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FAQ: INTELLECTUAL PROPERTY & BUSINESS LAW

Intellectual Property

What is a trademark? What is a service mark? What's the difference between the two?

Trademarks and service marks are the same in that they both are used by a person or company to distinguish what they have to offer from what other people or companies have to offer. The difference is in how or where the mark appears and what is being offered. Trademarks are used to identify a product or goods, while service marks are used to identify a service performed. Trademarks are usually found on things like the labeling of a product or package, whereas service marks are generally found on a sign, website, brochure, or other service-related ads.

How can registering my trademark help my business?

Without question, trademarks and service marks can be among the most valuable assets of a business. Ironically, like goodwill, value is seldom listed on the balance sheet of a business in connection with its trademark or service marks. Nevertheless, the service marks and trademarks of a business are very much an integral part of its going concern value. One need only reflect upon the fact that a bottle of designer water with a prestigious brand name sells for substantially more than a generic container of water, even if they came from the same faucet, to realize the value of a trademark. Also, consider the fact that independent retailers are willing to give up six to eight percent of their gross revenues for the privilege of brand name identity that franchisors offer.

When you register a trademark with the United States Patent and Trademark Office, it helps protect your business from potential demands of others that you cease using that trademark. It may also give you the right to demand that other businesses cease using trademarks or service marks that are identical or confusingly similar to yours.

Isn't it true that if I register the name of my business on the Internet, it is much cheaper than getting a trademark registration?

It is true that the cost is much cheaper; however, it is also a classic example of getting what you pay for. Domain name registration on the Internet protects only the exact letters that have been registered. So if one simply varies one letter or adds one letter to a phrase, a new domain name can be registered with no questions asked. Even more importantly, registration of a domain name does not, in and of itself, offer any protection beyond setting aside that particular clause as a domain name on the Internet for the registrant. For instance, I own the domain name BuyingGroups.com. I use that web page to provide legal information concerning purchasing alliances. The mere fact that I have a domain name registered would not protect me against another law firm who advertises itself as the "Buying Groups Law Firm," even if they did such advertising on the Internet. In fact, if I did not have BuyingGroups.org registered, that law firm could register it as a domain name.

How long does it usually take to get a trademark registered with state government?

From the time that a trademark application is submitted with the Secretary of State until it is registered can be as fast as a few days.

How long does it usually take to get a trademark registered with federal government?

From the time that a trademark application is submitted to the United States Patent and Trademark Office until it is registered generally takes at least eight or nine months to a year, assuming all goes smoothly.

How can I know if my company name or other trademark is already being used by somebody else?

You can never know that with complete certainty, but some ways of checking are as simple as looking on the Internet for trademarks or service marks that are identical or confusingly similar and are related to the same industry. You can also check on USPTO.gov and on the websites of various secretaries of state where you intend to use the company name or trademark. It is best to have a trademark attorney to assist with such a trademark search, especially if it is not immediately apparent that another company is using that trademark or company name because a trademark attorney will have the experience necessary to spot possible trademark conflicts that would readily apparent for the untrained eye to spot.

How can I keep my trademark from being used by other people?

The first step is in choosing the correct name. Not only does the company need to select an attractive name that would help market its services, but it also must be a name that does not infringe upon the trademark rights of others. A trademark search should be conducted. At a minimum, the records of the U.S. Patent and Trademark Office should be searched. A federal trademark search can now be done by anyone online. The web address is http://www.uspto.gov/web/menu/tm.html. It is equally important for the company to have a trademark search done in each state where he intends to conduct business under that name. Typically, state trademark records are also accessible by Internet through the Office of the Secretary of State of that state. There is no charge for an online federal trademark search and usually no charge for a state trademark search, either. If no conflicting registrations are found after doing these searches, it would be money well spent to have a trademark lawyer also perform a trademark search on the mark under consideration. The level and the cost of the search will vary, depending upon how extensively the mark will be used. There is a wide range of factors which go into considering whether the proposed mark is in conflict with existing registrations or pending applications which require the experienced judgment of a seasoned trademark lawyer to be analyzed.

Once the trademark is selected, the next step is to protect it through registration. If the service mark is only going to be used within one state, then registration with the Secretary of State of that state is all that is needed. If the mark is to be used in several states, then a federal registration should be considered. There are two ways a service mark can be registered. At a minimum, it should be registered as a word mark, meaning that just the words, without any accompanying design or logo would be registered. That way, those words will be protected, regardless of any changes in the logo the owner may make from time to time. The second way of registering the service mark would be to include the stylized logo. A design mark registration would preclude a competitor from changing the words of the mark, but using the same type of logo. If the logo is an important aspect of the service mark, then both types of registrations are recommended.

It is very important that the trademark search be done before either a state or federal registration is undertaken. Strange as it may seem, a company could be better off using an unsearched mark without registration, than to register an unsearched mark. Some registered owners maintain monitoring services to alert them of all new applications and registrations for federal, state and even domain names. If an application for an unsearched mark comes anywhere near the scope of protection offered by such a monitoring service, it may well trigger a cease and desist letter from a lawyer. I will confess to writing numerous such letters to unsuspecting trademark applicants.

Actual usage of the mark is a key requirement to establishing ownership and registration such mark. Trademarks are like muscles. The more they are used, the stronger they get. Common law recognizes that marks have rights of protection, even if they are never registered. The priority of a mark is based upon first use. Common law protection extends only to the geographic area where the mark is actually used. The protection offered by registration extends to the full scope of the jurisdiction providing the registration. A federal registration of a trademark offers nationwide protection even if it is actually used in only three or four states.

Just as the prudent businessman maintains liability and casualty insurance, so will the prudent company take the necessary steps to select and protect the heart and sole of his business - its name.

After I register my trademark, what should I have to do next to make sure my mark stays active?

First, you should continue to use your trademark and have some way of documenting its use. It is also important to prevent others from using or registering marks that could be confusingly similar. This can be done through a monitoring service. It can also be done on a less expensive basis by repeating the search process outlined above from time to time to see if there have been any new trademark registrations filed at either the federal or the state level which could pose a problem. When such conflicting trademark registrations or applications are found, the company should have its lawyer write a cease and desist letter to the infringing party. If others are allowed to use the same or similar trademarks for the same or similar services, the mark becomes so weak, that it is no longer protectable.

The final step in protecting a trademark or service mark is complying with the additional filing deadlines required by law. A Statement of Use must be filed on a federal registration between the fifth and sixth anniversary date of registration in order to avoid cancellation. Renewal papers must be filed between the ninth and tenth anniversary dates to avoid expiration dates. State registrations generally require renewals every five or ten years. These deadlines must be kept up with, and because they are so far off, it is very easy to lose track of them. Trademark attorneys use trademark docketing software to keep up with the various deadlines for the trademarks for which they are the attorney of record.

What could happen if I never seek trademark protection?

If another person or company had been using a trademark that is similar or identical to yours for goods or services within the same industry, and had their trademark registered with the United States Patent and Trademark Office, they could keep you from using your mark in any part of the country in which you had not been using the trademark since before them. In fact, you could lose your trademark, and may even be subject to paying attorney fees and treble damages for trademark infringement.

What is a trade name?

A trade name (also known as a "DBA" or "fictitious name") is a name an owner uses to identify his/her business while a trademark is used to identify a good or service a business provides. Another distinct difference is that trade names are not registered at federal level. If a trade name meets the criteria of a trademark or service mark, however, it also might be eligible for registration as such.How long does a copyright usually last?Copyright protection is for a limited term. For works created after January 1, 1978, copyrights last for 70 years after the death of the author. -U.S. Copyright Office

What types of things can I copyright?

Copyrights protect original works of authorship including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture. Copyrights do not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed. -U.S. Copyright Office

Business Law

What is a franchise?

A franchise is a business model that involves one business owner licensing trademarks and methods to an independent entrepreneur. Sometimes, franchises are referred to as chains. -U.S. Small Business Administration

What are the advantages of forming a franchise?

If you have found a successful way of doing business that you can teach to others, and they are willing to pay a franchising fee in order to learn it, then a franchise is right for you. It allows your successful business model to be used in several places at once, and allows you to receive franchising fees. Franchises are also useful in taking advantage of economies of scale by purchasing larger quantities for the entire franchise at lower per unit prices. Another great advantage of a franchise is that all franchisees are able to benefit from using the trademarks and trade dress of the franchise, and share in the benefits of regional or national marketing campaigns.

What is the difference between an S-corporation and a C-corporation?

A C-corporation is taxed once at the corporate level and then taxed again at the individual level from dividends distributed to business owners. An S-corporation is only taxed through the owners' personal tax returns. However, C-corporations have no restrictions on ownership, while S-corporations do.

How is an LLC different from an S-Corporation?

The main difference between an LLC and an S-Corporation is that LLC's, unlike S-Corporations, do not have restrictions placed upon them as to the type of entity that can own them or as to how many owners there can be.

There are several other differences between an LLC and a corporation that are not tax-related, but they do not have any significant financial impact on the owners. For example, an LLC's organizational documents are called Articles of Organization, rather than a Charter, and an Operating Agreement rather than Bylaws. Also, the owners of an LLC do not have "stock" but rather "units of ownership."

What do an LLC and a corporation have in common?

In order to form both, one must file an organizational document (Article of Organization for an LLC, a Charter for a corporation) with the Secretary of State in the state in which the principal office of that entity is located. An LLC and a corporation provide the same protection to its owners against personal liability for the acts or omissions of the employees of the entity or of the entity itself.

Should all corporations have stock certificates?

Any corporation may use actual, physical certificates to represent stock, but that is not a requirement. Corporations can keep track of stock ownership by using a stock registry rather than having stock certificates.

How long does it usually take to form an LLC or a corporation?

While filing time varies from state to state, the process usually takes about four to six weeks once an application is filed.

What is my first step in forming an LLC?

The first step in forming an LLC is to choose a name and find out if anyone in your industry is using the same name for their business.

Why should an LLC have an Operating Agreement?

An operating agreement is not only legally required in most states, but is a very good idea. An operating agreement will help prevent financial and management confusion and assure you that your company is run by your rules and not default rules predetermined by your state.

What is a minority business enterprise?

A minority business enterprise is a term used in the United States to describe a business that is owned, operated, and controlled on a daily basis by one or more American citizens of most ethnic minorities. The most common ethnic minorities include African Americans, Asian Americans, Hispanic Americans, and Native Americans.

What advantages are there to being a minority business enterprise?

Many doors are opened to a business once it becomes certified as a minority business enterprise. Banks have more incentives to lend to certified minority business entities. There are special networking and training programs set aside especially for these businesses. There are many other extra resources that are set aside by the government to help minority business enterprises get an extra leg up on their competition.

What does it take to be a minority business enterprise?

Although businesses can identify themselves as a minority business enterprise, a government organization such as the National Minority Supplier Development Council usually is the one to certify them.

What is the best way to pass on my ownership of a company to my loved ones?

Estate planning documents such as a last will and testament can spell exactly what you want done with all of your assets after you pass away. Also, you must have formed your company in a way that such ownership can be transferred in that way.

© Harry Ray, Harry B. Ray & Associates, PLLC, Chattanooga, TN. May, 2014. All rights reserved. This article may not be reprinted nor reproduced in any manner without prior written permission by the author.

Certification as an Intellectual Property Law Specialist is not currently available in Tennessee.

This article provides general coverage of its subject area. It is provided free, for informational purposes only, with the understanding that the author, publisher and/or publication does not intend this article to be viewed as rendering legal advice or service. Readers should not act upon this information without seeking professional counsel. If legal advice is sought or required, the services of a competent licensed professional should be sought. The author and/or publisher shall not be responsible for any damages resulting from any error, inaccuracy or omission contained in this publication.

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