Our company is protected under common law, right?
It's a common question posed by new businesses. Unfortunately, the answer isn't always clear.
Common law rights are automatically granted to trademarks used without federal registration in the United States. They extend to whomever can prove first actual usage in commerce.
Translation: If Mary Lou is the first person to sell "Mary Lou's Brownies" in Denver, she unofficially holds the rights to that brand name under common law. The problem?
Her trademark isn't automatically protected should she expand to another region. Being the shrewd business owner she is, Mary Lou has plans to take her brownies nationwide via the World Wide Web. But what happens if Mary Lou launches her e-commerce site before registering her trademark?
Well, she very well might receive a cease and desist letter from another "Mary Lou's Brownies" in Los Angeles claiming trademark infringement. Does the brand name seem too unique for that to happen? You would be surprised! It happens all the time.
Understanding Common Law Trademark Rights
The United States is considered a "first in time, first in right" country. Meaning, your business doesn't have to register its trademark to receive first priority of use in your geographic area. So long as money has been exchanged for a product or service (and first-use can be proven) your trademark will be legally protected by your state's court.
Unfortunately, such flexibility is not granted within many European countries, where trademarks must be registered to receive protection. Each EU country has its own trademark registry, in addition to the EUIPO. Generally speaking, the law requires trademark holders to meet a 5-year use requirement after registration to remain legally binding. On the positive side, European use requirements are much looser than in the U.S.
When Common Law Trademark Rights Are Enough
Many new businesses are surprised to learn there are instances where common law protection is sufficient. If you are a "mom and pop" with absolutely no plans of expansion, you may be glad to know your local business is probably protected without the hassle of registration.
Further, if you're rapidly experimenting with product and service ideas, you might prefer the convenience of common law protection. No use registering a "throwaway" slogan, right?
For example, popular retailer Brookstone rarely trademarks its specialty items. The company releases a variety of products at a fast pace with no plans for continuous circulation. In such instances, there is little incentive to register trademarks. With that said, most B2Cs should register their trademarks.
When They Are Not
You absolutely need to register your trademark if you plan to do business outside your local jurisdiction.
As previously mentioned, common law trademark rights do NOT extend across the Inter-webs.
Very few companies today remain exclusively local. Those who forgo registration for too long (like our Mary Lou) may face difficulty asserting common law rights over specific geographic areas in court. Several factors are evaluated when determining if a provider has acquired common law rights, including: The public’s association of your mark with the offerings you provide, whether your mark is distinct of your offerings, and whether you exercises control over the quality of your offerings.
Going back to our earlier example, it may be difficult for Mary Lou to prove more people in Los Angeles associate her trademark with her brownies than those of her competitor.
Don't Wait Too Long to Register
As you can see, common law rights do provide a significant level of protection. However, they do not come with the benefits of being able to recover profits, statutory damages, and attorney fees should an issue ever arise. If you know you will be serving populations outside of your state (now or in the future), don't delay federal trademark registration.
By taking the time to register now, you could potentially save yourself some future headaches. Nothing is more frustrating than having to completely rebrand just when that "throw-away" idea is taking off. OR when you've landed an extraordinary onslaught of publicity that creates a catch-22: Tons of people who want to buy your product and an angry trademark holder saying you can't.