What's in a Name? Quite a Bit: Maybe Your Whole Business!


As the energy service industry changes and evolves, customer recognition of brand identity is more important than ever, especially as regional players are now directly competing with one another and company logos, and company acronyms in particular, may be similar, if not identical. These logos and acronyms, and brand identities themselves, are assets which are likely undervalued by their owners.

Trademarks and service marks are everywhere! Most purchasing decisions, by consumers and businesses alike, are based in large part on trademarks and service marks. In fact, trademarks and service marks are often the core of a company's competitive edge in the marketplace. Here's why: a trademark identifies the origin of the goods to which the trademark is affixed, and a service mark identifies the source of the services a business provides. Trademarks and service marks provide quality assurance, because the purchaser will expect the quality to be the same from purchase to purchase. Likewise, a trademark or service mark induces the supplier of the goods or services to maintain a consistent level of quality and develop goodwill for its products and/or services.

Why should a company care about protecting its trademarks and service marks? There are many reasons, the two most important being the avoidance of customer confusion and the strengthening of goodwill. If a purchaser associates high quality with a certain mark, it will seek out products or services associated with that mark in the future. If a company expands into another product or business area itself or through licenses, and uses the same or a similar mark, it can achieve instant goodwill and a customer base for its new products or services.

Trademarks and service marks are business assets, just like a company's computers, equipment, factories or real estate. Therefore, they should be protected and managed, just like a company's other assets. Many marks, especially famous ones, are extremely valuable assets, having an estimated worth of hundreds of millions of dollars, such as the famous COCA COLA trademark. On the other side of the coin, a company which is forced to stop using a trademark, because its use is an infringement of another's trademark, will incur enormous legal fees and may even suffer the loss of its entire business.

The protection of and ability to exploit one's trademark, if it has developed significant goodwill, can make or break a company. Imagine what would happen if McDONALDS or PRUDENTIAL could no longer use their marks. They would have to start all over again building a business on a new name. Or, imagine if others started using these marks -- you can bet these outside parties would cut corners, yet use these famous names on their products. The trademark owners would lose business to competitors selling products and services at lower cost, and likely inferior quality, and the public would be purchasing inferior products and would be confused as to the source of the products, likely attributing the low quality to the rightful trademark owners. If a company does not zealously guard its trademarks, its business can be devastated.

Almost anything capable of indicating source can function as a trademark. For instance, symbols such as letters, numbers, slogans, Internet domain names, colors, sounds, fragrances and the non-functional aspects of a product's shape or packaging can all serve as trademarks and may be eligible for federal trademark registration. In order for a symbol to function as a trademark, it must be distinctive, or recognizable as a mark, so that it can serve its source-identifying function. There are various degrees of distinctiveness of marks. In order of decreasing distinctiveness, marks are typically classified as (1) arbitrary or fanciful, (2) suggestive, (3) merely descriptive or (4) generic. Fanciful marks are made-up words, such as KODAK for film and CLOROX for bleach. Arbitrary marks are real words which bear no relationship to the product or service with which they are used, such as HORIZON for banking services and BLACK & WHITE for scotch whiskey. Suggestive marks suggest a quality or characteristic of the goods or services with which they are used, such as Q-TIPS for wooden sticks with cotton on the end and CITIBANK for an urban bank. Arbitrary, fanciful and suggestive marks are inherently distinctive, and are thus readily registrable as trademarks.

In contrast, a merely descriptive mark, which identifies a quality, characteristic or other aspect of a product or service, is not inherently distinctive. Therefore, it is not registrable unless it can be shown that consumers have learned to associate it with a single source. Such a learned association is called "acquired distinctiveness" or "secondary meaning". Examples of descriptive marks are SOLAR GLO for sunlit signs and RAISIN-BRAN for raisin and bran cereal.

Finally, a generic term is a common group or class name, such as "book", "desk", "chair" and "automobile", and cannot serve as a trademark. Examples of terms held to be generic include "SPACE SHUTTLE" for a space craft that carries humans and cargo to space and back and "DOS" for a type of computer operating system. A term that is generic for one product can be arbitrary when applied to another product. For instance, "apple" is a generic term for a kind of fruit, yet APPLE is arbitrary as applied to computers. A term that is not initially generic may become so, based on consumer use and belief. Marks that have become generic include "aspirin" and "escalator". In fact, the acronym ESCO seems well on its way to becoming generic, if it is not generic already. Other marks are misused as generic terms, such as KLEENEX for tissues, XEROX for copies and copiers, STYROFOAM for polystyrene foam and JELL-O for gelatin; they have become so popular that the public often misuses them as generic words when they are actually trademarks.

When choosing a mark to identify one's products or services, if possible, it is best to choose an arbitrary or fanciful mark. Such marks are the most distinctive and enjoy the most protection against infringers. Once a mark is chosen, one should obtain a comprehensive trademark search to check for any conflicts and confirm that the mark is available for the company's use and registration. If it is not available, the company should choose another mark before investing resources and building goodwill in a mark which it may be forced to stop using in the future. While there is some cost and time involved in an initial investigation, it is well worth it. Just think about how much money a company spends on signs, stationery, business cards, advertising and promotion; imagine if you had to throw it all away, redo everything, and explain to your customers and clients why you have to change the name of your product or service. Also, if it takes a court order to make a company change the mark it is using, the infringer may have to pay damages to the rightful trademark owner and the trademark owner's attorneys' fees. The damages could even be tripled. In short - do your research first.

Trademarks can be protected under federal and state statutes, as well as the common law (judge-made law). Federal and state statutes provide for registration of trademarks and service marks. Federal registration of a mark preempts state registrations, so it is most beneficial for a company to seek federal registration of its marks. Federal registration provides many procedural advantages for companies, especially if a company must sue another company for trademark infringement.

To obtain a federal registration, one files an application for registration with the United States Patent and Trademark Office ("PTO"). An application can be filed based on use of a mark in interstate commerce or a bona fide intent to use a mark in interstate commerce. The PTO examines the application and can either approve the mark for registration, or refuse registration for a variety of reasons, such as if the mark is merely descriptive or is confusingly similar to another mark registered or applied for.

In addition to federal and state statutes providing for registration and remedies for infringement, federal and state statutes and the common law of every state provide trademark protection under the umbrella prohibition of unfair competition. Therefore, even if a mark is not registered, or while a company is awaiting registration, trademark protection is available as soon as a company starts using its mark. However, a company expanding its service territory beyond a certain region should not rely solely on state statutes and the common law for protection. If you expand into an area in which another company with the same or confusingly similar name exists with use dates prior to your company, you may be prevented from doing business in that area using your company name or service mark. State and common law protection is a good supplemental form of protection; it is not an alternative for federal registration. Likewise, if you expand your business outside of the United States, you cannot rely on United States federal and state laws for protection; you will need to seek trademark protection in each of the countries in which you do business.

When a company owns a trademark or service mark, it should let the world know! Before a mark is registered, one should use the TM or SM symbol next to the mark, to indicate that the user is claiming trademark or service mark rights, respectively. Once the mark is federally registered, one should use the ® symbol with the mark. Using these symbols lets the public know that the owner is claiming trademark rights, and it deters others from unlawfully using the mark of another. The trademark or service mark should always be used in conjunction with the generic term or descriptive word for the goods or services to emphasize the "brand" aspect of the mark. A trademark should never be used as a noun. For instance, the mark CHEVROLET should be used with the words "car", "van" or "automobile".

Be careful out there! Choosing and protecting trademarks present very complex business and legal issues. The law is continuing to develop in this area, especially with the emergence and proliferation of the Internet and domain names. As you choose and seek to protect your company's trademarks and service marks, do all that you can to distinguish your company's marks in the marketplace - in so doing, you will maximize the distinction between you and your competitors' goods and services, increase the value of your company, and avoid legal problems with your competitors. Your whole business may depend on it.