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Trade Names Versus Trademarks

One of the issues that most commonly arises with new clients of mine is that they confuse their business trade names with trademarks. Specifically, many companies incorrectly assume that once they have chosen a name and registered that name with the state of incorporation, they have unlimited rights to that name in connection with their business, including usage as a brand.

This is a dangerous assumption because registering a trade name does not confer any trademark rights to the registrant per se.

WHAT IS A TRADE NAME AND WHEN CAN IT BE USED?

A trade name is the name under which an entity does business at the state level. Rights associated with “doing business” include the right to use a trade name for banking, billing, business identification (e.g. yellow pages) and tax purposes, among others.

Typically there are two types of names a company may use for these purposes:

  • The name provided to the state upon registration as an entity (as an LLC or Corporation, for example).
  • An “assumed” name, which must be registered with states separately from the registered name.

Selecting a trade name is not a complex process and is not typically subject to rigorous examination by states when approving these names. To the extent that state governments use any criteria at all to reject a name, it is often a matter of ensuring that the business does not misrepresent its industry (e.g. a grocery store using “bank” in the name) or duplicate an existing entity in that state. While procedures vary from state to state, the key point is that state governments never evaluate a trade name as a brand.

HOW CAN RELIANCE ON TRADE NAMES (IN LIEU OF REGISTERING TRADEMARKS) CAUSE LEGAL TROUBLE FOR A BUSINESS?

Some businesses assume that a registered name gives them the right to use that name for *any* purpose related to the business, and thus it creates a false sense of security. However, when the business is using its trade name to identify its products or services, the trade name is functioning as a trademark, and confusion with (or dilution of) existing trademarks must be considered. A business has a legal right to use a name as a trademark only to the extent that it does not infringe upon the existing trademark rights of others.

WHEN DOES A TRADE NAME INFRINGE UPON A TRADEMARK?

Infringement can be subtle, and is not always obvious! If your name is sufficiently similar to a registered trademark such that it causes “a likelihood of customer confusion” (a legal term of art for a sophisticated multi-part test), you might have to change your business name, spend money on corrective advertising or even pay for the lost profits of the holder of the registered mark, among other things. In fact, damages can occur regardless of registration in some cases.

HOW TO STEER CLEAR OF TRADEMARK INFRINGEMENT?

A trademark is the legal concept for a brand. An experienced and skilled trademark attorney can help you steer clear of infringement before it takes a costly toll on your business by researching the brand for potential conflicts and other bars to use and registering the brand as a trademark with the appropriate entities (state, federal and international, as applicable). Registering your brands as trademarks (whether they be product names, logos or other devices that identify and distinguish goods and services) can discourage other from using similar trademarks and give you a leg up in litigation in the unfortunate event of a competing brand treading too closely to yours.

REGISTER A TRADEMARK

 

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