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PROTECTING YOUR INTELLECTUAL PROPERTY RIGHTS-TRADE MARKS
In the May 2007 Law Newsletter I discussed the importance of protecting the intellectual property rights in a small business. I discussed Trade Secrets in that inaugural issue. In this issue of the Law Newsletter I’ll discuss the importance of another area of intellectual property rights, i.e. “trademarks.” A company’s “trademarks” are an integral and valuable part of its business success. Federal and California law protect trademarks. In actuality, the generic term “trademarks” includes several sub-categories of intellectual property rights, including:
• Trademarks • Service marks • Collective marks • Certification marks • Trade names • Domain names
The major purpose of “trademark” law is to prevent confusion among consumers as to the source of goods or services. A trademark may consist of a name, a phrase, numbers, symbols, characters, sounds, visually moving images, designs, configurations, etc.; even colors under special circumstances. The owner of a “trademark” has rights in the mark, to the exclusion of all others, to use the same or a similar mark in connection with goods or services, in circumstances that may result in confusion to consumers.
Legal Basis for Trademarks
The legal authority for trademarks is found in common, state and federal law. Most states allow the registration of trademarks. Federal registration affords the registrant national protection against infringement. State laws generally only afford intrastate protection. A trademark may also be established through common law “usage” vis-à-vis registration. Definitional Framework
Trademarks. A trademark is “any word, name, symbol, device or any combination thereof used by a manufacturer or retailer of a product, in connection with that product, to help consumers identify that product and distinguish that product from the products of competitors.” Trademarks distinguish products in the minds of consumers, even if the source of the products is unknown to them. They connote a certain quality, craftsmanship, reputation and goodwill of the mark’s owner.
Service marks. A service mark is “any word, name, symbol or device used in providing services, in connection with those services, to aid the public in identifying the services and in distinguishing them from the services of others.” Service marks are protected in the same manner as trademarks.
Collective marks. A collective mark is “a trademark or service mark used by the members of a cooperative, an association or other collective group or organization to indicate membership in such a group or organization.” They are registrable and protected in the same manner as trademarks and service marks.
Certification marks. A certification mark is “a mark used in connection with a product or service by a person other than the owner of the mark to certify that the product or service is of a specific regional origin, material, mode of manufacture, quality, accuracy or other characteristic.” These marks are registrable and protected under federal law (the Lanham Act) except if misleading.
Trade names. A trade name is “a mark used to identify a business. It is the name under which a company does business.” Trade names are not registrable under federal law unless they also function as trademarks or service marks. An example of a trade name that has been registered is “Allstate.” It is demonstrative to note the unique stylized “A” in the trade name “Allstate.” Trade names are registrable under various state statutes.
Domain names. A domain name is “the text name corresponding to the numeric IP address of a computer on the Internet. A domain name must be unique. Internet users access websites using domain names and thereby gain access to the contents of that page.” The IP address is also known as the URL, an acronym for Uniform Resource Locator. Domain names may also be trademarks or service marks if more than an address, i.e. they must identify products or services being provided under the domain name via the internet. Therefore, domain names are registrable and protected under federal and state laws. The Internet Corporation for Assigned Names and Numbers (ICANN) is responsible for managing and coordinating domain names, but it does not protect the registrant of the domain name with respect to trademark, service mark or content copyright infringements.
Mark or Name Selection
Several economic events may trigger the need for mark or name selection and registration. They include:
• BStarting a new business • Incorporating or forming an LLC or LLP • Introducing a new product or service • Selling over the internet • Expanding the scope of a business or company • Forming a franchise
Before selecting or adopting a trademark (hereinafter “mark”), it is important to determine whether any one else is already using a similar mark in connection with the manufacture or sale of goods or services similar to the planned product or service.
Selection Process
Before settling upon a particular mark, the party seeking to register or introduce the mark should conduct a search as to the existence of marks, both registered and unregistered, that are the same or similar. Failure to conduct a proper search may result in the introduction of a “mark” that infringes on the rights of another, leading to subsequent legal action forcing the company to cease using the mark and the award of a judgment for damages (including costs and attorney fees) to the owner of the earlier mark.
The business owner should also consider the so-called “strength” of the mark. The mark will identify the business and its products. Strong marks typically not only afford their owners protection from use of identical marks, but also similar marks. In this sense the mark should be “distinctive.” A hierarchy of attributes is used to assess distinctiveness, i.e. whether the mark is fanciful, arbitrary, suggestive or descriptive.
A fanciful mark is a “coined” mark. It is highly protected. An example might be “Exxon.” It has no existence in the vernacular before it is “coined.” Another example is “Q-Tips.” An arbitrary mark is found in the dictionary, but it bears no relationship to the product or service that it represents. An example might be Apple Computers, or “Seven for all mankind.” The latter is a popular jeans brand, privately owned until recently, when it was acquired in a lucrative deal by a large multi-national. A suggestive mark contains some description, but requires imagination to make the connection between the mark and the product. An example is “Roach Motel” or “Chicken of the Sea.” And finally, descriptive marks are least protected under the law. Unless the descriptive term achieves market recognition or “secondary” meaning, i.e. distinctiveness, e.g. “Philadelphia Cream Cheese,” no protection will be afforded the mark.
The following marks are barred from registration:
• Generic terms, e.g. “diet cola” • Surnames (unless proved to have distinctiveness, e.g. Levi Jeans) • Geographic locations (again, unless distinctive, e.g. Philadelphia Cream Cheese) • Deceptive, disparaging or scandalous terms, e.g. bull sh*t by Red Bull.
Common Problem Areas
A few commonly troublesome areas are worth nothing.
Fictitious business names:
• Filing establishes a rebuttable presumption that the registrant has the exclusive right to use as a trade name, the fictitious business in the county of registration • It also establishes the same presumption as to any confusingly similar trade name in the county of registration • Provided the registrant is the first to file in that county and is actually engaged in a trade or business utilizing the fictitious name or a confusingly similar name in that county.
Articles of Incorporation:
• Filing articles establish a rebuttable presumption that the corporation has the exclusive right to use the corporate name as a trade name in the California • Filing articles also establish the same rights as to confusingly similar trade names • Provided the corporation is the first to file articles (or register a foreign corporation in California) and is actually engaged in a trade or business utilizing the corporate name or any confusingly similar name.
A rebuttable presumption is legal terminology for establishing a prima facie (on the face of it) right by facts and circumstances that tends to prove the right to use the “mark,” which may be rebutted (i.e. later overcome) by a showing of other facts or circumstances that trump the facts establishing the prima facie right.
Neither the filing of a fictitious name statement, nor the filing of articles of incorporation will authorize the use of a business name, be it fictitious or corporate, in violation of the rights of a third party who has established its right in the name under the federal Trademark Act (15 USC Sec. 1127 or the Lanham Act), California law (Civil Code Sec. 655 and Business & Professions Code Sec. 14200) or common law.
Finally, while domestic use of marks is governed by state and federal laws, international use is an entirely different “ball game.” Although there are international trademark treaties, you need to be very careful about protecting your trademark rights in other countries. Not only is translation problematic, but the laws of the land must be considered when allowing others to use the mark. Words that convey one meaning locally, may convey entirely different meanings in other countries. For example, “Come alive with the Pepsi generation” may mean “Pepsi brings your ancestors back from the grave” in China. While international trademark treaty systemization is beyond the scope of this issue, suffice to say that the Paris Convention and the Madrid Agreement and Protocol are two significant international treaties addressing trademarks and are generally “policed” by the World Intellectual Property Organization (WIPO), which is part of the United Nations. The latter instrument allows for registration of trademarks regionally among signatory countries to the treaty. For example, one application and fee filed from the US may cover most of Southeast Asia, with the exception of Countries A and B (who may not be signatory countries to the treaty). Another application and/or fee might be required for South America. This procedure is known as the integrated filing and registration system. Moreover, with respect to Countries A and B, separate applications may be required and the retention of local counsel to handle those registrations will likely be required.
Infringement
Once established, a trademark must be "policed" to maintain rights. If allowed the mark may become synonymous with others' goods or services, running the risk that the rights in the mark will be lost because the mark may be deemed to have become "generic," and thereby no longer identifies a source, but rather a good or service available from several sources. Legally, this is often referred to as “dilution,” i.e. the value of the mark is “diluted” by the inferior or pervasive exploitation of the mark. If a mark has not been registered, place the symbols "TM" and "SM" next to the mark in advertisements, etc., to indicate that the rights are claimed in the trademark or service mark involved, respectively. Registered marks should to be identified by the ® symbol. If referring to a mark belonging to another, indicate that the mark is owned by the other party: for example, "Presario is a registered trademark of Compaq Computers."
Conclusion
As noted, “marks” can be valuable property of a business. They may be licensed, as well as exploited commercially by their owners. They may be sold as well. The tax treatment under each scenario is different and in the international context yield widely different tax results. The laws governing “marks” are somewhat complex and warrant counsel in the use thereof from start to finish. Accordingly, competent legal advice should be secured.
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