Understanding Legalese: Why a Common Law Trademark Might be Enough
Want to know what people don’t talk about enough in the world of trademarks and brand protection?
Common law trademarks.
All we ever hear about is why it’s important to register your trademark with the federal trademark office to protect your brand. And that may be true for some businesses, but it’s not necessarily true for all businesses, especially the mom-and-pop shops, the freelancers, and other small businesses that have no plans to build a national or international brand, but are instead excited about serving their local communities or existing in their own little corner of the internet.
This article is for the people who run those businesses it will answer the following questions:
What is the purpose of a trademark?
What is a common law trademark?
What is the difference between a common law trademark and a federal trademark?
What are the benefits of a common law trademark for small businesses?
Let’s get into it.
What is the purpose of a trademark?
A trademark is a name, symbol, logo, etc. that is established as representing a company’s good or service. A classic example is that we associate those golden arches with McDonald’s.
The purpose of a trademark is to protect your brand and all the goodwill you’ve built with customers, potential customers, and your audience generally. Once you establish a brand by using it in commerce such that people start to associate your brand with a certain good or service, then the law says that you get to protect that brand.
Specifically, trademark law says you get to prevent other businesses from using any aspect of your brand like your name, logo, or symbol to sell their own goods or services. Because letting them do so would allow them to benefit unfairly from all the effort you put into building your brand’s goodwill.
When you think about it, this makes sense. Whatever your business is, I’m sure you’ve put effort (time, money, and energy) into marketing it to get the word out about your goods and/or services to potential customers. And you should be the only one who gets to benefit from that effort. Others shouldn’t be allowed to take advantage of the effort you put in to grow their own businesses; they need to make their own effort.
Okay, now that we know what a trademark is and what it does, let’s talk about the different types of trademarks.
What is a common law trademark?
When people talk about trademarks, they are usually referring to a federal trademark that is registered with the U.S. Patent and Trademark Office.
But I want to talk about common law trademarks. What are they and where do they come from?
A common law trademark is a trademark that is recognized and protected by common law, or the body of law that is created on a case by case basis by judges. Common law trademark rights are established by using your brand assets (name, logo, etc.) in association with a good or service in commerce. So if you have a website with your business name on it, great news: you’ve established some common law trademark rights. The more you use your business name and logo in the marketplace, through marketing or otherwise, the stronger your common law trademark rights are.
That’s it. You don’t have to register anything or pay any money to a government entity to establish common law trademark rights. You just need to use your brand assets publicly when you talk about and sell your goods and services.
What is the difference between a common law trademark and a federal trademark?
So what about the other type of trademark? Good question. A federal trademark or a registered trademark is a trademark (again business name, logo, symbol, slogan, etc.) that you register formally with the US Patent and Trademark Office. This is usually the type of trademark people are talking about when they talk about brand protection.
If your application is approved, then you are granted national trademark protection for your brand. The process for registering your trademark costs money: you have to pay a lawyer to help you and you also have to pay the government a registration fee. It can also be a long process. A fast trademark registration process can still take 18 months to 2 years.
And yes, I know what you’re thinking: why would anyone pay to register their trademark when they can get one for free just by using their brand in commerce?
Well, let’s talk about the difference between a common law/unregistered trademark and a federal/registered trademark.
The main difference between a common law trademark and a federal trademark is a federal trademark provides stronger protection for your brand than a common law trademark.
Let’s talk more specifically about the differences between the two.
A common law trademark is governed by state law. You file your case against the person using your trademark without permission in a state court. And to win your case, you have to prove you have an established trademark (among other things). That means you have to provide evidence that people recognize your brand and associate it with certain goods and services. This is called secondary meaning and can be hard (and expensive) to prove.
A common law trademark is also restricted to a certain geographic area, usually the area where you operate your business. This is a bit more difficult to determine if your business is primarily online, but the general idea is that you only get protection in the local area where you operate your business. This is different from a federal trademark, which affords your brand national protection once it’s registered.
A federal or registered trademark is governed by federal law. You file your case in a federal court. But with a federal trademark, you don’t need to prove you have an established trademark, that is assumed since your trademark is already registered.
In a nutshell, the difference between the two types of marks is the most important when you need to stop someone else from using your trademark.
So here’s the big question: if common law trademarks are harder to protect, then why wouldn’t I just pay to register one?
Well, let’s talk about it.
What are the benefits of a common law trademark for small businesses?
I just told you that common law trademarks are a lot harder to enforce than federal trademarks so why am I telling you to rely on them for your business?
Because enforcing a trademark costs a lot of money. It’s no secret that lawsuits are extremely expensive. On a really good day, litigation is a 5-figure expense, but on most days, it’s at least a 6-figure expense. So if you’re a small business owner like me, then the truth is that you probably don’t have enforcement money – for a common law or a federal trademark.
So let me ask you this: if you don’t have the money to enforce a trademark, then what’s the point of paying to register one in the first place?
I know this is an unpopular opinion, but I like to keep it real and offer practical opinions. Registering a trademark isn’t exactly cheap. It usually costs a few thousand dollars. If your business is already strapped for cash, then that can be a really big expense. In my opinion, there’s no need to strain your business finances to acquire a right you can’t even afford to enforce.
Instead, I think it’s okay to rely on a common law trademark, especially while you’re still in the early processes of building you business. If your business grows and it looks like you’re starting to expand nationally, then you can consider registering your trademark. By then, you’ll probably also have more money such that the registration process is less of a financial strain and fingers crossed you’ll also have enough revenue where enforcement of your trademark rights is something you could reasonably consider.
To be clear: it’s not that I’m against federal trademark registration, it’s just that I think most small businesses can leverage the rights of common law trademarks to take a wait and see approach. Wait to see if your business grows large enough that a federal trademark is warranted. In the meantime, common law trademark rights are probably enough.
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