. And now everyone knows exactly what it is. These are words that don’t have any descriptive quality to it. Therefore, they become kind of sticky factor. You remember them, they stand out and those are the strongest types of trademarks.

Kind of second in line, maybe 1A, 1B are arbitrary marks, which are a mark that has nothing to do with the goods or services. So Apple for phones. Apple is a normal, generic word, has no connection to TVs, cell phones, cameras, all of the stuff that Apple does. It’s completely arbitrary. So those two things, if you can ever end up in those two categories, you’re doing well from a trademark perspective in terms of the strength of your mark. The problem is that most business owners don’t do that. They want to kind of tell consumers what the product is through its name. And the more you do that, the weaker your mark is from a trademark perspective. So it’s really like an inverse relationship. The more the name your product has nothing to do with your product, the better it is from a trademark view. Like there’s a middle ground here, which is like suggestive marks.

John:

Yeah. Suggestive marks are where attorneys make their money. They are something that are not descriptive, but require an additional cognitive leap to think about what is being sold underneath the mark. And one of the classic examples that I give is Microsoft for computer software, because it’s the combination of the term microcomputer and software. And when you first look at it, you don’t know that it directly describes software. Although now you do because of the brand value, but it is something that’s just a little more distinctive than a descriptive mark. And another good one is Greyhound for bus services. Greyhounds are fast, it requires that additional cognitive leap to determine what it is being sold underneath it. It’s not necessarily bus services, but if you think about greyhounds are fast, so the bus service must be fast, and therefore it describes it in a more attenuated way than a directly descriptive term would.

Eric:

I always like Gorilla Glue as an example, it kind of gets the point across that it’s really strong and it’s going to hold on. But you don’t call it strong glue. It’s Gorilla Glue. One that does stand out a bit more and gives it that something extra to keep it from being a descriptive mark.

John:

Yeah. That’s a great example. That’s much better than Microsoft because Microsoft’s so recognizable and I guess Gorilla Glue is too. But you’re right in saying that when a business owner starts a business, they think about describing their business in the mark that they choose. But in reality, the better marks are those that are further away from what the business does, and Apple and Amazon are great examples. And there’s this trade off where if you choose a really distinctive mark, you’re going to have a strong trademark, but it also costs you a lot more to build that brand equity in. Because when you start to sell the product, you’re going to have to spend more on marketing to let people know what it is exactly that you do. There is this trade off.

It’s easy to at the beginning, call yourself, Cherry Capital Foods, for example, which is an example in our local area. But over time, you may want to have a stronger trademark if you’re a consumer oriented brand. Now sometimes trademarks, when you apply to register them, they can get rejected because they’re too close to another trademark. And Eric, what is too close in this context? What does it mean to run into conflict with another trademark owner?

Eric:

This is usually the question we get that makes us explain all the stuff we’ve already explained. Like someone calls us and says, “Oh, I got this trademark issue. This is my name. This is my mark. This is a competitor’s mark.” Or, “This is what I want to call it. But there’s already this other company out there.” And we have to start from the beginning. All right, you’ve got to understand what is going on here and why do these things exist? Why are they protected? What’s good? What’s not good? And then you get to this question of, how close is too close? And I really hate this question because in my mind, you’re really asking the wrong question because why would you want to be close to someone else? If you are thinking it’s close, even if it’s not trademark infringement, maybe you should find one that is your own, make it your own. Because if you have this trademark problem on day one, it’s going to be there on year five, too. Probably not going away unless that other company goes away.

But what you have to understand is, how are trademarks judged as infringement? What is trademark infringement? When does it happen? And that all comes down to likelihood of confusion. Those are the magic words. Is there a likelihood of confusion between two marks such that the purchasing public would think one product is coming from a different source than what it is actually coming from. Who is behind that coffee? Where is the public confused by it? And this test is very, it’s a classic seven or eight part test, depending on where you are. And there’s a lot of different factors that go into it. And it’s very flexible.

So we have clients that oftentimes call and say, “Well, I have the word love in my mark, but I spell it with a U instead of an O. And that’s not going to make a difference. From a trademark view, that kind of small change will have practically no effect at all. I always explain it as a very flexible test. It’s not like this rigid, oh, you did this one thing so now you’re okay. It really is the whole ball of wax. And what are you selling? What are the marks? And all these other factors that kind of go into it.

John:

Yeah, it’s hard when a client says, “Well, can’t you just give me a straight answer?” Because the answer is always, it depends. And it really depends on a lot of different factors. So for example, in the love example that you gave, the test examines sight, sound and commercial impression. So in that case, you look at the sight, and it’s maybe not the same, but the sound and the commercial impression are similar.

And the other questions are things like what are the marketing channels that are being used? What is the sophistication of the people who are purchasing these products? Are they more likely to discern between the two products that are being sold or are they consumer products that are just pulled off of a shelf and they’re less likely to do that? And other things like, are you going to expand into a similar product line? It’s not an easy question to answer. And it requires quite a bit of analysis and quite a bit of analysis, particularly of the case law, both in front of the Trademark Trial and Appeal Board and in federal cases. So it’s always better to at the outset, run a clearance search, find a mark that is far enough away from others where you don’t have to run this analysis. Because this analysis is just … It doesn’t provide you with the level of certainty that you would expect it to provide you with. Don’t you agree with that?

Eric:

Yeah. Usually once you kind of drill down on some of these things, the answer is attorney fees. Like if you want the answer to this question, the answer is attorney fees. You’re going to be paying attorneys a lot of money to try to figure out the answer to this question, especially if you’re at the very beginning phases. Just pick a different mark. I know naming things is difficult, that you can run into a lot of problems and it’s complicated, but these problems don’t go away. And it just doesn’t make sense to start off a business or a new product when you know there is something else remotely close to it that could cause confusion. It’s not just that, oh, you might get sued for trademark infringement. Your brand may never be as strong as it should be. And that’s the way that I always want people to think about it is, am I doing the best for my brand? Not is this guy going to try to sue me. View it as owning it yourself rather than trying to squeak by.

John:

Yeah. Squeak by is absolutely right. You never want to squeak by. You want to have a wide birth for your brand because you don’t really know what direction you’re going into. I think that’s excellent advice. So let’s move on to the trademark registration process. Now, most people have a sense for the idea that you file an application with the US Patent and Trademark Office to register a trademark. Many people probably know that that is a federal filing and it gives you nationwide priority. But do you have to have a registration to have a trademark?

Eric:

Not at all, completely optional, which I think is a real surprise to a lot of people is, oh, I’ve got to get a trademark. I’ve got to pay for a trademark. I’ve got to register a trademark. The answer is no, you don’t. If you are using your mark in commerce, you already have trademark rights. The day you open for business and start offering goods or services under your business name, the logo that’s associated with your product, even a slogan. All of those things are starting to build trademark rights from day one. No registration is required and it’s a real benefit to businesses of all sizes to have these rights because they are strong rights. These unregistered rights are referred to as common law rights and they have limits. Some of those limits are things like geographical location, where you have the right to use that where you operate. And if you don’t go on and register your mark, then you’re always going to have this question of how far out do my rights expand, which again becomes a very expensive question to answer if that dispute ever came up.

John:

Very, very expensive. And there are a lot of really classic examples of this. I believe there was a case involving Big Boy where the rights were limited within certain territories as a result of prior common law use which existed before they filed an application for federal registration. And that federal registration gives you nationwide priority. So the upside of registration is that you don’t have to worry about these things. You get full nationwide priority to that trademark, but you don’t have to have a registration. A good example of this and why you would want one is a individual was buying a quick serve restaurant, a fairly famous regional fast food restaurant. And no one did trademark due diligence during the acquisition. And they acquired the restaurant and out of nowhere came a prior user who had used back in the 60s first, and had consistently and continuously used that mark.

And it put the acquiring party in a really bad position because they could not take that brand further than the units they had already acquired because there was a restriction because of this prior use. So they had this grand plan that they were going to go national and make this into a big chain. And it was going to be the next big thing, the next big Sonic or Chick-fil-A or whatever it might be. And that killed the deal. The restaurant just kind of has sat there with the same number of units as a result. So this stuff is important. It leads to the next question, which is why would you hire a trademark attorney? And Eric, there are so many services out there right now that are paper pushing services, that will file an application for trademark registration, there’s these services that are run by 1 attorney and 50 paralegals that will file applications with oversight of 1 attorney. Why should people not use those services?

Eric:

You’re going to get what you pay for. And these one off services, owning the trademark and how it’s used with your business is not a one off thing. Your business grows, changes, shifts. You have new services, new products, new competitors. It’s living, and when you don’t have someone on your side that understands who you are, where you are now, where you want to be, you’re going to get this really narrow view of buying a trademark off a shelf. And you’re not going to get the depth of advice that I think you really should have when you have this mark. Because I think a lot of people can figure out how to file for trademark registration. If you read, you can do it. It’s not the most complicated thing to check the right boxes and get it filed, but it’s a lot more complicated to do it right. Not just to get the registration, but do it right for your business overall.

And the importance of your trademark, I always find it a little weird where people are finding the cheapest option for this because all of your hard work in your business is embodied in your trademark. Everything you do, every time you’re working late at night and up early in the morning, or giving a refund to a consumer that maybe didn’t deserve it, or going out of your way and you didn’t charge enough and you’re going the extra mile. You’re all doing that to get goodwill in your business. And all of that goodwill is embodied in your trademark. And why would you go buy something off the shelf that isn’t caring for it the way it should? And what are you going to do when you have a question about what’s next? A lot of times we get those questions of what’s next, once a business has matured a little bit, and we go back, and we look at what was done, and it doesn’t really make sense and there’s problems with it. They should have done it a different way. And now they’re behind the eight ball.

John:

I agree entirely. And a good example of this is we had a client come to us, wanting to move to a new brand that had undertaken some equity financing. And in the process of filing the application for registration, we received what’s called an office action. And an office action is a rejection of your application that is issued by the attorney on the other side. So step one, there’s an attorney on the other side, it’s not a layperson, it’s not a filing clerk. It’s somebody with a high amount of legal knowledge whose sole job is to make sure that mark meets the legal requirements. And if it doesn’t, they will issue a refusal. And then you have to respond to that refusal with a brief. Now, these people make mistakes a lot to say the least. So when they make a mistake, you have to convince them that they’ve made a mistake and that’s not an easy process, but then there are cases where you can’t convince them that they’ve made a mistake.

And the next step is to then work out a deal with the party that they have notified you conflicts with your trademark to work around that mistake. So we call those consent to register agreements where we go out and we talk to some third party mark owner, and we try to negotiate a deal to allow this mark that we filed for to proceed to registration. And in those cases, that doesn’t always work out because you are asking for permission from somebody and maybe they don’t want to give that to you. Then you’ve got to appeal. And this is all stuff that is very difficult, highly complex, requires a lot of strategic planning. And what I don’t think people really understand is just from a purely economic standpoint, the form filing services and the one off attorneys that file trademark registrations and 50 paralegals, it doesn’t even make sense from an economic perspective.

Because if they’re charging you, let’s say $800, which is higher than most of them will charge, but I’m going to use that as an example. And the filing fee for 1 class of goods and services is $225. Then in order to pay a trademark attorney $100,000 a year, that trademark attorney is going to have to probably do about 173 applications per year just to make their salary nut. And that doesn’t include benefits or whatever else it might be. Now, you’re really probably talking about three times that. So you’re talking about 521 applications per year. In order to make $100,000, that attorney’s going to have to file that many applications. Now attendant to those applications is all of the stuff that happens, all of the deadlines and all of the office actions that are issued and have to be responded to. And really, you’re probably not going to convince somebody who’s a decent trademark attorney to take that job because they’re not going to want to do 521 applications a year at a price of $100,000 a year. It doesn’t make sense. They can go do something else for more money.

So what you’re really getting is literally the worst people that should be working on trademarks. You’re getting the bottom of the barrel of attorneys working within these types of firms and within these form filing services. So I think it’s important for consumers to understand that the pricing associated with these types of services is meaningful, and it is reflective of the value of the service that is being provided. It is not something that is wholly made up as a result of information asymmetry or something along those lines.

Eric:

Also the cost for moving away from one of those services, it’s not that much. I always tell people, this is a really worthy investment into your business. And if it’s going to cost say 2 grand, 2,500 bucks to go through the trademark process for a couple of registrations and have someone that knows your marks, knows your business, has thought about it and you’ve created a plan. That is going to pay off big time in terms of setting your business up for the future because the trademark world, on the one hand it’s this very flexible thing and there’s a lot of wiggle room. On the other hand, the registration process is very technical and very time sensitive. So when you file what has a real impact on what you’re going to get in terms of registrations. And if you don’t file for the right stuff at the right time, meaning as early as you can, you can leave the door open and what would have cost, let’s say 1,500 bucks more than what you would pay someone to get this off the shelf service.

If it’s not done right, you have 10, 15, 20 times the expense now to correct that mistake. Because to correct these mistakes and trademark actions and try to cancel someone else’s mark or registration, it’s a lawsuit, it’s a mini lawsuit. It’s expensive and it could have all been avoided if you would’ve just gone for actually talking to a human and talking about your trademark. It’s everything you have in your business. I don’t know why it gets short shrift in this just because technically, yeah, someone could figure out how to file it, but that doesn’t mean you should.

John:

Yeah, absolutely. I mean, there was a case that I handled early on in my career where our client had not filed and was expanding into another market, in another state, and realized that because they had not filed and they didn’t have priority to this mark, they would have to rebrand and it cost them over $3 million. And it wasn’t just the cost of trying to cancel or anything. It was the signs, like taking down the signs off the storefront, changing all the marketing material, hiring a creative agency to go rebrand. It’s just a nightmare. And it’s just not something that you want to do. So spending that money on trademark is highly important, especially in our business. One of the biggest assets on the balance sheet, if not the only asset, it’s a highly important thing, and it is important to take seriously.

And the future plan thing that you’ve mentioned before is so important because when I wake up Monday morning, I roll over, I pull my laptop out from underneath my bed, I open it and I review all of the trademark reports for our larger clients. And I know that these clients are moving into different industries. And so I look at these reports and I say to myself, okay, of the trademarks that have been filed, which of these pose a risk to the expansion of our clients’ business into these other industries. And then I notify them if I see something that is occurring, that I think should be addressed. You’re not going to get that from a form filing service.

And the final question is always, does Microsoft, or Amazon, or Sony use a form filing service? And the answer is no. And it’s not because they are cheap because the primary goal of that company is to make money for its shareholders. I can tell you if they could find a way to do this stuff for cheaper, they would absolutely without question, do it. To do it cheaper and more efficiently, that is the nature of the corporate structure, but it is not possible. This is a thing that you have to do with levels of skill. And with that, Eric, is there anything else that you think we should cover in the world of trademarks today?

Eric:

I think there’s one more thing we can cover, which is a couple of easy things to avoid. So when people are talking about you have a new product or a new business, you have to name it. There’s a couple of tricky areas that are more likely than not going to cause you problems. And that’s names with a geographic feature, putting the city name or a region name, or state name into your business name. It’s going to be problematic. Geographically descriptive marks have a real uphill battle to getting registration.

Same with last names, surnames. It may be kind of unexpected because people, a lot of people name their business after their name, but you can really run into a lot of problems with that. Ideally something to avoid.

And then foreign languages. Sometimes people try to get you creative. I’m not going to use the English word, I’m going to use it in Italian or Spanish, whatever. Trademark law in the US doesn’t care. It just immediately translates that back to English. So you’re not tricking anyone. You’re not getting one step ahead by a foreign language. Those are three easy ones when you’re going through this process of naming something. Geography, last names, foreign words, try to avoid them.

John:

That’s great advice. And it is the doctrine of foreign equivalence or the stop and translate test. Those things apply not just to Spanish words. So something that you would normally see in a US supermarket, for example, that would use a Spanish word. It is like random Russian words that 2% of the population are not going to stop and translate. It still applies. I think that’s a really important point because we get a lot of clients that pick foreign language words and expect that they’ll be registerable and they just aren’t because they are a generic term for the product that they’re selling. So I think that’s all we have for today, Eric. I really appreciate it. This is again the May It Please The Internet Podcast. This is Revision Legal and we thank you for listening.