Business Trade Names vs. Trademarks

 

Business trade names differentiate one business from another. They should not be confused with trademarks or service marks, which identify actual goods or services.  As an example, the company Tandy Chemical Processing, Inc. may use the more friendly name Tandy Chemicals when it holds itself out to the public. Tandy Chemicals is the trade name. Trade names are not eligible for state or federal registration since a trade name, by itself, cannot be protected. In fact, a clear distinction is made between trade names and trademarks by the United States Patent & Trademark Office (USPTO). However, a trade name that functions as a trade mark as an identifier of goods or services can receive state and federal protection, and all the benefits that come with registration.

TIP! You should generally choose a business trade name that functions as a trademark. In order to select a strong trade name, you need to know the characteristics of a good trademark. You basically need to know which names are protectable and the degree of protection certain types of names provide over others. Similar to trademarks, trade names are grouped into four distinct categories: a) generic, b) descriptive, c) suggestive and d) arbitrary or fanciful.

A common mistake regarding choosing a business name is the false belief simply filing articles of incorporation or organization provides protection of the name. The state you organize under only does a name check to prevent the filing of multiple entities with the same name with that state. But, this does not secure rights to the business name. You should understand that even within the same state there may be different types of entities, such as limited partnerships and LLCs, as well as sole proprietorships or partnerships using the same name that do not show up on a corporate name check by the Secretary of State. Organization does not secure your right to the business name nor does it protect you from claims of infringement by a prior user of the name.

 

Types of Trademarks

Trademarks which are arbitrary or fanciful receive the highest degree of protection under law and generic names do not receive any protection. The four categories essentially provide a protection spectrum, ranging from zero protection for generic names to the highest degree of protection for arbitrary and/or fanciful names. Descriptive and suggestive names qualify under a stricter test.

The four types of trademarks are described in detail below:

1. Generic names provide no real unique description or means of identifying the business apart from others offering the same or similar goods or services. Simply stated, a generic trade name describes the goods or services being sold and is used by the public in describing the business activity being conducted. As an example, if you invent a vacuum and call your company “Vacuums” your business name will not be eligible for trade name protection since it generically describes the type of good the business sells.

2. Arbitrary or Fanciful names are existing names that bear no logical relation to the good or service the mark identifies. “Apple,” “AJAX,” “Ivory” and “Banana Republic” are all examples of arbitrary marks. Fanciful names bear no logical relation to the good or service the mark identifies. These names are made up by their owners (e.g. “Exxon” or “Fuddrucker’s”). Arbitrary and/or fanciful names receive the highest degree of protection due to uniqueness of the name relevant to the nature of the business.

3. Descriptive names or marks actually describe the goods or services they represent, or some ingredient, characteristic or quality of the good or service. “Sno-Rake,” “Bug Mist,” “World Book,” “Open MRI” and “Vision Center” all describe the underlying product or service, or some aspect of the product or service. A term is descriptive if you have an immediate idea of the nature of the goods or services, or of some ingredient, quality or characteristic of the goods or services the mark is trying to describe. Descriptive marks do not identify the source of the goods or services and are only eligible for legal protection once they acquire “secondary meaning.” Thus, they are not automatically eligible for trademark protection. Of course, acquiring secondary meaning doesn’t happen overnight.

Secondary meaning exists when consumers associate and identify the descriptive name with the particular business, or the source of the goods or services being sold. This stems from ongoing advertising and sales. Also, after amendments were made to Federal law (Lanham Act), the public does not have to identify the specific producer, only that the product or service comes from one single producer. The Courts have generally evaluated the following factors when trying to determine whether a descriptive mark has acquired secondary meaning: (1) the amount and manner of advertising; (2) the volume of sales; (3) the length and manner of the term’s use; (4) results of consumer surveys. Zatarain’s, Inc. v. Oak Grove Smokehouse, Inc. (1983).

4. Suggestive marks only “suggest” rather than describe some aspect or characteristic of the product or service it represents. Suggestive marks receive less protection than arbitrary of fanciful names, but do not require that a secondary meaning is shown to become eligible for protection. Like arbitrary and fanciful marks, they are eligible for protection automatically. According to the courts, a term or word is suggestive if it “requires imagination, thought or perception to determine the nature of the goods or services.”

Descriptive marks describe the good or service more literally then suggestive marks and do not require any imaginative leap to determine the nature of the product or some quality or ingredient of the product. For example, the word “Coppertone” is suggestive of sun-tan lotion, but does not specifically describe the underlying product. Similarly, “7-Eleven,” “Liquid Paper” or “Wrangler” are examples of suggestive marks.

TIP! Arbitrary or fanciful names bear no logical relation to the goods or service being provided. Although they are the strongest marks, they are also the most difficult to establish in commerce. You have to carefully cultivate and grow recognition of these types of marks by properly using them in commerce and in all advertising. Many new businesses may find it easier to select a name that directly describes or is logically connected to the good or service being offered.

If this is the route you decide to take, you should attempt to choose a name that is suggestive rather than descriptive. Suggestive marks bear some relationship to the good or service, making them easier to market then arbitrary or fanciful names. Yet, since no secondary meaning is required to be shown, they are eligible for protection right away and are generally much stronger marks then descriptive marks.

 

Business Trade Name Selection Guidelines

Here are some other guidelines many trademark attorneys have generally recommended when selecting your trade name:

    • Avoid surnames – Many clients tend to want to use their last names as the names of their businesses. Avoid doing so. Surnames present a few different problems. First, marks that are “primarily merely a surname” cannot be federally registered absent showing the name has acquired a secondary meaning. Also, many states do not grant to individuals the absolute right to use their surnames as a trade name. Thus, you could end up infringing upon the established mark of another business already using your last name if you mistakenly believe your entitled to use your last name.
    • Avoid geographic terms – Trade names can be ineligible for protection based on the use of geographical terms. You can use certain geographic terms to describe your mark, but it depends upon the nature of your business and how you use the term to describe the good or service. Essentially, a trade name that uses a geographic term is either a: i) geographically descriptive mark; ii) a geographically misdescriptive; or iii) geographically deceptively misdescriptive. Only trade names which are geographically misdescriptive are eligible for Federal protection. These types of marks are also referred to as “geographically suggestive” because they do not actually relate or denote the business’s location or origin of the goods or services whose name the mark bears. But, they are meant to get the public to make desirable associations with the geographic term referred to in the trade name. For example, the trade name “Beverly Hills Boots” for a shoemaker in Wisconsin would be suggestive since the trade name is meant to evoke wealth and luxury. But, it does not indicate the origin of the goods or the origin of the business. Similarly, “Outback Steak House” may represent an example of geographically suggestive mark. A geographically deceptively misdescriptive name does not relate to or denote the business’s location, but is meant to mislead the public into thinking the geographic term being used as significance or relation to the good or service. Of course, a geographically descriptive name actually describes the location of the business or origin of the good or service (i.e. “California Pizza Kitchen”). Again, both of these types of marks are not eligible for protection.
    • Follow State business statutes – You also want to be certain to follow state statutory requirements when choosing the name of your business. You or your attorney should carefully review the business organization laws you have or will organize under to determine what requirements exist for your business’s name.

In short, you can plan ahead and protect your businesses name by choosing a strong trade name that is eligible for trademark protection. Many of my clients’ first instincts are to name their business with something that logically relates to the products or services they offer. They realize that descriptive names tend to establish a more immediate connection with the consumer. However, as stated, descriptive marks receive virtually no legal protection. While descriptive names may establish a quicker connection with the good or service being provided by the business, secondary meaning must be established, making these marks generally a bad choice.

 

Perform a Trademark Search

Once you have determined what name you are going to choose, you need to make sure no other person or entity is using the mark. You will need to search existing trademark at both the federal and state level. Trademarks must be searched at the state trademark register at the state level. The method for searching state registered trademarks will vary from state to state and information regarding state trademarks is typically handled by the Secretary of State, or similar department. Federal searches can be conducted through the trademark Electronic Search System (TESS) provided by the United States Patent and Trademark Office’s (USPTO) official Web site at www.uspto.gov. The trademark section can be accessed by clicking on “Trademarks” tab on the home page navigation bar. Then click on “Search Marks” in the middle of trademark home page. You can perform a basic trademark search of words, designs or a combination of both using the TESS protocol.

You should also perform a common law trademark search. A trademark that has not been registered with the state or federal government is a common law trademark. As mentioned, the rule is first to use the mark in commerce has priority where used. So, you will need to leave no stone unturned if you conduct an Internet business. The best place to start is the major search engines. Then you should review other prominent business directories, such as ReferenceUSA, or other trade directories containing the names of manufacturers, wholesalers, retailers, etc. Finally, you should also review the business names found on Dun & Bradstreet’s website (www.dnb.com) and the Thomas Register (www.thomasregister.com).

However, you can skip these steps and hire a trademark attorney or search company to perform this for you. There are plenty of reputable companies out there that will perform a comprehensive search and provide an opinion. An attorney will cost more, but you have the benefit of a legal opinion from a professional.