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Making Every Dollar Count: Should Startups and Small Businesses Register Their Trademarks?

Categories: Intellectual Property, Article

Benefits of registering trademarks for startups

How important is reputation in your line of work? What is it worth? Does it matter that others associate your company with consistently high-quality goods or services? That your company represents a strong value-add proposition? That your company was easy to work with and exceeded expectations? And how do customers find you? Word-of-mouth? Marketing efforts? Search-engine optimization?

A Trademark is the Embodiment of Your Company's Reputation.

A trademark is a word, name, or symbol used to distinguish one's goods or services from those of others. A trademark is a brand name. It's how customers identify you in a sea of endless alternatives. It's the embodiment of your company's reputation.

A company begins to forge a reputation the moment it begins operating. Every dollar and effort expended contributes to the burgeoning light of the company's goodwill with consumers and the public.

Building a desired reputation is both time-consuming and expensive. Legendary investor and business magnate Warren Buffett famously quipped, "It takes 20 years to build a reputation and five minutes to ruin it."

But startups and small businesses often operate on shoe-string budgets. Every dollar and effort expended must be carefully and strategically allocated to maximize its benefit. There is little room for error; little room for excursions beyond operational necessities. Thus, it is particularly important to be purposeful in the activities undertaken to influence reputation.

This is precisely why startups and small businesses should clear and register their trademarks early in their lifecycles: Every dollar and effort expended must count.

Failing to Clear and Register a Trademark Can Be Devastating to a Startup or Small Business.

You spend countless hours building your brand and promoting your company. You dedicate valuable resources to marketing, website development, and SEO. You go the extra mile for clients in hopes that they will sing your praises to others so your business can grow.

A clearance search will analyze the likelihood that your mark is available for registration. If you fail to clear the trademark, you may find yourself on the receiving end of a lawsuit—and, ultimately, incurring the high cost of rebranding and having to start from near-scratch. In that case, every dollar and effort expended to accumulate goodwill in your brand up to that point will have been for naught. And the exposure to liability for trademark infringement may pose a serious setback to the viability of the company. Importantly, a Google search, even if extensive, often does not find every potentially conflicting mark.

Moreover, if you fail to register your trademark and another company subsequently adopts the same or similar mark, you may not be able to stop them. Although common law trademark rights arise automatically from use in commerce, such rights only extend to a company's demonstrable geographic trade area. Until registered, the mark is still available to others outside of your trade area.

Perhaps more concerning, however, a subsequent adopter of your trademark can register the mark before you and obtain exclusive rights in the mark everywhere in the U.S. other than in your immediate trade area. In that case, your company will be forever frozen into its trade area, unable to expand despite the fact you adopted the mark first. This can mean you are legally restricted from taking on customers and growing the business in new territories. While there may be options available to challenge the registration for a limited time after the conflicting mark is registered, legal disputes are far more expensive than taking preventive steps to clear and protect a mark from the outset.

Notably, a basic USPTO search and trademark application can generally be completed for less than $1,500. 

Trademark registration provides numerous benefits—benefits that are just as important to startups and small businesses (if not more so) than to large corporations. A more comprehensive article on the benefits of registration is here. A few of the more pertinent benefits for startups and small businesses are highlighted below –

Registration provides nationwide priority in a mark. This means nobody else can adopt your mark, even if they're on the other side of the country. This is particularly important for companies with plans to expand beyond their initial trade area—or even for companies that do not presently intend to expand but want to maintain flexibility in the future. A registered trademark can be exceptionally important to a business exit strategy.

But even if you're satisfied with business in your trade area, the interaction of consumers and companies online can cause serious problems where a second company begins using a confusingly similar mark on the internet. Registration will help mitigate the risk of such confusion by obtaining nationwide exclusive rights in the mark.

Registration can significantly reduce costs. A trademark registration provides public record of ownership of the mark. Anyone who later adopts a registered mark is deemed to have constructive knowledge of the registrant's use, even if they didn't have actual knowledge of the registrant's rights in the mark. This eliminates the defense of good-faith adoption of a mark and creates a deterrent to those who might seek to adopt a similar mark, reducing the likelihood of having to find funds for a legal dispute.

The USPTO will police trademark applications to avoid registration of similar marks. Essentially, the USPTO will help enforce your rights, providing an extra layer of protection without additional expense.

The law also imposes various legal presumptions in favor of a registered trademark, which effectively shifts the burden of proof to an accused infringer who seeks to attack the validity of the mark. This can provide significant cost savings in the event of a trademark dispute.

And registration authorizes the registrant to use the ® symbol, which notifies the public that the mark is registered with the USPTO and that its owner enjoys all the accompanying benefits of registration. The symbol can give the mark greater credibility and notify would-be infringers that you take your intellectual property rights seriously. This can generate a greater deterrent to infringing conduct and mitigate the risk that you will incur legal expenses down the road.

For companies that sell goods, a trademark registrant may record its mark with U.S. Customs and Border Protection, which will monitor, seize, and detain imported goods that infringe the owner's rights. Essentially, Customs will enforce your rights, providing yet another layer of protection and further deterrence to those who might usurp your brand. There are also secondary market benefits for sellers of goods. For example, the Amazon Brand Registry allows brand owners to control the brand and more easily police infringers on the platform. Amazon requires that the mark be registered to qualify for participation.

Conclusion

Startups and small businesses are often constrained to lean operations. However, clearing and registering a trademark early is one expense that should not be put off for a later date. This is one instance where an ounce of prevention truly is worth a pound of cure. The benefits of clearing and registering a mark to a startup or small business cannot be overstated. Registration will ensure every dollar counts when building your brand, promoting your company, and protecting your reputation.


About the Author: Aaron K. Haar is an attorney at the Phoenix law firm of Jaburg Wilk. He practices in the areas of intellectual property, internet law, and business litigation. He advises clients in all matters relating to the protection and enforcement of intellectual property rights.