Startup Branding Mistakes
Undoubtedly, one of the most important aspects of any business is its branding. New entrepreneurs and startups have a laundry list of brand protection concerns to navigate in the beginning. Simply put, a startup can make catastrophic branding mistakes in the beginning that it may not recover from. The following branding mistakes are focused on brand protection from a legal standpoint and should be avoided by any startup or existing business trying to establish a new brand.
1. Not Choosing A Business Name That Functions As A Trademark
Business trade names differentiate one business from another. They should not be confused with trademarks or service marks, which identify the actual goods or services in commerce. As a hypothetical example, Acme Holdings, Inc. may use the name “Acme Widgets” when holding itself out to the public. Acme Holdings, Inc. would be the legal name whereas Acme Widgets would be 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). A trade name which is used in commerce to identify the goods or services being offered is also a trademark and can receive state and federal protection and all the benefits that come with registration.
Businesses 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. Trademarks are grouped into four distinct categories: a) generic, b) descriptive, c) suggestive and d) arbitrary or fanciful. Only suggestive or arbitrary/fanciful marks receive automatic protection. Generic marks receive no protection while descriptive marks must acquire “secondary meaning” to be eligible for protection.
2. Forgetting To Search, Search, Search…
After you have settled on a brand name for your business or a separate product or service brand, make sure it doesn’t infringe upon the rights of an existing trademark or service mark holder. Brand names should obviously be as unique as possible anyways. But, misstep here can lead to your business receiving a cease and desist letter from a brand owner that has already been using the same or a substantially similar brand in commerce first. Your business will be forced to start from scratch and will have potentially wasted a great deal of time and money for a negative return.
The method for searching state registered trademarks will vary from state to state, but is generally handled through the secretary of state of each state. 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. Brand owners 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. The rule is first to use the mark in commerce has priority in the geographic location where the mark is being used. The first place to start of course is by conduction a comprehensive search engine review for competing or similar businesses using the mark. Then, prominent business and trade directories, Dun & Bradstreet’s website (www.dnb.com), the Thomas Register (www.thomasregister.com), etc. should be thoroughly searched. See my previous post on the basics of trademark searches for more details.
However, these steps should really be skipped altogether by any business and a trademark attorney should be hired instead. There are also plenty of reputable companies out there that will perform a comprehensive search. An attorney will cost more, but you have the benefit of a legal opinion from a professional.
3. Assuming Business Organization Provides Trademark Protection
A big mistake startups make regarding choosing a business name is the false belief that business organization at the state level provides protection of the business name as a trademark or service mark. 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 any intellectual property rights to the business name. Startups 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.
4. Forgetting About The Domain Name(s)!
After the brand name is confidently deemed to be safe, the corresponding domain name should be selected, especially for the business’s trade name. Brand owners don’t necessarily need to worry about anything beyond obvious domains, such as the .com, .net and perhaps the .info versions of the brand/business name. Any obvious misspellings or plural .com versions of the domain should also be considered. What about .sucks and all the new top level domains? Generally speaking, securing every iteration of your brand domain is not cost effective or even necessary.
Many domain names pointing to commercial websites do not function as trademarks or service marks. The United States Patent & Trademark Office (“USPTO”) has determined that use of a domain name as a reference directing traffic to a website does not amount to what is known as a “source identifier.” In other words, the USPTO will reject applications to register domain names as trademarks or service marks unless the domain identifies the source of some goods or services.
This means that in terms of brand identity and protection, you should consider using your business’s trade name as your website domain name. Of course, this is provided that your business trade name also functions as either a trademark or a service mark. In addition, confusingly similar domain names or other relevant names should be purchased and registered upon the formation of your business entity. It’s much better to spend a few more dollars in the beginning then losing business revenue down the road that will far exceed these extra costs. You should also register your domain as a .net and/or .info and also register any misspellings of your domain name that you think could frequently occur (the only other commercially relevant top level domain you may want to consider are .biz and .tv). Then, point all of these domains to your business’s main website in order to “catch” visitors who might use these other domain names.
SEO professionals might advise that you choose a domain name based on relevant and popular keyword searches. Having a domain name based upon keywords can be very powerful for SEO purposes. While SEO is far beyond the scope of my general knowledge, I felt this was worth mentioning so you understand that there are certainly pros and cons of choosing your domain name strictly with an eye toward securing a strong business trade name.
5. Failing To Secure Intellectual Property Rights
The main rule all startups and existing business must understand is that If you are not the actual creator of a logo or other creative work, then the only way that you can acquire exclusive rights to the work is by having a signed and legally sufficient writing transferring some or all of those rights exclusively to you or your business. Under the concept of a ‘work for hire’, all of the attributes of copyright ownership vest in the hiring party, not the creator or author. There are only two situations in which a work for hire exists legally: (1) a work created by an independent contractor; and a (2) work prepared by an employee within the scope of his/her employment.
The question of whether a business owns whatever freelance contractors create is the critical legal concern with using these freelance providers. Using a freelance contractor found through Odesk (now Upwork), Elance or Fiverr creates a valid work for hire agreement. The short answer is that the terms of service contained on these popular freelance sites provide that the creator transfers copyright ownership to the hiring party upon job completion and successful payment in full. An agreement signed directly by the creator under a work-for-hire situation would obviously leave no doubt whether the creator intended to retain ownership of any work(s).
Your business should ask all freelance designers to sign a simple Work for Hire Agreement. A work for hire agreement should absolutely be signed by your freelance designers if they have not previously agreed to such terms directly through a freelance provider forum.
What About Using Licenses Instead?
A copyright is essentially a bundle of rights. Thus, agreements involving the creator licensing various rights to use the work, but retaining all other rights, can be entered into. You don’t have to sign a work made or hire arrangement legally. If the designer is not an actual employee, the parties have flexibility in the type of agreement that can be reached. Licenses to use the content in a certain way for certain periods of time and which includes other rights can be used freely. But, again, you should still try to secure the full bundle of rights by a valid work made for hire agreement.
6. Not Using Your Mark In Commerce Or Reserving Future Rights To Use
Once you have created your mark, you should prominently and continually use it in commerce, once you have begun conducting business. Ultimate priority of protection is given to whoever establishes the same or confusingly similar mark first in commerce. A trademark is not eligible for protection without actual use in commerce. However, when a business is not ready to use its brand in commerce, the USPTO permits “intent to use” the mark in commerce as the basis for federal registration. There are a variety of ways a business can properly establish use of any mark in commerce so that it is eligible for registration. Examples would include display of the mark on the product label or packaging, on business cards, letterhead or advertisements, on websites and social media pages, even on the goods itself. For service marks, examples may include use on business cards, letterhead, on websites and social media pages, brochures, flyers or advertisements. The bottom line is that brand owners should either use the brand mark in commerce as soon as possible or file an intent to use trademark application with the USPTO, or risk losing the right to use the brand in commerce before even getting started!