First of all, my fellow ECO team members and I learned Friday that Alan Shrater, @ARShaterCPA, passed away Thursday night. Alan was on the ECO Operations Team and his passing was not expected. He we will be missed and we are keeping his family in our prayers and thoughts.
Introduction to the Topic
All businesses have an image which is presented to the public. Some businesses actively manage their image while others do not. Some of the businesses which managing their image treat their image as an asset in which they invest and which has a monetary value.
While a business may present its goods or services under the business name alone, businesses can also create identities for their goods or services which are distinct from the business name. For example, Twinkies® are made by Hostess®, but both Twinkies® and Hostess® are different in the minds of consumers.
The most basic presentation of the image of a business, good, or service is through its name. Beyond the name, a business can have a logo, colors, packaging design, a look and feel, and so on. Depending on who you talk to, the totality of the identity of a business, good or service is its brand. That brand communicates something to the public about the business, good, or service. This can be as little as the type of good or service, to as much as a consistent experience, a certain level of quality, support of specific values, a kind of lifestyle, or even participation in a common belief.
Legal Protections for Brands and Marks
The law provides a tool businesses can use to protect their marks and brands. The law does not create the marks or brands, it recognizes what is there, and gives the owners the ability to use the legal system to protect it. However, the law is concerned with consumer protection more than protecting businesses.
Consumer protection in trademark law is about preventing unfair competition and stopping the deception of consumers. When a businesses works to communicate with consumers through its name, goods, or services, the law allows businesses to prevent others from misappropriating the marks of the business.
When others use the marks, they get the advantage of the value and meaning associated with the mark because of the work of the original company even though they have not built that value and meaning themselves. This is unfair competition and inappropriately diverts business away by deceiving consumers. Other businesses can also undermine the value and meaning associated with a mark by providing similar goods or services which do not match the quality or consistency of the originals. This has the effect of diluting the inherent value and meaning of the mark by deceiving consumers to the detriment of the original company.
Source of Goods or Services
As the primary issue for trademark protection is consumer protection, the mark is about telling the consumer the source of the goods or services. In short, the mark is about the identity of the business presented to the public or market about its particular goods or services. The law helps businesses maintain and manage their identity with the public on their terms, and without intrusion from others. Registration of a mark with the federal government helps to establish those identities, and give notice to the others within the Unites States of the claims of various businesses and individuals.
In addition to the source of the goods or services, in order to be legally recognized, a mark must be distinctive. This means that the mark, logo, colors, and so on, must be unique to the business, industry, and its activities in commerce. Different marks have different levels of protection from very narrow to very broad, most often associated with the kind of terms used in the mark. Generally, the law recognizes different levels of a mark:
- Generic: A generic mark is one which is commonly used in the industry or in commerce and is not at all distinctive. For example, Gas Station is a generic term used by the public and businesses to refer to a particular type of service or product. A business cannot obtain protection for the use of generic terms as these terms are freely available to everyone.
- Merely Descriptive: A merely descriptive term is one that simply describes the good or service at issue. An example is Chocolate Fudge. This describes the good, but it is not distinctive. However, a descriptive term may become distinctive and can be a protected mark if it comes to have a secondary meaning associated with a particularly product or service. In other words, if consumers come to identify the descriptive term as being unique to a particular good or service from a particular source, the law will provide protection to that extent. For example, Staples inherently describes the type of goods at the store and is descriptive. However, the company has succeeded in building a secondary meaning into the term so that consumers recognize the name as unique to a particular source of office supplies. Accordingly, the store has been able to obtain protection to that extent.
- Suggestive: Another type of mark is one which does not describe the product or service, but which creates a mental suggestion about what the product or service is, or does. An example is Spic and Span which suggests what the product or service is. Use of the mark does not prevent the use of the suggestive language by others, but it does create protection to the extent that consumers come to recognize the term in relation to a particular product or service.
- Arbitrary: Some marks are considered arbitrary because they have no intuitive relationship to the actual business, product or service. For example, an apple is a recognized fruit, but in the context of computers and software, Apple is a mark for a company which has nothing to do with fruit.
- Fanciful: Marks which are made up and have no relation to anything specific are considered fanciful marks. An example is Kodak which is meaningless except for its relationship with the film company, and which derives its meaning from this association. Fanciful terms have the greatest and broadest protection as there is generally no other generally accepted use of the term outside of the context of the business, good or service at issue.
Businesses can develop their identities, and the identities of their goods and services, as well as their banding strategies in conjunction with the legal standards regarding distinctiveness to create and develop strong protection for their marks.
Use in Trade or Commerce
In addition to source and distinctiveness, Trademark law only applies to goods or services actually used in commerce. It is not just a mark, but a trade mark. Because the focus is on consumers in the marketplace, not merely entities in existence, registration of a mark is dependent on the mark being used in trade or commerce to identify to consumers the source of the goods or services.
During registration, one can apply for a mark with the intent to use the mark in trade or commerce. The Patent and Trademark Office will allow the registration on the contingency that the business establish that it is actually using the mark within a certain amount of time after the registration. If the business fails to do this, the registration does not continue.
Registration of a trademark does not prevent others from infringing on the mark. It gives the public notice of the use of the mark and provides certain presumptions to the register of the mark to use litigation to stop others who inappropriately use the mark. Accordingly, after registration and use of a mark, it is the owner’s obligation to actually take action to stop others from using the mark. If the owner fails to do so, and others use the mark, it is possible the owner will loose the exclusive rights to use the mark as the mark may become diluted and the public may no longer associate the mark with the particular owner.
Owners of marks need to treat their marks as marks, and not allow the term to become generic. The widespread use of a mark in a generic sense, without activities by the owner to protect its mark can have disastrous consequences. For example, aspirin was originally a trademark for Beyer’s product to treat headaches. However, people began to call all such medicine aspirin and the association of aspirin with Beyer disappeared. The courts then decided that the term aspirin was generic.
In contrast, Kleenex, Coke, and Xerox have engaged in activities to try to train consumers and others to recognize that their mark refers to a particular type of product, not the product type as a whole. Kleenex is a particular type of tissue paper, Xerox is a product that makes copies, and Coke is type of soft drink. Not all tissue paper is Kleenex, not all copies are Xeroxes, and not all soft drinks are Cokes.
It is also important to realize that once a business has a mark, the value of the mark is somewhat dependent on the business building the brand so that consumers recognize the mark and understand the communication of the source of goods and the meaning behind the mark. This, in addition to enforcement, can be very expensive, but is the intrinsic purpose of the mark.
Trademarks in business can be extremely valuable and important methods of communication with consumers. With a strong strategy and intentional activities, a business can invest in its mark to create an asset with its own value. Hostess may go bankrupt, but Twinkies as a product and mark recognized by consumers has its own value as an asset which will continue whether under the name of Hostess or someone else.
It is important for businesses to recognize the legal structures in place for protection of marks and the identify of businesses, goods, and services so they can utilize those tools to maximize their business and value as a part of their business operations and interactions with other businesses and consumers.