When you were starting your business what were the things that were most important to you? Let’s be honest.
It usually boils down to branding, graphics, and web design, and of course, your business plan and marketing strategy. Anything “legal” is placed on a back burner and not made a spending priority. Often new business owners figure they can do it themselves. Or, they figure it can wait until some metaphorical rainy day. You figure, what are the odds of something happening. “I’m so small now, I’ll wait.”
Is this you? Now’s my turn to be completely honest. I don’t blame you one bit. See. I chose the law school route, you didn’t. And, on the outside looking in, I get it. I see why something like registering a federal trademark feels like something you can handle later. And, it certainly doesn’t seem as pressing as those other things that I mentioned earlier.
When you are starting a business you have a responsibility to yourself, and any business partners to make wise spending decisions. You should be making decisions not just based on where you’re at today but where your business is headed. You shouldn’t be making decisions that are short sighted and that may actually cause you to lose money down the road.
I’m going to share how choosing not to take care of protecting your brand with a federal trademark registration is actually costing you money.
Your unprotected brand is actually a liability for you right now. Liabilities cost.
Let me explain. Right now, let’s say you’re using a brand name, logo or tagline that you don’t actually own as a federal trademark. You currently have common law ownership of it – meaning it’s simply an unregistered trademark. Common law trademark owners do have limited rights. Typically, your ownership is limited to your geographic area, but if you’re operating your business primarily online your reach may be a bit broader. These rights may sound good but are limited, because if someone infringes on your trademark, your ability to defend it successfully actually becomes a game of “he said-she-said.”
Defending an unregistered/common law trademark gets a lot more expensive than defending a federal trademark because when you own a federal trademark: 1) You are the valid and presumed owner of the trademark and 2) After five years, your ownership of the federal trademark becomes incontestable. With a common law trademark, you don’t have these assumptions working in your favor. Therefore, you have to actually prove it up in court. Additionally, your unregistered/common law trademark is a liability because you may actually be infringing on someone else’s trademark, and not even know it.
See– the first thing that a trademark attorney will do for you is conduct a trademark search and clearance review. During this process, they’ll identify potential instances of trademark infringement. This step is important because it’s proof that you, the creative genius, did your due diligence. It also ensures that you aren’t pouring money into building the brand behind your unregistered trademark only to have to redeux it later because it actually infringes on someone else’s. Again, going through this process ensures that your brand isn’t a liability, but is instead positioned to increase your business’ bottom line.
Limits your plans for expansion
Maybe you want to license your trademarks to expand your reach. Or maybe you have some hot collaboration opportunity on the table that will open you up to a broader audience. But, you aren’t pushing forward because your foundation is rocky. Remember, registration with the United States Patent and Trademark Office (USPTO) is proof that you are the valid owner. Without taking that important, formal step, whether you actually own the trademarks that you’re using is pretty much a coin toss. Bringing other people into the fold by licensing to them the right to use your unregistered trademarks opens a huge can of worms. Trust.
By not registering your trademark with the USPTO you are limiting the ability of your business and brand to expand and capping your revenue potential.
Let me tell you a story. It’s about a fast food burger place called…Burger King. The very first Burger King restaurant was founded in Matoon, Illinois in 1957 but the founders (the Hoots family) did not register the trademark with the USPTO. Years later, the Hoots family learned of another Burger King in Florida with plans to expand in Illinois (yep, the one that we all know).
In 1961, the Florida-based Burger King opened a location in Skokie, Illinois and by 1967 had 50 Illinois locations. Guess what else? They actually registered the name with the USPTO. Unfortunately, because the federal trademark registration trumps the state, the newer Burger King (the chain that we all know today) won the court battle over the name, and the smaller Burger King was limited to using the name within the 20 mile radius of the town where it’s located (remember I mentioned that common law trademarks are limited to geographic location). The famous Burger King chain was also prevented from setting up a location in Mattoon (womp).
What’s the lesson here? Even if you aren’t crystal clear right now on how you want to expand your business. Even if you are starting off as a mom and pop business. Even if you are purely brick and mortar. Even if you think no one is paying attention….
You need the freedom to choose your adventure down the road.
It makes your business less investable.
People want to invest money into businesses with minimal risk and serious growth potential. There is risk associated with building a business based on brand names or logos that you don’t own. There’s risk that you’ll have to pay out royalties to someone else down the road. There’s risk you’ll have to rebrand and lose some of that brand equity you’ve built up. There’s risk that you’ll deplete your revenues litigating a trademark infringement case. Then, there’s risk that your opportunities for growth may be severely impacted by the fact that you don’t own the federal trademarks associated with your brand, products and services. This makes your business a less attractive opportunity for investors. If you’re looking for funding now, or even if you’re building a business that you might sell later, this is something to seriously consider.
That’s the gist of it peeps.
I typically don’t write posts like this because I don’t want to scare you. But, I do realize that most newer business owners (and even some seasoned business owners) don’t fully realize the importance of owning federal trademarks. I’d be doing you a disservice if I didn’t lay it out there for you. I don’t think that everyone needs to go rush and register everything under the sun with the USPTO right now. In fact, it may actually be too soon for you to register. That is where it takes strategy, prioritizing and really working through what makes sense for your business based on what you’re doing now and your long term goals.
I hope you’re updating that to-do list. Eh?