Starting a Business?: Trademark Considerations for Startups

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You might be surprised to learn that many new companies fail to recognize the breadth of their intellectual property (IP) or to appreciate the significance of proper protection.  IP issues are among the most important (read: valuable) assets that any company will have. Yet, it is one of the last considerations for some companies, particularly startups.  The good news is, though, many of the common pitfalls can be avoided by developing an IP strategy early, and revisiting it often.  When it comes to protecting your brand, a strong trademark is key.

So, what is a trademark anyway? A trademark can be a word, symbol, slogan, design, or any combination of these.  Trademarks (or “marks”) identify and distinguish one’s goods and services from another person’s goods and services.  In the United States, trademark rights are based on actual use and trademark owners have exclusive rights to use the mark in connection with their goods and services.  Thus, mark owners can prevent others from using an identical, or a confusingly similar, mark.  Although not required, federal registration is recommended to enhance a trademark owner’s ability to protect its brand. 

Registering a business name with your state does not create (or protect) your trademark rights. Of course, you should search your state’s corporation database before selecting a business name to make sure your chosen name is available for use. However, states do not perform trademark searches, and thus, state approval of your chosen business name only signifies that the name is not a registered company name in your state’s database.  Importantly, simply forming the entity with the state does not create trademark rights. That’s why comprehensive trademark searches are an important first step in the trademark process and are strongly recommended in most, if not all, cases.  Note, however, that trademark searches are a best practice tool for eliminating a mark from consideration, but not for determining a mark is 100% clear for use or available.  Selecting and clearing a mark is an important and invaluable part of protecting your IP.

IP ownership should be established at the outset.  In the United States, IP rights do not automatically transfer from an employee or contractor to the startup.  But, in the midst of getting a startup ready for launch, it is easy to overlook this consideration.  The reality is that employees and contractors (and others involved in the startup) will come and go. And in this reality, with these departures could also be the valuable IP they developed for the startup unless there are strong, written agreements in place.

Intellectual property costs can be deferred, but should never be avoided.  Investing in your IP is just as valuable as your product (or service) itself.  Understandably, startups are cost-conscious, and possibly strapped for cash, as their founders work tirelessly to develop the brand itself.  With that being said, a “DIY” approach to IP, or any  other important legal decisions for that matter, may not be the best approach.  Often times, startups trying to DIY their IP end up spending more.  Why, you ask? That’s because the creatives behind the startup don’t have the depth or breadth of an experienced IP practitioner. For example, a startup that doesn’t get a trademark search done might not realize that their “similar but not identical” mark can still be likely to cause confusion among consumers with an existing mark.  This oversight usually occurs because the startup does not know about this important and best practice or because they are singularly focused on moving forward with a product or service launch.  The risk:  having to rebrand soon after investing costly resources on an unavailable mark, or worse, facing a federal lawsuit for trademark infringement.  An experienced trademark attorney will be able to properly advise the startup on selecting and clearing their mark as well as how to avoid choosing an unavailable mark for their brand.

The takeaway here is that, a failure to address IP considerations can have a devastating and lasting impact—including a permanent loss of IP rights and a risk of costly litigation—which ultimately hinders the ability to grow from a startup into a thriving, successful company.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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