Although trademarks can be the crown jewels of a company's assets, even the most talented marketing specialists and most promising corporate executives can share fundamental misunderstandings about the creation, protection, and enforcement of trademarks. I offer below a brief overview of the Top Ten mistakes I've encountered over the years in working with outside ad agencies, in-house marketing folks, and corporate officers in the hope of clearing up some fundamental misconceptions and help you avoid costly consequences in the future.

The Top Ten

1. Our agency owns a portfolio of trademarks we coined and can make available to our customers.

This remarkably common statement reflects a fundamental misunderstanding of trademarks on a whole host of levels. Perhaps most critically, simply because an agency might have "coined" a word or developed a design does not mean that it "owns" that word or design from a trademark perspective. Trademark rights arise from the commercial use of a mark on goods or for services. While you do not need to own a federal trademark registration to have any protectible rights, you must actually use a mark on products or services to have any such claim. So unless the ad agency actually uses the coined term or logo in commerce in connection with the offering of goods or services, it does not and, indeed, cannot, "own" the mark. Be wary of any advertising or marketing company that claims to own a portfolio of already developed trademarks from which you can choose. They may have coined some words, or developed some designs, but they likely don't own any trademark rights.

2. We own the domain name, so we own the mark.

Merely registering the associated ".com," ".biz," ".info," or other domain names does not mean you have acquired or own any trademark rights in the mark. As mentioned above, trademark rights inure from use. Thus, the mere registration of a domain name, without use, does not suffice to secure trademark rights. So if a company or its ad agency owns a spate of domain names, and neither uses them in connection with the offering of goods or services, neither owns any trademark rights.

3. We coined the term or created the logo, so we own it.

Unlike copyright law, trademark law is not about rewarding creativity. Instead, it focuses on the marketplace, seeking to protect consumers against confusion and companies that have invested money, time, and effort in developing goodwill. Nor do marks have to be identical for a court to find infringement. If someone else has beaten you to the market with a mark that is "confusingly similar" in appearance,  commercial impression, pronunciation, or meaning and covers goods or services so related that consumers are likely to be confused, your company will be out of luck.

4. We own the trademark for all goods and services.

This statement misses the mark as well. Even after a trademark is in commercial use for goods or services or both, an owner's rights in that mark are not unlimited. To the contrary, trademark rights are earned only in relation to the particular goods or services for which a mark is actually in use, and the "natural zone of expansion." So if a company uses the mark for sunglasses, it probably cannot stop someone else from using the same mark for dissimilar goods, e.g., bicycles or bed linens. Thus, there is no way any company can "own a trademark for all goods and services" unless it is actually using that mark for all goods and services.

As always in the legal world, virtually every rule has an exception. If a company's mark is so famous that consumers are likely to believe that even the most dissimilar products are somehow associated with, or licensed by, the company, it might have an infringement or, alternatively, a dilution claim. But this breadth of rights belongs only to an exalted few - the truly famous mark (e.g., Coca-Cola).

5. The mark is available. We searched the PTO online database, and no one has registered it.

The PTO online database provides a wonderful tool, and many trademark practitioners use it daily. That said, a search on the PTO database for the identical mark is neither an adequate nor a reliable method for determining whether a trademark is available for registration or use.

First, since trademark rights inure from use, not just registration, looking only at federal registrations is inadequate for clearance purposes. While a search of the PTO records can help a company "knock out" a mark and tell when a mark definitely is unavailable, it cannot tell what is available.

A PTO search is also inadequate because unless a company has experienced practitioners schooled in PTO search strategy, it will find only identical trademarks (e.g., a search for CAT might not reveal KAT or CAT-TRAp, etc.). And as discussed briefly above, "identity" is not the test for trademark infringement. A proper clearance search needs to locate the plural and the singular, the synonym, and marks that might share a similar pronunciation or commercial impression. A search is only as good as the searcher and the database.

And just as critically, trademark rights stem from use, not just from registration. Thus, the PTO database can only ever provide a starting point. Searchers must look at the state trademark registries, industry publications, the internet, domain names, and other sources. In other words, a true availability search is likely far broader and more extensive than anything a company or advertising agency can do in-house. In short, you need the help of an experienced trademark lawyer.

6. We know this mark is available because the PTO lists it as "abandoned" (or "cancelled") on its website.

This is a refrain that trademark lawyers hear all the time. Frustrated with the difficulty of finding an available mark, ad agencies sometimes use the PTO database to search for abandoned or cancelled marks, which, they believe, are available for registration and use. But just because a mark is identified as "abandoned" or "cancelled" does not mean it is available. Trademark maintenance requirements in the U.S. are pretty complicated. To maintain a trademark registration, its owner needs to file evidence that the mark continues to be in use for the products and services covered by that registration on an ongoing basis in regular intervals. Many companies fail to docket and comply with renewal requirements and, as a result, their registrations are cancelled. But cancellation of a registration does not mean termination of trademark rights. If a company continues to use the mark in commerce, its trademark rights endure. As a result, the PTO status of a trademark is not definitive. A use investigation will be necessary to determine whether the mark is still in use in any form.

The same rule holds true, of course, for an abandoned application. Even though a mark is filed on an intent-to-use basis, it might actually already be in use. And although an application is listed as "abandoned," the company might still be using the mark. There are many reasons a company might decide not to continue to pursue a trademark application. Some trademarks might be difficult or expensive to register. Employee turnover can result in a missed docket date. The listed goods or services might turn out to be inaccurate or unduly narrow. There might have been an error in the identity of the listed applicant. Any number of possible explanations exist. But as with a cancelled mark, only a use investigation can offer any level of assurance on a mark's current status. So once again, one should not accept the PTO's status information on faith.

7. There is no point to obtaining a trademark clearance search before we find out which marks the client loves and run a focus group to find out what the public loves.

An alternative position might be: does it make sense to fall in love with a mark that might not be available? And similarly, does it make sense to spend money and time on focus-group testing, only to find out the company cannot use the mark?

If the company understands the trademark-clearance process and has available legal resources, an ad agency should be able to present the company with a host of choices and allow it obtain the necessary clearances. The benefits to this approach are multiple. The ad agency does not have to worry about building clearance search costs into its agency fees, and neither the agency nor its corporate client need to worry about the potential issues of attorney-client privilege waiver that might arise when a search is performed for the agency, rather than the company itself.

Furthermore, competent trademark counsel should be able to tell the company not only if a trademark is available, but whether it suffers from any negative associations that might come out during the survey-vetting process. For example, is the proposed mark a "street name" for an illegal drug? Is the mark registered as a domain name for pornography sites? Was the mark associated with a product that was introduced to the marketplace and failed or got bad press or got pulled off the market? Does the mark have an undesirable translation in a foreign language? And if the answer to any of these questions is in the affirmative, does it even make sense for the ad agency to present the mark to the company or to a focus group?

Everyone involved needs to be aware of and prepared to deal with this potential quagmire before it happens.

8. Taglines do not need to be searched because they are not trademarks.

It is difficult to peg the origins of this misunderstanding, but it is surprisingly widespread. Perhaps the confusion lies in the fact that taglines often appear in advertising copy rather than on product packaging, and they often appear to be relatively descriptive ("Can you hear me now?" for telecommunications services or "Good to the last drop" for coffee). They are, however, enforceable trademarks that are a valuable asset in any trademark portfolio and they need to be searched and cleared just like any other type of mark. If the tagline is emphasized in any fashion in ad copy (whether through a special styleization, larger size, special font, colouring, or otherwise), it needs to be searched. If, on the other hand, the phrase is used descriptively in the textual portion of an advertisement, clearance is probably unnecessary. Once again, it is better to be safe than sorry.

9. In a short-term marketing campaign, trademark clearance really is not necessary.

Recognize that this statement reflects a risk-benefit analysis that might have costly consequences. You need to be fully aware of the potential risks associated with failing to search before either decide to skip the clearance process. While your company or client might be willing to drop the mark or ad campaign if a third-party trademark owner objects, that third-party might not be so co-operative and may, instead, decide to pursue damages in multiple forms including actual damages, disgorgement of company's profits, payment for corrective advertising, prejudgment interest, and, in exceptional cases, even payment of the trademark owner's attorney's fees (on top, of course, of the company's own).

Recent case law has seen trademark-infringement damage award exceed $300 million. According to the May 7, 2008, edition of the Oregonian: "In what experts are calling the largest award of its kind, a federal jury in Portland has ordered Payless Shoesource Inc. to shell out $304.6 million for infringing on Adidas America Inc.'s three-stripe trademark and shoe styles." As you can readily see, the cost of obtaining the necessary clearance search pales in comparison to the potential financial and public-relations costs of doing nothing. Proactive searching up front can save enormous time, expense, and frustration in the long run.

10. The more the mark conveys about the nature of the product or service, the better it is.

This statement reflects a fundamental misunderstanding about trademark law and the inevitable tension between the marketing and legal departments. Trademark practitioners have certainly heard the phrase that "not all marks are created equal." Inequality shows up in trademark law's "ranking" of marks in one of four categories to determine whether, and the extent to which, a mark will be entitled to protection against competitors: