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Practical Trademark Law and Your Business

I have counseled many businesses in trademark matters over the years, and one thing I have found is that most business people, indeed most people, do not understand their options regarding the protection of their trademarks. This article will clarify the options and put you in a better position to make informed decisions.

There are essentially four options: (1) federal trademark registrations, (2) state registrations, (3) common law trademarks, and (4) international trademarks. A federal registration has a number of benefits, but one of the most significant is that it is enforceable nationwide. This is a huge advantage over state trademarks and common law trademarks, which are only enforceable within the actual geographic scope of their use. Another advantage of a federal registration is that it provides for enhanced damages. Under the federal system, you can obtain as much as three times your actual damages (i.e. "treble" damages) in cases of willful infringement. This is simply not available under most state systems.

Federal registrations also impart a presumption of validity, which can be very valuable in the context of litigation. This presumption is the result of the federal examination process. When you send your application to the United States Patent and Trademark Office, it goes to an Examining Attorney, who reviews the substance of the proposed registration. He makes determinations as to its capacity to function as a trademark, to distinguish your goods and services, and whether the proposed mark would infringe that of another. Even if his findings are favorable, the next step is not to issue the registration, but rather to publish the mark for public comment. If any member of the public believes he would be harmed by the registration, he can oppose the application and effectively block it from issuing. So, if you are able to jump through all of these hoops and obtain a registration, you get a prize. That prize is a presumption of validity.

Finally, a federal registration can also become incontestable after five years. This means that the mark's validity can never be challenged on the grounds of its distinctiveness, a common defense in infringement proceedings. Thus, incontestability can also be a very valuable advantage in the context of litigation, and this is available nowhere but the federal system.

Now, compare this to the rights conferred under common law. A "senior user" (i.e. earlier user) has limited enforceable rights to a trademark as soon as he uses it in commerce. No registration is necessary. However, these rights are limited. In part, they are limited to the geographic scope of use. For example, if you only advertise and do business in Tidioute, Pennsylvania, population 792 according to the 2000 census, you may only be able to enforce your common law trademark rights in Tidioute, Pennsylvania. Further, there is no presumption of validity, no presumption of distinctiveness, not even a presumption of ownership. All of these things must be proven at trial. So, although there are no front-end costs to a common law mark, the cost of enforcement can be substantially greater than that of a federally registered trademark.

State trademarks also have several advantages, but they still fall far short of those of a federal mark. For instance, state registrations are much less expensive and easier to obtain than federal trademarks, but to a certain extent, you get what you pay for. Part of the reason they are cheap is that in most states there is no examination at all. Typically, under state trademark systems, if you fill out the form properly and your check clears, you will receive a trademark registration. In the words of the Ohio trademark statute, a registration "is competent evidence of a registration" and nothing more. It is not evidence of an enforceable trademark. In essence a state trademark registration is simply a recordation of a common law trademark.

Finally, a fourth option is a foreign or international trademark, which can be obtained either by filing applications in each nation where a registration is sought, or by filing a single application under the Madrid Protocol. But first, what is the Madrid Protocol? This is a treaty to which the United States is a signatory. It allows a trademark owner to obtain registrations in multiple nations by preparing and filing only one application with a centralized international administrative body. The benefit conferred by the Madrid Protocol is strictly financial. Whether or not it offers a financial advantage over nation-by-nation filing must be assessed on an individual basis. The reason for this is that under the Madrid Protocol the applicant must pay filing fees in each nation where he seeks a registration, just as he would if he were filing nation-by-nation. Plus, the Madrid applicant must also pay an international filing fee, which is substantial and runs in the thousands. So, in terms of filing fees, the Madrid applicant pays more. But, there is a potential cost savings in attorney time because the Madrid applicant only needs to prepare and file a single application, whereas a nation-by-nation filer would have to prepare and file an application in each country where he seeks a registration.

Unfortunately, not all of our trading partners are members of the Madrid Protocol, although the number is growing. So, businesses engaging in commerce in multiple nations still may not benefit from a Madrid application if only one or two of the foreign nations are a member of the Madrid Protocol. This and the fact that every nation has its own filing fee, as well as several other variables, requires each case to be assessed individually to determine whether it would benefit from a Madrid Protocol application.

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