Protecting Your Business Brand
Business owners depend on their brand for market recognition and customer loyalty. A successful brand may often be a business’ most valuable asset. Yet, the assets that comprise the brand, called trademarks, need to be treated differently than other kinds of assets such as real estate and personal property. If improperly handled, a trademark can lose significance and forfeit the entire investment made in it by its owner. Several of the many important considerations for business owners with valuable brands are discussed below.
Registering with the State does not protect brands. Many business owners are under the impression that when they formed their business and filed with the state they obtained exclusive rights to a trademark. In fact, this type of state registration does not afford a business owner any trademark protection. The state’s limited purpose is to make sure the public is aware of who is operating a particular establishment and collecting taxes from it. The laws that require these registrations specifically state that no trademark rights are granted by the registration. Consistent with that many states permit multiple businesses to use the same name so long as an appropriate consent is on file.
Use and USPTO registration provide protection. Brand protection begins with the use of your trademarks in commerce. This means selling goods or services to others under the mark. From the date you first use the trademark in commerce you begin to build your rights to exclusivity in connection with the goods or services that you sell. This level of protection, though, is limited and must be perfected by obtaining a registration from the United States Patent and Trademark Office (USPTO). The advantages gained by a registration include: national rights in the mark, i.e. the right to stop others from using the mark throughout the country even if you actually uses it only in a small region; the right to request attorney’s fees in a case where someone tries to use or take your mark; and after five years of registration an “incontestability” designation that makes it very hard for anyone to take away the registration.
Trademark rights must be enforced.. It is the business’ responsibility to “police” its trademarks. That means you should be aware of your marketplace and look for others who might be using trademarks that are the same or confusingly similar. Unauthorized use is called infringement and it must be stopped immediately by the use of cease and desist letters and where necessary, court action. Remember, with a registered trademark you have the right to ask for attorneys’ fees from the court. On the other hand, if you do not police your trademarks, over time, infringers rights increase and the value of your trademarks decline. Eventually, your brand will lose significant value.
Licenses to others must be proper. When a business gives a third party the legitimate right to use its trademark it is called a license. Often businesses will grant licenses in exchange for a royalty payment or revenue split. Improper licensing of a trademark, though, can lead to loss of rights in the mark licensed. To maintain the validity of a licensed mark, the owner of the licensed trademark must monitor the nature and quality of the goods or services offered by its licensee. This requirement of vigilance by the trademark owner seeks to ensure that the licensed product or service meets a uniform standard of quality set by the licensor. Absent this oversight, a license can be branded as naked, resulting in the loss of rights and exclusivity to the licensed mark.
By avoiding some common missteps and taking appropriate actions to strengthen trademark assets businesses can protect their brand value and investment.
For questions, comments or additional information, please contact Dan Fiore, Partner in our Corporate & Business Services Group, at email@example.com or via phone at 215.495.6533.