Why Business Owners Need Federally Protected Trademarks

In my practice, I often encounter business owners who want help with their branding, but don’t grasp the importance of federal trademark registration. They run a small business that does well locally and may expand throughout the state. Since they aren’t planning to go national, can’t they hold off on filing a federal application? That makes a certain level of sense, especially if you’re trying to control costs at startup. Yet, federal trademark registration is not a cost-prohibitive process and, with the way the trademark system works, waiting to assert your rights is the easiest way to lose them.

Writing for the patent and trademark blog IPWatchdog  a few years ago, Gene Quinn told a story that touches on just this point. In 2004, software giant Microsoft told Rich Tanenbaum, the founder of a company called Savvysoft, that he had “to stop using the name TurboExcel for his own software.” Big companies do this all the time to “the little guys,” except that this time Microsoft had screwed up. The company “did not have a federally registered trademark in the United States on the name Excel.” After a bit of face-palming, “Microsoft finally did apply for a trademark on the name Excel… on April 12, 2004.”

As Mr. Quinn goes on to explain, Microsoft would be fine even without a registered trademark. “[B]ecause they had spent so many millions of dollars getting the public to associate Excel with Microsoft,” the company could file for trademark infringement under Section 43(a) of the Lanham Act, which is designed to protect consumers from confusion in the marketplace.  Because “consumers would all but certainly believe Microsoft was the source of any product … that incorporates the term “Excel” into the name,” Microsoft could get a court order to stop Savvysoft from calling its product TurboExcel.

But, what happens when a company isn’t a household name? If you’re an HVAC company serving three counties in Pennsylvania and an out-of-state competitor decides to open three locations with a sound-alike name they’ve established in their region, what are your rights to your company name, logo and service mark?

As Mr. Quinn explains, “With a federally registered trademark it is usually extremely easy to get a competitor to stop using a name or symbol that you own the rights to use commercially. Without a federally registered trademark it is still possible, but much more difficult and far from guaranteed.” The consequence is that you’ll wind up paying lawyers far more to fight for your rights (without any guarantee of success) than you would have spent to secure your rights through trademark registration.

Now, imagine your out-of-state competitor applies for a federal trademark while you file for a state trademark. The competitor not only obtains the rights to use the trademark across the country, but your use could be restricted within your own state to the region where you are currently doing business. Your growth is arrested, and if you wanted to expand further, you would have to do it under a different trademark, so the goodwill you’ve built up with your mark would be all for naught.

The upshot is that federal trademark registration is highly cost-effective protection for your branding. The expense is truly minimal when you consider the many advantages and the fact that trademarks can potentially last forever.

If you have questions about federal trademark protection for your business, contact us today.