Business Name and Trademark Confusion Can Cost Your Business Big Bucks

One of the biggest mistakes that a business can make is failing to secure the trademark for its business name.

Many businesses register their business names in their states so they can start operating, and they think that’s all they have to do. Fast forward a few years and a business that makes this mistake could receive a cease and desist letter from another company’s attorney. The letter tells them that they’re violating the other company’s trademark registration and they have to stop using the name they’ve been building for years.

Why would this happen?

The answer is simple. A business name, referred to as a trade name, is not the same as a trademark, and both need to be protected. Let’s take a closer look.

What is a Trade Name?

Your business name, which you registered in your state to begin operating and appears on your official corporate documents, bank accounts, tax return, and so on, is your business’s legal name.

Trade names are approved and regulated at the state level. For example, I live in and operate my business from Pennsylvania. In my state, a trade name must be deemed a valid business name by the Department of State Bureau of Corporations and Charitable Organizations before a business can be registered under that name.

If your business name is approved and registered in your state, you have the exclusive right to use that name as your business’ legal trade name (not a trademark), but that exclusive right only applies in the state where your name is registered.

What is a Trademark?

A trademark represents your business’ product or service in the marketplace and serves as an indicator of origin to consumers.

Consumers expect products and services bearing the same or a similar trademark to come from a common source. Trademarks are intended to eliminate confusion as to the source of a product or service.

For example, if you purchase a toothbrush with the CREST name or logo on it, you expect that the product is from the same source and will have the same levels of quality and price as other products that you’ve purchased which bear the CREST trademarks, such as CREST toothpaste. The trademark is CREST, which was registered with the U.S. Patent & Trademark Office by Proctor & Gamble (the trade name).

A trade name has acceptance in the marketplace upon registration, but a trademark doesn’t have marketplace value, validity, or acceptance until the mark is actually used in commerce. By registering a trademark at the federal level, the mark grants you the right to enforce and protect it nationwide.

Keep in mind, a trade name and a trademark could match. Nike, Inc. is a trade name but NIKE is also a trademark. In other words, Nike, Inc. is the legal business name of the company that produces products which bear the NIKE trademarks, including the NIKE brand name, logo, and “Just Do It” slogan.

Next Steps for Businesses

It is absolutely critical that you clear your business name at the state level and clear your trademarks at the federal level to ensure the brand you’re building is set up for long-term success.

Trust me, the amount of time, money, and heartache you’ll save by making the investment in fully protecting your business today is an investment you’ll never regret. However, if you don’t register your trade name and trademarks, you’re setting your business up for unnecessary risks and expenses later.

Only you can determine how much you’re willing to invest today and how much risk you’re willing to accept in the future.