Whether you want to launch an app, a social startup, or a traditional storefront business, being aware of trademark issues at play will be crucial to protecting and growing your brand. Here, we focus on one of the earliest considerations: choosing a name.
Conducting a thorough search, being deliberate, and picking an appropriate timing strategy are crucial. Don’t just take our word for it - read the cautionary tales below. Heavy hitters in technology, manufacturing, and pharmaceuticals - as well as smaller online businesses - have all learned the hard way.
Here are three best practices for budding entrepreneurs:
1. Do a comprehensive trademark search. Without it, your startup may find itself either facing a lawsuit or having to re-brand to avoid one. While rebranding may not seem like a costly proposition, consider the marketing and merchandising costs that go into developing a well-recognized brand name.
Importantly, entrepreneurs should also ensure that their search includes company names, state trademarks, press releases and domain name databases. Trademark examiners use all of these to determine whether a business-owner can successfully register a trademark.
Increasingly, entrepreneurs have also looked to international trademark databases to protect themselves when preparing for international expansion. Tesla’s recent spat with a Chinese trademark holder ended in an undisclosed settlement after a suit alleging damages of over $32 million delayed Tesla’s entry into the Chinese market.
Horror story: In 2007, Microsoft launched SkyDrive, its cloud storage offering, in 38 international markets. To market their new offering, Microsoft invested heavily in an extensive TV ad campaign featuring Aubrey Plaza and other celebrities. Unfortunately, their advertising caught the attention of UK-based BSkyB, who in February 2014. Microsoft’s subsequent move to re-brand their service as ‘OneDrive’ meant that seven years and millions of dollars spent promoting the product’s initial name went to waste.
The strength of Microsoft’s legal team makes it highly likely that they did a comprehensive search but proceeded to launch as ‘SkyDrive’ anyway. This case highlights the importance of anticipating both future international expansion and changes in the market. In fact, BSkyB launched its own cloud storage offering after Microsoft made its branding decision but before Microsoft entered the UK market.
2. Pick a term you can trademark. When evaluating trademark applications, the Trademark Office doesn’t look kindly on generic marks. For example, it would reject applications to trademark ‘EBooks,’ ‘Hotels.com,’ and ‘Children’s DHA.’
Instead, entrepreneurs should try to select arbitrary or suggestive trademarks that convey what a product does without describing it. ‘Wired’ (magazine), ‘Playskool’ (toys), and ‘Greyhound’ (bus lines) all invoke the particular industry a product affiliates with, without mentioning the precise service by name.
But entrepreneurs should take care lest their mark become too synonymous with their product. When consumers begin to confuse a mark with the actual name of a product, genericide occurs. At one point, companies had active trademarks on the terms 'Kleenex', ‘Escalator,’ and ‘Yo-Yo’. But as soon as these terms entered common parlance, the marks lost their ability to identify an exclusive source of goods or services. When this happens, courts haven't hesitated to strip their trademark status. Although this wouldn't prevent an entrepreneur from continuing to use their mark, it would prevent them from protecting its exclusive use in court.
Horror story: The 2014 case Elliott v. Google perfectly illustrates the danger of genericide. 2014 WL 4447764 (D. Ariz. Sept. 10, 2014). Google’s opponents challenged the company’s trademark as generic, arguing that the general public understands the term ‘google’ to refer to the act of searching the internet without regard to the search engine used.
In this case, the court held that even if plaintiffs could prove that consumers associated ‘googling’ with the act of performing any internet search, Google’s evidence that over 90% of consumers associate ‘Google’ with the company’s trademark was dispositive.
Importantly, Google has invested heavily in preventing genericide. Beginning as early as 2003, Google lawyers contacted publishers and media organizations who used the term ’Google’ as a verb. In an early case, Google sent a cease-and-desist letter to Word Spy, a popular online dictionary. The letter demanded that Word Spy change its entry for the term 'google' to emphasize that it refers not to internet searches in general but only to those conducted using Google.
3. Think carefully about when to trademark. For one thing, you don't need to register a trademark to enter the market. In fact, “use in commerce” itself produces some common law protection. One primary benefit here is speed: you can mark your turf without waiting for approval. Additionally, this tactic allows you to build buzz around your brand and create secondary meaning, which can improve your odds of getting a merely descriptive name approved. For example, this strategy recently allowed a Washington D.C. favorite, Georgetown Cupcakes, to obtain exclusive rights to what otherwise would be a borderline name. But these common law benefits come with significant drawbacks. Protection is limited to the product category and geographic market in which the use occurs. Additionally, you may be exposed to significant legal risk if you did poor research before choosing the name.
In contrast, federal registration allows for nationwide protection and greater flexibility with regard to product category. Procuring federal registration also provides an added perk to those with an eye on international markets. For a six month window after applying, you can backdate foreign trademark applications to the U.S. registration date. This extra time can be quite helpful when dealing with international logistics and help pre-empt future name poachers.
For those with an idea that isn’t ready to launch, there’s also the option to file an “intent to use” application. This option allows protection so long as you enter the market within 6 months. With demonstrated efforts to use the trademark in commerce, this option is even extendable up to 3 years.
Horror Story: Ever heard of the Casino de Monte Carlo? World travelers and fans of blockbusters such as Goldeneye, Madagascar, and Oceans Twelve would be quick to nod. Some 43 small-time gambling websites still felt the term was generic enough to use a “Monte Carlo” theme without any repercussions. The result: tens of thousands of dollars in damages and the loss of their domain names. Lesson learned - don’t roll the dice with your business, even if your business is gambling. International Bancorp LLC v. Societe des Bains de Mer et du Cercle de Etrangers a Monaco, 329 F.3d 359 (4th Cir. 2003).
In sum, do your homework! Retaining counsel can go a long way towards ensuring success. A recent study, analyzing 25 years worth of data, concluded that trademark applications were 50% more likely to succeed when reviewed by an attorney. Prevention costs are a mere fraction compared to the enormous litigation costs down the road when things turn sour and you will be more focused on what matters: making that new name worth something.