5 things business owners should know about trademarks

Trademarks are an important part of your business's intellectual property. But if you're like many small business owners, you may not be exactly sure what a trademark is, or how to protect it.

Here are some facts to clear up several of the most common misunderstandings about trademarks.

What is a business trademark?

A trademark is a word, phrase, symbol, or sound that you use to identify your business and set it apart from competitors. You might trademark a business name, tagline, logo, or packaging. For example, the Coca-Cola company has trademarks for the name “Coke," the word “Coca-Cola" written in white script on a red background, the phrase “It's the Real Thing," and the curvy shape of a Coke bottle.

Trademarks are important because they give you a legal way to prevent other businesses from using marks that are confusingly similar to yours. A confusingly similar mark looks or sounds similar to yours and is used on a similar type of goods or services, so that people are likely to be confused about the source of those goods or services.

You can get a weak form of trademark protection in your local area just by using your trademark in your business. But to trademark a name with nationwide protection and the right to enforce your trademark in federal court, you must register these trademarks with the United States Patent and Trademark Office (USPTO).

Here are five commonly misunderstood facts about trademarks.

Forming a business isn't federal trademark registration

Many business owners think that when they form a business entity in their state, they also get a registered trademark on their business name. This isn't exactly true. Forming a business entity does give you some state law trademark rights on your business name. And your state won't allow another business to be formed with the same name as yours.

But this protection for your business name will not extend beyond state lines, and the rights you have may be hard to enforce. Simply forming a business does not give you any trademark rights in your other trademarks, like your tagline or logo. For nationwide protection and stronger enforcement rights, you must register your trademarks with the USPTO.

All business names aren't created equal

Some business names get stronger trademark protection than others. And some types of names can't be registered as trademarks at all because they are too generic.

• The strongest trademark protection goes to “fanciful" or made-up names like “Xerox," and “arbitrary" names that use a common word to refer to an unrelated product, like “Apple" computers or “Shell" oil company.
• Suggestive names that imply a product's qualities without naming them–like “Under Armour" or “JiffyLube" –also are eligible for trademarking.
• Descriptive or location names, like “Chicago Pizza" or “Clean Car Wash" usually can't be registered trademarks. Neither can purely generic names, like “Ice Cream."

When choosing a name for your business, consider choosing a name that's likely to be eligible for trademark protection.

Do a trademark search BEFORE naming your business

It's a common scenario. You choose a business name, set up a website, print signs, labels, and promotional materials, and start to make sales. And then there's a letter from another company's lawyer telling you that you're infringing the other company's trademarks.

Changing your name and rebranding your business is expensive. And most small businesses can't afford to fight a trademark infringement lawsuit.

To avoid costly rebranding or litigation, conduct a trademark search before you name your business to find out if your proposed name might infringe someone else's trademark. If you don't want to do the search yourself, LegalZoom offers affordable comprehensive trademark searches.

Your trademark class matters

To register a trademark, you must file an application with the USPTO. Among the information you'll need is the “class" of goods or services that your trademark will apply to.

The USPTO has 45 classes of goods and services, and it's important to choose the correct one, because your trademark will only be valid for the class(es) that you specify. If you make a mistake, you can't amend your registration later.

Choosing the correct class can sometimes be confusing. For example, if you sell screen printed T-shirts, should you have a trademark for a good (shirts) or a service (printing), or both? Consult with a trademark lawyer if you are unsure how to choose a trademark class.

It's up to you to enforce your trademarks

The USPTO registers trademarks, but it doesn't monitor and enforce them. That's your job, and it's possible to lose your trademark if you don't enforce or maintain it. Effectively enforcing a trademark involves several things:

• Use the registered trademark symbol, ®, on your trademarks to notify others of your trademark. If you have a pending trademark application, you can use the symbol TM.
• Use a trademark monitoring service to keep tabs on trademark filings, and file objections to any that might infringe on your trademarks.
• Act promptly if you believe another business is infringing your trademarks. Consult a lawyer for advice on sending a “cease and desist" letter and other actions you might take.
• File maintenance documents on time. The USPTO requires maintenance documents every several years. Stay on top of deadlines to avoid having your mark declared abandoned.

Trademarks can be a valuable tool to protect your business. To maximize your chances of strong trademark protection, do your research and choose a business name carefully. Register your trademark in the proper class. And monitor and police any possible infringing uses.