Attention Incorporating Professionals! When helping clients incorporate, one must take the time to clear the name the clients have chosen for their corporation not only as a corporate or trade name, but also as a trademark. To do so, one must not only clear the name with the State Secretary of the state in which the clients have chosen to incorporate in, but one should also commission a comprehensive trademark search. Failure to do so may lead to a whole host of problems that may severely affect the clients’ income and quality of life.
Anything can be used as a trademark. A trademark is a source identifier, i.e. a tool, which companies use in connection with their goods and services for the purpose of helping consumers distinguish their goods and services from those of their competitors. Famous trademarks include McDonald’s, Coke, Pepsi, Nike, Adidas, Tommy Hillfiger, Ferrari, BMW, Jaguar, Prudential, Century 21, and so on.
It is not unusual for clients to use their corporate name as a trademark, as soon as the corporation is formed and/or the domain name for the corporation is registered. Further, clients incur tremendous costs in connection with such use. Such costs can include the cost of (i) designing, developing and commissioning packaging for the clients’ goods or services; (ii) creating selling opportunities through various advertising media including but not limited to signs, brochures, catalogs, flyers, television, radio, internet, trade shows, seminars, and public demonstrations ; (iii) building up inventory to meet consumer demand; and (iv) attracting investors. As a result, the clients’ business begins growing nationwide, maybe even worldwide, attracting lots of attention along the way.
And then, it happens. The clients receive a cease and desist letter from another company, maybe a competitor maybe not (hereinafter “the sender”), informing them that their use of their company name as a trademark is confusingly similar to the sender’s trademark, and constitutes grounds for a lawsuit against the clients for trademark infringement and unfair competition. Furthermore, the clients’ failure to cease and desist from the use of their company name as a trademark will result in the sender’s initiation of a lawsuit against them in a court of law.
The threat of a lawsuit, the obvious need to stop using the corporate name as a trademark, and the clear necessity to adopt a new name and incur new costs in connection with the adoption and promotion of a new name, on top of the costs already incurred, has a significant negative impact on both the clients’ income and quality of life. The clients are first shocked, and then angry. Why should the clients have to change their company name? Did not the incorporating professionals clear it as a corporate name? Did they not search the state data base? And did not the web registrar clear it as a domain name? Was this not enough? The answer is no, it was not enough. Such searches do not clear the corporate name for use as a trademark. Only a full blown trademark search in data bases that comprise both registered and unregistered trademarks can clear the name as a trademark.
Further, who will compensate the clients for the past costs incurred in connection with the name that is supposedly infringing and who will reimburse them for the new costs they will have to incur in connection with new packaging, new advertising and disposing of the old inventory? It is not too difficult to see how the clients might blame the incorporating professionals and even bring suit against them, for their failure to clear the name or advise them to clear the name as a trademark.
A trademark search brings peace of mind that the clients have taken all reasonable business steps necessary to prevent capitalizing on, and misappropriating, the good will of any trademark that might precede them in the industry. It minimizes the chances of ever receiving a cease and desist letter of the type discussed above. Furthermore, in the event there is a lawsuit brought against them for trademark infringement, a trademark search absolves them of any damages, punitive or otherwise. Finally, it precludes their insurance company from denying them coverage for a trademark infringement suit, on the basis of bad faith. Most importantly however, it provides them with commercial leverage that gives them an edge in business, whether in trying to secure financing, or during a possible merger or acquisition.
Does this all make sense? If it does, then make it a habit to advise your clients that if they are going to use their corporate name as a trademark, they really, really need to commission a trademark search to make sure that their use of their company name is not confusingly similar to a trademark already being used in commerce by someone else.