So you have come up with a name for your new business or new product, and you love it. It is the perfect brand and trademark to propel your business to widespread success. But wisely, you have a trademark search conducted, and you find that you are not the first person to come up with it. Your new name is not quite as unique or original as you had hoped- some other business is using a similar name. We will call that other business “First User, Inc.”
What should you do? Do you have to drop the name? Change it? Contact First User? Or can you just go ahead with your registration and marketing plans as if nothing had changed? There are a few factors you must weight when making that decision:
- What First User can do to you if they find out you are using a similar trademark
- How likely First User is to find out or decide to go after you
- Just how good the name you came up with is
The first factor is the potential cost to you of using the trademark, the second is the probability of incurring that cost, and the third factor is the benefit from using that trademark. You can then make the classic calculation: is the potential cost multiplied by the probability of incurring that cost greater than the expected benefit to you?
1) Penalties for Trademark Infringement
If you decide to begin using a trademark (business name, logo, brand name, etc.) that is confusingly similar to the trademark of another business in the U.S., that other business can cause you a lot of problems. It can stop you from registering your trademark and it may be able to stop you from using the trademark.
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Preventing You From Registering Your Trademark
Trademark Examining Attorney Refusal to Register
The Trademark Office will not register a trademark if it is confusingly similar to another registered trademark. Therefore, if First User has registered their trademark, it may be difficult for you to get your application allowed by the PTO. The Trademark Examining Attorney assigned to your application is likely to refuse registration of your mark.
Trademark Opposition / Cancellation
Even if the PTO allows your trademark application, First User can oppose your registration, regardless of whether it has a registration and regardless of where in the U.S. it is located. A trademark opposition is an administrative proceeding before the Trademark Trial and Appeal Board (TTAB) and is essentially a mini-trial.
To go all the way through an opposition you can expect to spend $50,000 to $100,000, depending on what law firm you use. If First User can prove that your mark is confusingly similar to theirs and that it began using the mark in commerce before you, it is likely to succeed in preventing your registration.
Even if your mark is successfully registered without an opposition, First User can come back and petition to cancel your registration up to five years later. A cancellation proceeding is very similar to an opposition in expense, etc.
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Preventing You From Using Your Trademark
Although registering your trademark is very important, the right to use your trademark is even more important. If First User has registered their trademark, they have exclusive rights to that mark nationwide. Regardless of whether you are operating in the same geographic area, your use of a confusingly similar mark in the United States constitutes trademark infringement.
In that case, First User can sue you and, if it can prove confusing similarity, force you to stop using your trademark. You would then have to redo your marketing materials and marketing campaign and devote a lot of money to rebranding.
As you are probably beginning to understand, it is generally a bad idea to use a trademark that seriously conflicts with an existing registered trademark. More frequently, you will have to make a decision regarding a trademark that is used by another business, but not registered. In that case, you can only be sued for trademark infringement if you do business in the same geographic area as First User, and only in state court. First User will have to prove confusing similarity and first use.
Defending a trademark infringement lawsuit can easily run six figures. Monetary damages could also be awarded against you, although they are uncommon.
2) Likelihood That Trademark Infringement Will Be Discovered or Prosecuted
Whether First User is likely to discover your use of a similar mark or pursue you if they do depends on a number of factors, including:
- Is First User big or small?
- Is First User brand-focused?
- How close are the marks / how strong is First User’s legal position?
- Does First User do business in your geographic area?
- Do you have a significant web presence?
- Is First User a direct competitor?
- How big will your business become, and how fast?
These factors will be discussed in more depth in a subsequent post. Generally, large corporations are very likely to find out about trademark infringement and take action, whereas very small businesses are very unlikely to.
If you are able to register your trademark and keep that registration for five years, your registration will become incontestable, meaning that First User will no longer be able to cancel it for confusing similarity to their own mark. Your registration will also allow you to prevent First User from expanding beyond their geographic area.
3) How Important Is It To Keep Your Trademark?
Finally, you should consider the importance of the trademark you have selected. Are you wedded to it? Would you be open to tweaking it in order to differentiate it from First User’s trademark? If there are good alternatives and you have nto spent much money on putting together your branding materials, often it is better to avoid potential conflicts by choosing a new trademark.
On the other hand, if you have a really good and meaningful trademark that you have spent money to develop and build a marketing campaign around, it may be worth taking the risk of going ahead with it. This is particularly true when the risk is low, for example if First User is a small business that is not a direct competitor and is unlikely to discover the similarity.
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