When the battle with the U.S. Patent and Trademark Office is finally over, a new battle against the rest of the world begins. Once the mark is registered, you must develop an active trademark-protection program designed to educate company staff, consultants, distributors, suppliers and all others who may come in contact with the company's marks, as to proper usage and protection of the marks. As with trade-secret laws, the courts will usually only help those who have attempted to help themselves. A company that tolerates misuse of its marks by the public and/or fails to enforce quality control standards in any licensing of the mark may lose its trademark rights, and, therefore, one of its most valuable weapons in the war for market share.
A well-managed trademark-protection program begins with a formal compliance manual, drafted with the assistance of trademark counsel and the company's advertising agency. The compliance manual should contain detailed guidelines for proper trademark usage, grammar and quality. For example, a trademark is correctly used only as a proper adjective, and therefore it should always be capitalized and modify a noun. An example of a commonly misused trademark in this context is Xerox®, which is often used improperly as a noun (to refer to the end product instead of the source of the process, or even as a verb to refer to the process itself).
The trademark should always be used in conjunction with the generic name of the class of products to which it belongs—for example, Kleenex® facial tissues or Sunkist® orange juice. Once a trademark has been registered, you should develop compliance guidelines that address the following:
- proper display of the marks (use of the ®, ™ or © symbol);
- all documents, correspondence and other materials on which the licensee must display the trademarks and identify itself as a licensee;.
- all authorized and prohibited uses of the marks (such as whether or not it may be used as part of licensee's corporate name).
In addition to a compliance manual, strategies should be developed to monitor competitors and other third parties so as to forestall improper usage or potential infringement of the mark.
A staff member should read trade publications, business press, marketing materials of competitors, and in-house production, labeling and correspondence to ensure that the mark is properly used and not stolen by competitors. If an infringing use is discovered by a clipping service, company field representative, trade association or supplier, then the owner of the mark must be vigilant in protecting it. This will require working closely with trademark counsel to ensure that all potential infringers receive letters demanding that such practices be immediately discontinued and infringing materials destroyed. As much evidence as possible should be gathered on each potential infringer, and accurate files kept, in the event that trademark-infringement litigation is necessary to settle the dispute.
The registrant considering litigation should carefully weigh the costs and likely result of the suit against the potential loss of goodwill and market share. It may be wiser to allocate those funds towards advertising rather than towards legal fees, especially if the likelihood of winning is remote.
Infringement and Dilution
The principal reason why entrepreneurs and growing companies must maintain a trademark monitoring program is to guard against trademark infringement or dilution. Under the Lanham Act, infringement is defined as a demonstration, by the owner of a registered mark, that some third party is using a reproduction or imitation of the registered mark in connection with the offer or sale of goods and services in such a way as to be likely to cause confusion, mistake or deception from the perspective of the ordinary purchaser.
The exact definition of the "likelihood of confusion" standard has been the source of much debate over the years. The focus has always been on whether the ordinary purchaser of the product in question is likely to be confused as to source of origin or sponsorship. There are a wide variety of factors which the courts have listed as criteria for determining whether a likelihood of confusion exists, such as:
- degree of similarity and resemblance of the infringer's marks to the registered marks (in terms of visual appearance, pronunciation, interpretation, etc.)
- strength of the registered mark in the relevant industry or territory
- actual or constructive intent of the infringer
- similarity of the goods or services offered by the infringer and the owner of the registered mark
- overlap (if any) in the distribution and marketing channels of the infringer and the owner of the registered mark
- extent to which the owner of the registered mark can demonstrate that consumers were actually confused (usually demonstrated with consumer surveys and affidavits).
In addition to a federal cause of action for trademark infringement, many state trademark statutes provide owners of registered marks with an anti-dilution remedy. This remedy is available when a third party is using a mark in a manner which has the effect of diluting the distinctive quality of a mark that has been registered under the state statute or used under common law. The owner of the registered mark and the diluting party need not be in competition, nor must a likelihood of confusion be demonstrated. However, in order to make a claim for dilution, the trademark must have a "distinctive quality," which means that it must enjoy very strong consumer loyalty, recognition and goodwill.
Trademark rights are often the most valuable asset of an emerging growth company in today's competitive marketplace. The goodwill and consumer recognition that trademarks and service marks represent have tremendous economic value, so it is usually worth the effort and expense to register and protect them properly. This also requires a commitment by management to implement and support a strict trademark-compliance program, including usage guidelines for all departments inside the company as well as for suppliers, licensees, service providers, and distributors. Clipping services, semiannual trademark searches, media awareness programs, designation of in-house compliance officers, warning letters to infringers and diluters and even litigation are all part of an aggressive trademark-protection program.
Andrew J. Sherman Partner Dickstein Shapiro Morin and Oshinsky LLP