The average small business vigorously avoids incurring legal costs, especially voluntarily, and especially at its beginning.
But that is when a business chooses its trademark. And failing to properly clear and protect the trademark of a fledgling business can be a critical legal mistake.
Consider this scenario: In 1888, Mr. Green starts a dairy business in Akron. He calls the business Green Dairy. Because of limitations on refrigeration and transportation at that time, the business is generally localized, but within that locality, very successful.
By 2001, due to good management and high-quality products and services, Green Dairy has several manufacturing plants and retail outlets dispersed throughout Ohio and Pennsylvania. In the Akron area, the trademark “Green Dairy” had developed considerable goodwill and name recognition. In addition, due to advances in distribution channels and in advertising, Green Dairy now has the opportunity to expand its operation into Indianapolis.
Management decides to apply for a federal trademark, because it now sees the need for nationwide trademark rights. However, when its trademark attorney searched the availability of the trademark “Green Dairy,” he discovered another dairy in Phoenix had obtained a federal trademark registration for the mark “Green Dairy” six years earlier. The Akron-based Green Dairy now asks what can be done.
Unfortunately, very little. Because the Akron Green Dairy never sold products in Phoenix, the Phoenix Green Dairy had the right to call its dairy Green Dairy. Further, because the Phoenix Green Dairy owns a federal trademark, it owns trademark rights everywhere the trademark “Green Dairy” had not yet been used at the time the application was filed.
As such, even though Akron Green Dairy had adopted the trademark “Green Dairy” in 1888, because the Phoenix Green Dairy had filed a trademark application in 1995, it owned the trademark everywhere except Akron. If the Akron Green Dairy expanded into Indianapolis, its use of the trademark “Green Dairy” would be an infringement of the trademark rights of the Phoenix Green Dairy.
The Akron Green Dairy was left with a difficult choice. It could either choose not expand its business, or it could choose to adopt a new trademark. In effect, the filing of the federal trademark application by the Phoenix Green Dairy cut off the Akron Green Dairy’s ability to expand in new areas under the valuable trademark “Green Dairy.”
How can this situation be avoided? By promptly clearing any new trademark through a trademark lawyer. Once the lawyer has rendered an opinion that the mark is available, it should be secured by filing a federal trademark application.
By doing so, the business owner ensures the mark is available for the business as it grows. The process of clearing and protecting a trademark is not expensive, but because trademarks last as long as they continued to be used, federal trademarks grow to become valuable business assets.
Roger Emerson is a shareholder in the intellectual property law firm of Emerson & Skeriotis. He can be reached at [email protected].