Using and Protecting Trademarks
Johnson, E. Scott, The CPA Journal
How to Safeguard a Valuable Intangible Asset
Buyers depend upon brand names to differentiate product and service preferences in the marketplace; sellers depend upon brand names to serve as a repository for customer goodwill. Trademarks link the unique identities of products or services with their source and thereby protect the public from deception and confusion. To fully ensure their protection, trademarks must be registered with the U.S. Patent and Trademark Office. This process entails introducing the product in the marketplace or filing an intent-to-use notice with the PTO and a thorough examination process that ensures the mark is registrable. Once a trademark has been successfully registered, protection can last indefinitely.
Product names, logos, and slogans can become valuable assets, attracting purchasers who have come to rely on the quality of brand-name goods and services. The Big Four have established valuable goodwill in their firm names and have even branded specific services they provide. For example, Ernst & Young has federally registered more than 140 trademarks, including Futurewealth, From Thought to Finish, Growth Works, Value Journey, Ernie Trendwatch, and many others, including, of course, Ernst & Young. The recent experience of Arthur Andersen illustrates how, despite a long history and solid reputation, a company's public goodwill can be very fragile.
Trademarks generally have little or no value initially, but can dramatically appreciate in value through successful use. Unlike copyrights and patents that expire after a set term, trademark rights can last as long as the trademark remains in use. Because a trademark is an appreciating asset with a potentially perpetual life, it is important to choose trademarks carefully and protect them through federal registration and controlled licensing.
What Is a Trademark? A trademark is any word, symbol, design, or combination of words and design (each a mark) that identifies and distinguishes one seller's goods from another. For example, "Coke" and "Excedrin" are both trademarks, as are the Ralston Purina checkerboard square design and the hourglass-shaped Coca-Cola bottle. A slogan, such as Nike's "Just Do It," can also be a trademark.
When used to identify a service, the mark is called a servicemark. For example, McDonald's is a servicemark for restaurant services, as is the golden arches design. "Reach Out and Touch Someone" is a servicemark for AT&T's telephone services. Some marks function as both trademarks and servicemarks. For example, Lexus is both a trademark for automobiles and a servicemark for automobile repair services. Because trademark law is based on the idea that a trademark serves as a source-identifying badge of quality, legal protections exist both to protect the public from deception and confusion, and to protect the mark
Before registering a prospective mark with the U.S. Patent and Trademark Office (PTO; www.uspto.gov), a trademark search should be undertaken to determine whether any other entity can claim prior rights in the mark. Comparable in some respects to a real estate title search, the trademark search reveals prior users that could prevent registration of the mark or could assert a claim of trademark infringement.
Business owners sometimes mistakenly believe that because their state's corporations division has accepted their corporate charter or trade name filing, this name can be used for any products or services the business promotes. In fact, the acceptance of a corporate name, trade name, or limited liability company name by a state agency has no bearing on whether that same name might infringe a federal trademark or servicemark, or common-law trademark rights that another might possess. State acceptance of a corporate name or trade name generally means only that no other entity within that state has incorporated or registered to do business under the same name. …