Have copycat competitors used your business name? This can lead to customer confusion and revenue loss. In nightmare scenarios, you might even get accused of infringement. That’s even if you swear that “you were the first.”
Doing Without a Trademark? That’s Risky Business
The law doesn’t require it. But every business owner should weigh protecting your brand through the U.S. Patent and Trademark Office. When should you register with the USPTO? What about international protections? Experts Paul Shrater and Ali Smith share tips in this interview. You’ll also find thoughts about starting off on the wrong foot. And learn how expensive it can be to course-correct.
Entrepreneur Paul Shrater graduates from the Wharton School of the University of Pennsylvania. Shrater guest lectures at universities on subjects like ecommerce, supply chain management, and change management. He co-founded Minimus.biz in 2004. It is a consumer products ecommerce startup. And Internet Retailer recognized the site in its Top 1000 highest-grossing B2C e-commerce businesses (U.S.). It also placed in the top 300 for Internet Retailer’s B2B ranking. Minimus grew expansion divisions. They were for the promotional products industry and third party logistics services for other brands. Prior to becoming an entrepreneur, Shrater enjoyed another career. He worked as a film and television producer and writer. And he developed projects with production companies, studios, major networks, etc.
Ali Smith serves as the Product Marketing Manager for Trademark.com. She works on intellectual property SaaS solutions. This career occupied her for the last several years. And she believes in making world-class resources available, accessible, and affordable to businesses of all sizes. She works in Boston. Ali holds an MBA from the University of Warwick in the UK.
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How Do Trademarks Work?
Small Business Trends: What do you suggest as a starting point when an entrepreneur is thinking about getting a registered trademark with the USPTO?
Paul Shrater: Like any sound business decision, I think the conversation needs to start with an honest analysis of costs versus benefits. Registration of a trademark, which usually starts at around $400, can be costly in comparison to a startup’s size and its available funds. Consider whether available funds may be best spent elsewhere to grow the business. Of course, you’re taking on risk by not formally securing nationwide ownership of a mark you’re using to do business. One way to think about this is to ask yourself what you’d lose if a copycat came along and you had to throw out your brand name or logo and start over. If the answer is “not that much,” then keep trademark registration on the to-do list, but mark it for a later time when funding is available.
Ali Smith: I agree with Paul that the key question is “Is the risk of trademark infringement to your business’s brand equity acceptable to you at this particular point in time?” It’s understandable that there may be more pressing business priorities, but I’d caution business owners in this scenario against falling into the trap of skipping due diligence around picking a strong, defensible brand name in the first place. Even if you don’t register your mark right away, you’ll want to start out using a name that is in fact eligible for registration when the time comes. Basically this means that it isn’t a generic term or descriptive term, and it isn’t identical or too similar to any name already in use in your area of business. This is a really critical step that you shouldn’t skip.
Other Considerations for Trademarks
Small Business Trends: What other scenarios are wise to consider?
Ali Smith: I’d say reach is another factor to think about carefully. If you’re only doing business at the local or state level with no future plans for expansion, then you may not need the nationwide coverage that comes with a federally registered trademark; registering your mark with the state may be sufficient.
There’s also some protection afforded to U.S. business owners in their local jurisdiction just by using the mark in commerce, which is known as a ‘common law’ trademark, often denoted by the ™ symbol. If you were the first to use your brand, common law rights may protect your right to use your trademark in your local area even if another business secures federal registration for the same mark.
It can be hard to prove first use when there is no verifiable public record of your trademark or when you began using your brand. Regardless of whether you choose to register your mark or rely on common law rights, it’s your responsibility as a trademark owner to enforce your rights or risk losing them.
What Happens if you Don’t Register?
Paul Shrater: I think it’s important for entrepreneurs to understand that if you don’t register your mark with the USPTO at the outset, it can be difficult to expand your brand later. This is particularly important from an international perspective. A global trademark search at the outset can prevent near term issues. There could be a country that already has a registered brand name in the space. If you don’t know this from the start and are caught off-guard, you’d have to create a whole new brand identity. Social media following, website, logos, etc. Just to do business in that country. Is that worth it? It could get exponentially expensive quickly. If the brand is cleared for use in the countries that you plan to enter, you can work with a global trademark registration service to register in those countries.
A company’s market channel is also a factor. Are you a supplier or dealing directly with the end consumer? If your business is predicated upon distributing other brands, like Minimus, then your company name isn’t necessarily a big target for copycats, and there’s little risk of customer confusion. But, if your company name is also a brand name meant to be seen on products sold to the public, then it would be a good idea to register to protect that trademark.
It’s important to remember that trademark disputes can quickly get expensive. If a simple “cease and desist” letter from your attorney doesn’t nip the infringement issue in the bud. Then it’s nice to know that having a federally registered trademark gives you the advantage in terms of burden of proof at trial, and possibly awarded attorneys’ fees.
How to Apply
Small Business Trends: If a small business takes the plunge to register with the USPTO, do brand names, designs, taglines, etc. all require separate applications?
Paul Shrater: Many large, risk-averse companies seek to trademark everything. Logos, catch phrases, even ancillary artwork, etc. They do this because they can. For them it’s not much of an expense to have as much protection as they can. Whether it is really needed or helpful or not. However, this “trademark everything” approach can be cost prohibitive for a smaller business. The main thing to consider: What would be business-critical if someone copied it? Is it just the name? Or is it something else? Usually, it is just the name. So start there.
Ali Smith: In general, a trademarked name alone is preferable to just a trademarked logo. As it usually provides broader legal protection against copycats. However, it is best practice to register both a company name and a logo. With individual applications for each if you can. If you register your business name and logo together with the USPTO under one application, you must then use them together at all times. To have legal protection under federal law, and that’s probably inconvenient. It’s highly likely there’ll be circumstances that necessitate using just the word mark or just the logo, and so that would be a risk. It’s better to do separate applications.