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Trademarks: If you Misuse Them, You Lose Them

Monday, July 11, 2005

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In the fast-paced, media-based world in which we live, brand recognition is often the key to success in the commercial arena. Some businesses spend hundreds of thousands of dollars developing and promoting brands. How are brands marketed? Through trademarks (for goods) and service marks (for services). In reality, the trademark is the brand. Once a trademark has accumulated good will, it takes on value. In many instances, the brand is where all of the worth of company lies. Take Coca-Cola for example. Other than the secret formula (a trade secret), the value of that company lies in its trademark — its brand recognition. Given the great value placed upon the development and promotion of a business' trademarks, one would think that equal attention would be spent on making sure the trademarks are used properly so as to retain their value under the law. Sadly, this often is not the case — with the resulting consequence being the unintentional loss of rights in a valuable mark.

How can this occur, you ask? Well, here's an example. Assume your name is the Xerox Corporation, and you have developed a great product known as the photocopier. You brand the product under the Xerox brand, and it's a big hit. Pretty soon everyone is making a "Xerox" of something (not a copy). Similarly, another company, the Kleenex Corporation, has come out with a great new paper product for blowing one's nose. Before you know it, people are running to get a "Kleenex" to blow their noses. Time marches on, and the Internet brings forward a search engine giant — Google. In no time, people now "Google it" on the Internet when they are looking for something. So what, you say - isn't it great that the public has become so familiar with these famous brands that they have become household words. Au contraire. It is this commonplace status that may become the downfall of the mega-brand. But why?  The answer requires a brief digression into the law of trademarks.

Under the trademark law, terms are recognized as trademarks or service marks if they become associated in the minds of consumers with a single source as being the originator of a particular product or service. They also serve to let the public know in advance something about the quality of the product or service. However, to function as a trademark under the law, the terms must serve as the brand name for an item, not as the common name for the item itself. Trademarks are protected according to a hierarchy of distinctiveness under the law. Those marks that are entitled to the greatest protection are known as "inherently" distinctive marks.  They are comprised of "made up" words (such as Kodak for cameras), arbitrary words (such as Apple for computers), and suggestive terms (such as Stride Right for shoes). They are deemed to be memorable and distinctive without proof of the same.  Next in the hierarchy comes descriptive terms (such as Shiny Black Shoes for shoes). Descriptive terms usually may only be protected as trademarks upon a showing that they have become distinctive in the minds of the consuming public (i.e., they are associated in the minds of consumers only with a single source). Finally, there are generic terms (such as belts for belts), which are the common or ordinary name for something. The thing about generic terms is that anyone would need to be able to refer to their products by their ordinary names, so generic terms can never be protected as trademarks. (Imagine trying to tell someone that you sell ladders without referring to the term "ladder" — you see the point).  So how does this law apply to the prior hypotheticals?

The problem with doing too good a job at branding and selling your products is the risk that the brand becomes a common name for something (e.g., a tissue is now a "Kleenex;" we don't search for something on the Internet — instead, we "Google" it). Once a term stops functioning as an adjective (i.e., Kleenex brand tissue, or Kleenex tissue), and instead becomes a noun or a verb, there is a real risk that its status as a trademark will be lost, along with the rights that go along with the same. In other words, under the law the mark has become generic and incapable of protection.

Another common problem arises where a business decides to adopt its company name as its primary brand name. In order for trademark rights to accrue, it must be clear that one is using a term or phrase as a brand name, and not simply to identify its business.  This concern is of particular significance when trying to obtain registration of a mark in the United States Patent and Trademark Office (USPTO). Before one can obtain a federal trademark registration, it must submit a specimen showing how the mark is used in commerce (as a brand name — that is, as an adjective to identify a particular product or service). The USPTO will not accept a specimen that shows the name being used merely to identify one's business. So, for example, let's say that the company is Happy Days Corporation, and its brand name likewise is Happy Days Corporation. Assume further that all of its marketing materials simply say Happy Days Corporation, followed immediately by the company address. When the USPTO receives such a specimen, the Examiner will be left in a quandary. Is the name being used in this context as a brand name or as a company name? The less distinctive the font, placement, and presentation of the words, the more likely the USPTO will simply say that the mark is used only as a business name (particularly if the name is in close proximity with the company address and contact information). 

The concern in the above example is not just about registration, because if a court were to find that a phrase has been presented only as a business name, and not as a brand name, it might well conclude that there is no priority in a particular mark in a given case.

So, in the two hypothetical situations above, how could the problems be avoided? Well, with respect to the genericness issue, the key is to never use the trademark as a noun or as a verb. Only use the mark as an adjective. One should say, "eat Cheerios brand cereal," or "eat Cheerios oat cereal," but don't say, "eat Cheerios." Similarly, one should say, "I'm going to do a search using the Google search engine" (not, "I'll Google it"). Likewise, if the company name is also its brand, marketing specimens, labels and the like should show the "brand" by itself, in a prominent, distinctive font, away from the company name, address, etc. In contrast, when the phrase is being used as the company name, it should be in smaller, more ordinary font, and placed in a less prominent location, next to the company identifying information. The employees of a company, particularly its marketing and business development personnel, should become well versed in these rules.

The examples discussed in this article are two of the most significant misuses of a trademark. There are, however, many other possible misuses. While coverage of these points is beyond the scope of this article, the best way for a company to avoid the inadvertent loss of its valuable trademark rights is to develop and implement guidelines to ensure that its trademarks are being used correctly. Your legal counsel should be able to assist you in the process of drafting appropriate guidelines for use in your business, to help ensure that your brands stay with you.

This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.