Trademark infringement is the unauthorized use of a trademark on or in connection with goods and/or services in a manner that is likely to cause confusion, deception, or mistake about the source of the goods and/or services. But what does this mean for your small business? How can you avoid receiving a nasty cease and desist letter accusing you of infringing someone else’s trademark? And how much can a trademark mistake cost you?
In plain English, there are three key elements to a trademark infringement claim:
1. Using a trademark without permission:
A trademark owner needs to prove not only that they own a valid trademark, but also that they have “priority.” When a trademark is registered with the USPTO, there is a presumption that the trademark is valid and owned by the person or company identified as the owner in the registration. The law also presumes that this registered trademark owner has the exclusive right to use the trademark nationwide on or in connection with the goods or services listed in the registration. While a defendant can try to rebut these presumptions in a court case, it is quite an uphill battle. This is why we highly recommend registering your trademarks as soon as possible.
Because trademark rights are created by use, the idea of “priority” deals with determining who was using a particular trademark first and should be considered the “senior” rights holder. For example, if someone has been using an unregistered trademark in their local area, they may be considered the senior user in that particular geographic area. However, when that same user tries to expand to a new area, they may find that, unbeknownst to them, someone else already has seniority because of prior use in the expansion area.
2. Using that trademark in connection with goods or services
Both the creation and infringement of trademark rights requires that a trademark be used in connection with goods or services. So, for example, it’s not trademark infringement when someone uses your trademark to review your products or services. It’s also generally not trademark infringement when two unrelated companies use a similar trademark on vastly different goods or services. (Note: The more famous a trademark is, the more likely it’s trademark rights will expand beyond its current goods and services.)
3. Using that trademark in a way that is likely to cause consumer confusion, deception, or mistake
Is it likely that consumers will see the trademark and purchase goods or services from one company while believing that they were purchasing from another, or believing that the two companies were somehow related? The likelihood of confusion analysis is at the heart of trademark law and is the key element in any trademark infringement case. The courts consider a variety of factors in assessing likelihood of confusion, but the key factors are:
In addition to these key factors, courts typically consider how the goods and services in question are advertised, marketed, and sold; the typical purchasing process consumers go through; the size of the overall market (confusion is more likely when two competitors are each trying to woo a relatively small number of consumers in a niche market); evidence of actual consumer confusion; the defendant’s intent or motive for adopting the allegedly infringing trademark; and the strength of the plaintiff’s trademark (i.e., how closely consumers associate a particular mark with a particular product or service).
Why is trademark infringement a major problem for small businesses?
Trademark infringement is a major problem for small businesses because trademark infringement cases are incredibly complex, making them expensive to litigate. Even if you are successful in defending your use of a similar trademark, you are still out tens of thousands of dollars in legal fees, not to mention the stress of it all and the time it will take away from your business.
Let’s say, for example, you’ve chosen a new business or product name. You quickly determine that the name is available in the Ohio Secretary of State’s database. Maybe you even do a quick search in the USPTO database and feel confident in moving forward because no one has registered the exact name you’ve chosen. But the confusingly similar standard means that even these basic searches are not enough to avoid potential trademark infringement. (And no, ignorance of your competition is not a defense. The law presumes that everyone is aware of what has been registered in the USPTO database.) You need to cast a much wider net to find out what other names are out there that are potentially similar to the name you’ve chosen.
We often see clients get into similar trouble with logos. Even if you had a graphic designer create a new logo for your business, you can’t be certain that the logo doesn’t contain very similar elements as other logos that are already in use without first conducting a thorough trademark search.
What are the potential penalties for trademark infringement?
When a trademark owner suspects another business is infringing their trademark, they will typically send a cease and desist letter demanding that the infringement cease. Often, the cease and desist letter will also demand additional information needed to determine how much in damages the defendant should be required to pay, as well as a demand that the infringing party pay the trademark owner’s legal fees.
While most litigation is ultimately settled before trial, if a trademark owner does have to bring their case in court, the court can:
Trademark infringement can be an incredibly expensive problem for a small business. But it is also entirely preventable. If you have questions about the trademarks used in your business: