One of the great things about being a business attorney is getting to work with people who are, by nature, creative, visionary and risk takers. But sometimes that right-brained dominance can cause a blind spot when it comes to “the details”. Of the multitude of risks one must be prepared to take when launching a new business, failing to properly research one’s trade name prior to investing time and money in a website, logo, marketing materials, and advertising shouldn’t be one of them.
An unfortunate example of this “cart before the horse” approach to starting a new business began to publicly unfold in the local business community in mid-2002, and finally concluded nearly three years and several hundreds of thousands of dollars later. If you lived in the Treasure Valley during that time period, you may recall a very clever billboard advertising campaign that announced with a great degree of fanfare and suspense the approaching arrival of a new, state-of-the-art real estate company. After plenty of teaser advertisements strategically placed throughout the community, the name of the new company was finally revealed: Compass, Inc.
Problem was, there was already a company doing real estate business in the Treasure Valley under the trade name of Compass Commercial Properties, LLC and they were not amused by the news heralded by the new entity’s billboard campaign. Not only that but, not surprisingly, Compass Commercial Properties used the image of a compass as part of its logo – the very same iconic symbol that Compass, Inc. used in its advertising campaign and related marketing materials.
Predictably, a lawsuit ensued. After nearly eight months, a preliminary injunction was issued prohibiting use of the trade name and the compass-based logo by Compass, Inc. That prompted Compass, Inc. to adopt a new trade name: Sel-Equity. Fourteen months into the litigation, new counsel appeared on behalf of the defendant, Compass, Inc. Twenty long months into the dispute, QwestDex was brought into the suit by Compass, Inc. on allegations that, despite knowledge of the court’s injunction prohibiting Compass, Inc.’s use of the “Compass” trade name, QwestDex published the prohibited trade name in its 2004 edition of its telephone directory. Ultimately, Yellow Book USA, Inc. was also sued by Compass, Inc. for publishing the prohibited trade name in its 2004 directory instead of using the company’s new trade name, Sel-Equity.
Judgment in the amount of $110,000 was entered against Compass, Inc. in March of 2005. There is no public record as to the amount of attorney fees incurred by the parties in resolving this matter.
So, what’s the lesson? While you’re dreaming up a catchy name and advertising campaign to launch your new business, start by doing some basic research into whether the name is already in use by another person or entity in a similar business field.
An easy way to conduct such research is via Google or similar search engines. You might also check with the U.S. Patent and Trademark Office. They have a very user-friendly searchable database of existing registered trademarks (Trademark Electronic Search System or TESS), that includes information regarding when the mark was registered, whether it is still active, and what goods and services it relates to. A good place to start on the USPTO website is found at this link: http://www.uspto.gov/trademarks/basics/index.jsp.
But remember, just because a trade name isn’t registered with the USPTO, or isn’t listed with the Idaho Secretary of State’s Office as the name of an existing entity or as an Assumed Business Name for an existing entity, or just because a domain name is available for a website, doesn’t mean you’re home free. Although officially registering a trade name is often advisable, it isn’t required to assert a superior right to use the name to the exclusion of others. By simply using a trade name in commerce you acquire certain common law rights to use that name if no one else has beaten you to the punch. That’s where a Google or other such search comes in handy – it will often reveal an unbelievable number of people across the world who have already staked a claim in that really cool trade name you’re itching to use.
And, for good measure, you might be well-served to consult an attorney who specializes in trademark matters before committing thousands of dollars in advertising and other costs to a trade name that is going to cost you hundreds of thousands of dollars more in legal fees and damages.
Molly O’Leary represents business and telecommunications clients throughout Idaho, and is the Managing Principal of BizCounselor@Law, PLLC. In addition, she is a Past President of the Idaho State Bar and a current member of the Statewide Advisory Counsel for the Idaho Small Business Development Center. You may follow her on Twitter: @BizCounselor.