Like a Common Law Marriage, a Common Law Trademark May Not Be the Way to Go…

Trademark rights are acquired in the United States through (1) use of the trademark or (2) by filling a trademark application in the U.S. Patent and Trademark Office (USPTO) and obtaining a registration.

Businesses sometimes opt not to register their trademarks at the USPTO. A mark that is in use but not federally registered creates “common law” trademark rights, but those rights are limited. One important limitation is that your client’s rights only exist in the geographical area in which your client is using the trademark. Your client’s rights may be further limited if someone else, not knowing about your client’s use of the mark, files an application at the USPTO and obtains a federal trademark registration. In this scenario, your client’s rights will be limited to its geographical extent of mark usage, as of the filing date of the other party’s application.

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Federally registering a trademark avoids these problems, while offering a number of other significant advantages.

One of the underlying principles relating to rights in a trademark is that the first user of the trademark has superior rights (everything else being equal). The importance of using a trademark first, or filing an application in the USPTO first cannot be overemphasized. The advantages of obtaining a federal trademark registration include:

  1. Provides constructive notice of your client’s trademark rights to others within the US and places that mark in the records of the USPTO where many trademark searches are performed, thereby providing actual notice to others of your trademark rights when they are choosing a trademark.
  2. Once a registration is obtained, the USPTO may use your client’s registration to stop others from receiving registrations for confusingly similar marks.
  3. Provides nationwide notice of ownership of your client’s mark as of the registration date.
  4. Gives your client the right to use the ®symbol for the goods and services listed in the registration.
  5. If your client’s mark is registered then any third-party copy of your client’s product with that mark may be considered as a “counterfeit” under federal law. If that registration is recorded with U.S. Customs, importation of those counterfeit products can be blocked.
  6. After five years of registration and continuous use of a mark, your client may acquire “incontestable rights” to that trademark. The incontestable rights to a trademark can provide great value to your client, not only during your client’s ownership of the business, but also upon sale of the business.

“Incontestable Rights” means that legal challenges to your client’s right to the mark are quite likely very limited.

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Incontestability also provides a trademark owner with peace of mind from cease-and-desist letters. For example, if your client has a common law trademark (again, no federal registration) and someone has a federal registration for the same/similar mark for the same/similar goods and services, your client may have to stop using that mark, even though substantial goodwill may have been developed through your client’s use for several years. If a trademark owner has a federal trademark registration, and that mark has been registered and used continuously for more than five years, a cease-and-desist letter from an unknown prior user will likely be somewhat of a non-event.

A federally registered trademark that has become incontestable can also be of a great benefit if the owner decides to sell the business associated with that mark. Typically, in the sale of a business that includes a trademark, the buyer wants assurances that your client has rights to the mark, with such assurances usually couched in the form of a warranty. If your client owns a federally registered trademark, and one that is incontestable, the owner/seller may be able to negotiate away the warranty in such a sale – because the trademark is “incontestable.”

When you get down to it, there is really only one choice between federal trademark registration and common law trademark rights, and that is registration.

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