Trademark Considerations in Selecting a Business Name
Choosing the right name for a business can be a difficult process. There are a number of things to consider, not just from a marketing standpoint, but also from a legal perspective. It’s not uncommon for new business owners to be uncertain about the legal process and the difference between registering with the state and filing for a trademark.
When you apply to form a corporation, limited liability company or limited partnership, the secretary of state’s office will check to make sure there isn’t already a company in the state that is using the same name. Every state has its own laws but, generally speaking, a name will not be allowed if it too closely resembles an existing name. Once your application is approved, your name is protected in that state and no other business will be able to register it as its name with the secretary of state's office.
Depending on your business, this sort of brand protection at the state level might be enough. But if the name will be used on products or in connection with promotion and advertisements, it is often a good idea to seek trademark protection.
Though rights in a mark can be earned through use - knows as "common law trademark rights," I generally recommend federal trademark registration to capture the entire US (even potentially before using the mark) - note that similar registrations can be made in other countries. Federal trademarks are issued by the U.S. Patent and Trademark Office. The owner of a federal trademark has exclusive rights to the trademark, which are protected at both the federal and state levels. There are a number of factors that go into determining whether the name you have chosen is eligible for trademark protection. Typically, the more distinctive your company’s name is, the greater trademark protection it will receive. Also, the name must not be confusingly similar to another mark in the same class. The most distinctive categories are:
- Fanciful: basically a made-up work or term that has no other meaning (think Kodak, or Xerox for example).
- Arbitrary: existing words used in a way that is unrelated to the normal meaning. The most well-known example of this would be Apple for computers.
- Suggestive: hints at a quality or aspect of the product or service, like Airbus for airplanes or Netscape for computer software.
Another, less distinctive category is merely descriptive marks. These are terms that merely describe the product on which the mark is used (e.g., Sharp Scissors). Generally, they will not be granted trademark rights unless there is evidence of a secondary meaning (proof that people have come to identify the mark specifically with your goods or services). An example of a descriptive mark that has acquired secondary meaning is Digital for computers.
U.S. trademark law treats surnames the same as descriptive marks, that is they are not protected unless they achieve a secondary meaning. Terms that describe the geographic location of a good or service (i.e., the Washington Post) are also considered descriptive.
The last category is generic terms, which are not registerable or protectable. These are words or phrases that have become a common term associated with a category of goods or services, like smartphone or e-mail.
Even if your company doesn’t plan to seek trademark protection, it is important to assess potential trademark risks of a name before adopting it. Otherwise, a company could find itself incorporated under a name that infringes or dilutes an existing trademark, which could expose it to potential legal action.
In 2010, for example, the U.S. Court of Appeals for the Sixth Circuit ruled in V Secret Catalogue Inc. et al. v. Moseley that a Kentucky sex toy shop could not call itself “Victor’s Little Secret,” finding the name dilutes by tarnishment the name of the Victoria’s Secret lingerie brand. In another case, a Wisconsin fishing gear company called Land O’ Lakes Tackle spent years fighting over trademark rights with the Land O’Lakes dairy company.
It is advisable for all companies conduct a thorough trademark search in any country where it intends to sell a product or service to check for any potential conflicts. Companies should do so early in the formation process, before any investment has been made in a particular name.