Top 4 reasons why a trademark is good for business

When it opened in a small town in Washington state, Drop Anchor Brewing was an instant hit. Within several months it was distributing to over 60 locations in Washington.

It was a classic success story until Anchor Brewing Co. of San Francisco sent the little brewery a “cease and desist" letter.

Anchor Brewing is a much older and larger company best known for its Anchor Steam beer. It claimed its federal trademark registration gave it the exclusive right to use the word “Anchor" in the beer industry.

Drop Anchor was forced to change its name to avoid a lawsuit. That meant getting a new logo, labels, signs, bar tops, and t-shirts. They had to work with a trademark lawyer to find an acceptable new name. One of the company founders observed that, even without litigation, the name change “costs us an arm and a leg."

The Drop Anchor story illustrates the power of a registered trademark—and the hazards of not having one. Here are four reasons a registered trademark can be good for your business.

Reason 1: Set your brand up for success

Effective marketing means creating a unique identity—or brand—for your company. And nothing is more central to your brand identity than your business and product names.

Names that are good for branding are memorable and aren't likely to be confused with competitors' names. These same sorts of names are eligible for trademark protection.

If you approach naming with federal trademark registration in mind, you will choose a unique, marketable name rather than a generic, forgettable one (like “New York Pizza").

As part of the registration process, it's advisable to conduct a thorough trademark search that will help you identify and avoid names that may cause problems because they are too similar to other brand names.

Reason 2: A trademark helps avoid rebranding

If you do your homework and choose company and product names that seem eligible for trademark protection, you reduce the chance that you'll have to rebrand your company later to avoid a lawsuit by a registered trademark owner, as Drop Anchor did.

Rebranding is an expensive and time-consuming process, and you lose the marketing momentum you already had.

If you file a trademark application and your federal trademark registration is approved, you have the exclusive right to use your mark nationwide on the goods or services you listed in your application.

This puts you on much firmer ground if another company claims you are infringing on its trademark.

Reason 3: Expand your business more easily

Forming a business entity in your state gives you an exclusive right to use your business name—but only within your state.

You may also have common law trademark protection because you've used your name in your business, but that protection only extends to the geographic area where the name has been used.

So while state and common law trademarks can help you protect your name locally, they aren't much help if you decide to expand.

Customers may confuse your business with other similarly named ones, or a similarly named business with a federal trademark may force you to change your name or limit your operations to your original locality—even if that business started later than yours.

Registration with the U.S. Patent and Trademark Office gives you national rights, minimizing the chance of problems when you decide to expand.

Reason 4: Protect your business from copycats

A registered trademark carries a legal presumption that you have a right to use your mark nationally and prevent others from using it. As Anchor Brewing Co. demonstrated, this can be a powerful tool if you feel another company is infringing your mark.

In addition, if you have a federally registered trademark, you can help prevent the importation of infringing merchandise by filing your trademark with the U.S. Customs Service. Filing a U.S. trademark application also makes it easier to apply for trademark protection in foreign countries.