The following article was published in the July/August edition of CREATE Magazine. The article is reprinted with permission from CREATE Magazine.
Look Before You Leap!
The dangers of not clearing brands before adoption and first use.
Good drivers don't enter intersections without first looking for oncoming traffic. Why? Accidents may cause significant liability and are expensive, inconvenient and sometimes deadly. While a trademark infringement lawsuit causes no physical harm, the resulting damage and negative effects can be significant. In addition, defending a lawsuit is time-consuming, expensive and a distraction to running a successful business or nonprofit organization. So, prior registered and unregistered trademark rights are like moving vehicles — they must be respected and carefully considered to help avoid liability and other problems associated with defending trademark lawsuits.
The Worst-Case Scenario
Being on the wrong end of a trademark lawsuit can result in a parade of horrible consequences. If the name, slogan, brand or trademark you have adopted and used is likely to cause confusion with the prior rights of another, an injunction is virtually certain. Actual confusion is not required. Identical names are not required for likely confusion either. Close similarity in meaning maybe enough to trigger liability, e.g., TORNADO v. HURRICANE, both for chain link fence. Injunctions require one to immediately stop using what got them into trouble in the first place and often require the destruction of any infringing product, packaging and/or marketing materials. Monetary awards are possible too, in certain cases. For example, turning over profits generated from the infringing conduct, paying out profits that could have been made by the prior trademark owner, and being held responsible for any other monetary damages flowing from the infringing conduct are substantial risks to those who have lost a trademark lawsuit. Although it is not too common, in some cases where the losing defendant's conduct is considered “exceptional,” not only must the losing party pay its own attorney's fees, but it must also pay the reasonable attorney's fees of its winning adversary. This award can really add insult to injury.
A Reasonable Business Strategy
Although there is no formal legal requirement to search and clear brands before adoption and first use, to help avoid the possible parade of horribles, most businesses and nonprofits consider proactive trademark clearance programs to be a reasonable and important part of their ongoing due diligence efforts. It is also believed that juries and courts appreciate the respect given prior trademark rights and they will view with favor the implementation of such programs as demonstrating care and reasonable business judgment. While searching doesn't necessarily insulate a brand owner from allegations of trademark infringement or even a successful trademark infringement lawsuit, searching is, at least, informally regarded as an expected business practice. Proactive trademark clearance programs typically involve at least two steps.
The Knock-Out Search
The first step typically involves what is called a preliminary or quick “knock-out” search. This truncated search looks for obvious problems that would make further searching a waste of time and money. The knock-out search is typically limited to looking for identical or near identical prior federally registered rights. Those who are familiar with the search features at http://www.uspto.gov/main/trademarks.htm may conduct searches using the U.S. Patent and TrademarkOffice (USPTO) database without involving trademark counsel. Not engaging trademark counsel for this initial step, however, can end up costing additional time and money. I recall a national financial institution wanting to rebrand and informing me it would be unnecessary to conduct preliminary “knock-out” searches for about 20 proposed names that had “already been cleared” by the creative firm that came up with the list. I expressed concern about this approach, but in the end, reluctantly followed instructions and ordered comprehensive searches for all 20 names. As it turned out, at least half of the research reports (costing thousands of dollars) were discarded after reading the first couple of pages for each. The creative firm that had“initially cleared” the potential names didn't appreciate the legal nuances that would be immediately apparent to an experienced trademark practitioner.
The Full & Comprehensive Search
If the preliminary search discloses no obvious conflicts, the next step typically involves commissioning a comprehensive and professional trademark search report. These reports are most often several hundred pages thick and cost several hundred dollars to obtain from a professional trademark search firm. These detailed reports should be reviewed and analyzed by competent trademark counsel. A comprehensive search is specifically designed to disclose not only registered, but unregistered potentially conflicting prior marks that share more subtle similarities as to sight, sound and meaning, such as phonetic similarities, misspellings and meaning similarities. Many resources beyond the USPTO's federal registration database are searched to look for potentially conflicting prior rights, including federal, state and local records, telephone and business directories, proprietary business information databases, and the Internet. Because prior registered and unregistered common-law trademark rights take priority over later uses and can easily trigger the parade of horribles described above, it is important to not overlook the comprehensive search step.
When to Search
It is important to appreciate that comprehensive professional searches are not infallible. It is possible that prior conflicting rights may not be disclosed for one reason or another. Nevertheless, the comprehensive search is considered a wise investment and the best available tool for avoiding trademark conflicts and lawsuits. Obviously, the critical time for a search is prior to adoption and first use of a new name, slogan, mark or brand. Less obvious and often forgotten are the other times when searching can be just as important: 1. Before extending an existing brand into new product or service categories; 2. Before licensing the brand to others; 3. Before modifying or modernizing a logo or trademark design; 4. Before extending a local use geographically if the mark is not federally registered; and 5. Before extending use of the brand outside the U.S. In sum, look before you leap, and know when to look, so that, at best, valuable business momentum and resources are not lost during the naming or branding process.
"Look Before You Leap!" CREATE Magazine July-Aug. 2007: 52. Print.