Increase the Value of Your Business by Protecting Your Competitive Edge – Part 1

A trademark must be more than merely descriptive.In business, imitation is NOT the sincerest or highest form of flattery; it is someone stealing your competitive edge!!  If you are successful, it is inevitable that someone is going to copy you. What are you doing to mitigate this risk? Do you have the legal tools in place to protect your competitive edge?

First you need to identify the assets that give you a competitive edge. Then you need to identify what legal tools you are using or should be using to protect those valuable assets. In this series we will discuss examples of assets that should be protected and strategies for incorporating the proper legal tools into best practices to mitigate the risk of losing the value of these assets; these protections ultimately will increase the value of your business.  First up…

Branding

You work hard to market your business and have spent not only countless hours, but thousands of dollars in building customer recognition and goodwill in your brand….Take Queen Bee Controllers for example. Queen Bee manufacturers PLC controllers for various types of industry and has customers in several different states. Queen Bee paid a graphic design company $2500 to develop their brand colors and design their logo in variety of sizes and formats for digital and print format. The Queen Bee logo and tag lines are printed on signs, shirts, hats, order sheets, wraps for their service vehicles, and product packaging; an investment of $20,000. In addition, Queen Bee has invested $15,000 in print and digital advertising over the past year and another $8,500 in upgrading their website to incorporate all the elements of the Queen Bee brand and enable online ordering. What does Queen Bee need to do to protect their brand?  Trademarks are the legal tool to protect your brand, and consequently your recognition and goodwill.

What is a trademark?

The legal definition of a trademark is a word, phrase, symbol, or design that identifies and distinguishes the source of goods and services. Most commonly we think of names and logos, but marks also include taglines, slogans, and even product shapes, sounds, smells, and colors.

What is the cost of Federal Trademark registration?

The online filing fee for a federal trademark application is $225 (items on a drop down list) or $275 (free hand listing) per class of goods and services indicated that the applicant wishes to cover. Using the above example, say Queen Bee wants to register their logo to cover PLC controllers (item on the drop down list), the cost of filing a federal application would be $225. Say they wanted to register the name “Queen Bee” to cover PLC controllers; that would require a separate application and would cost an additional $225. The legal fees for filing a federal trademark would range around $1000. So for around $3000, Queen Bee can protect its $46,000 investment in branding and marketing efforts.

What does federally registering a trademark really protect?

Federally registering a trademark protects the brand of an individual, group, business, product, or service used in commerce (i.e. across state lines). Registration gives an owner the exclusive use of the mark nationwide in connection with the goods or services indicated in the application, and it can prevent anyone from subsequently using a “confusingly” similar mark nationwide. This provides greater protection than a common law/state trademark. With common law/state trademarks, protection is limited only to local use. With federal registration you can expand protection of your brand across state lines, and prevent others with similar unregistered marks from expanding their brand and competing with you. For example, if Queen Bee has a federal registration, Queen Bee can enforce its trademark rights and seek an injunction against another PLC controller company in another state who would try to use the name Queen Bee or maybe even a similar name like King Hornet Controllers, as there could be a likelihood of confusion (discussed below). Queen Bee can also enforce its trademark rights against any PLC controller company who might try to use a similar logo.

Registration gives an owner the legal presumption that their mark is valid and also gives the public constructive notice of the mark nationwide. You can use the encircled R with your mark which indicates that you have a certificate of registration from the USPTO and a listing on the Principle Register. It’s true that this registration will deter those who properly use due diligence in checking the federal registry before finalizing their branding strategy… even though you will never see this aspect. The listing on the Principle Registry is deemed constructive notice to the public (including your competitors) of the use of your mark. There can be no valid claim of innocent infringement. You have nationwide priority for use of your mark.

What are the risks of not federally registering a trademark?

If you choose to forego federal registration, there is no legal presumption of ownership or validity of the mark, and because there is no public notice, someone can imitate or even register a similar mark and ultimately block the expansion your brand. Without registration an owner may be limited to using the mark only in their local area; quashing the expansion of the use of their mark and consequently hurting the expansion of their business.  For example, say Queen Bee is strongly established in three states, PA, OH, and WV, but King Hornet has been growing and decides to get a federal registration first, thus establishing exclusive nationwide use of the King Hornet brand. It is possible that, because of a likelihood of confusion, Queen Bee’s marketing would be restricted to the local areas in the three states in which it is doing business and that it would not be permitted to expand its brand, i.e. grow the business, in other states.

Registering also decreases chances that you will be threatened with an infringement suit. The result of litigation threats can cost you. To avoid litigation, you may have to settle and pay via a license agreement to continue using your mark. These license agreements often include a use restriction of your mark, blocking your potential expansion. Or you may have to forfeit using your mark, and its associated good will, and begin with a new mark. Re-branding your business has substantial costs (as outlined above) for the design and development of all-new marketing materials, uniforms, etc.

Should I check to see if my branding is confusingly similar to another’s trademark BEFORE using it?

Yes!! As part of your due diligence and best practices, you should always check to ensure that your branding does not infringe another business’s mark (whether they have a federal registration or not)!!! Otherwise, you may receive a cease and desist letter which will threaten a law suit unless you stop using your mark. If you apply to register for an unchecked mark, you may be rejected by the USPTO as being confusingly similar to another’s registered mark, even after making arguments as to why you are distinctive from that mark. Either of these scenarios may result in you having to change your mark, wasting all the hard work and money that you initially put into your brand/goodwill and incurring additional significant costs such as buying new letterhead, new shirts, new truck labeling, etc.

How do you evaluate whether a mark is confusingly similar to another’s mark?

This is especially where the expertise of an IP lawyer is well worth the investment. Your lawyer will perform the research to see:

  • Whether a mark is similar in appearance, phonetic sound, or meaning to another mark.
  • Whether or not the goods or services compete with or are similar to one another.
  • Whether or not the goods or services are so closely related that they are marketed in a similar manner.
  • How sophisticated the buyers are and how expensive the product is. This relates to how careful the consumer is likely to be when purchasing the goods or services. For example, people are more discerning when buying a car than when buying a pack of gum.
  • Whether or not the companies have overlapping customer bases.
  • Whether or not there has been any actual confusion. If so, this is not conclusive evidence of likelihood of confusion, but must be weighed together with the other factors.
Kathleen Kuznick assists business owners, entrepreneurs and inventors with all things related to intellectual property and brand protection, including patents, trademarks, copy rights and licensing. She can be reached via email at Kathleen Kuznicki or (724) 776-8000.
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