Many companies utilize the Internet as a means for advertising or selling its products. However, it is a common misconception that your Internet presence provides your nationwide common law trademark rights. Trademark rights are acquired through actual use of a mark being used on products or in connection with services within a geographic area. The geographic area in which a common law trademark is enforceable depends on its zone of actual goodwill. This zone of goodwill is considered the area in which consumers identify your mark with your company. This zone of actual good will is made up of the zone of market penetration and zone of reputation. The zone of market penetration is the area in which consumers have actually purchased your products or utilized your services. The zone of reputation is the area where consumers have not purchased your product/services but are aware of your mark and its use in connection with your goods/services.
In today’s competitive market, companies are frequently including non-compete clauses in their employment agreements. The purpose of a non-compete clause is to prevent an employee from working for or creating a company that is in direct competition with his or her former employer. Though this clause is permissible in most jurisdictions, they are often frowned upon as a restraint on trade.
This is the case in Virginia, where its Supreme Court has ruled that non-compete clauses are disfavored because they impose unreasonable restrictions on an employee’s ability to earn a living. Therefore, under Virginia law, the employer bears the burden of proof to show that the non-compete clause is reasonable and not a restraint on trade. The Court has ruled that for a non-compete clause to be reasonable it must be (1) no more restrictive than necessary to protect the employer’s legitimate business interest, (2) not unduly burdensome on the employee’s legitimate efforts to earn a livelihood and (3) not against public policy. This is a question that must be decided by the court on a case-by-case basis.
If you run a small business, you may have searched the Internet, hoping to find legal documents, including customer agreements, as a cost-saving measure to adopt as your own. Unfortunately, utilizing these “one size fits all” documents that are not tailored to your company’s specific needs can be very risky and lead to costly legal problems down the road.
First, it is common for standard agreements found on the Internet to contain boilerplate language that provide inadequate protection for the provider of the goods or services. For example, a sample contract found online may include a poorly written limitation of liability clause (LOL) that does not reasonably cap the business’ liability or comply with local laws, thus rendering them unenforceable. Furthermore, the online agreement may not include an exclusion of implied and express warranties clause even though your State may consider the inclusion of such a clause enforceable. The online agreement also may not include an adequate mechanism to suspend services for non-payment or an indemnification clause that protects your company in the event your customer causes loss. Forgoing the insertion of these clauses into your customer agreement may weaken the protection a service or goods provider receives and ultimately lead to losses, non-payment, customer confusion or worse.
Registering your trademarks with the U.S. Patent & Trademark Office should be one of the first steps for all new companies (that’s of course, after conducting a comprehensive trademark search). However, allocating the necessary funds to adequately protect its trademarks may be a tricky endeavor for a new startup company. Frequently, companies with limited budgets only have enough money file a single trademark and thus, must decide whether it is best for them to file a trademark application for their business name or logo. Before making a decision, it is extremely important to consult a trademark attorney since every mark is different and requires its own legal analysis. However, there are a few general factors that should be considered in the decision-making process.
In today’s economic environment, it has become popular for companies to relocate to another state. This strategic decision may occur as part of an effort to lower business costs, find a more business-friendly state with lower taxes and less burdensome regulation, or simply to provide employees a better quality of life. Historically, companies had three primary ways in which they could relocate: (1) remain a company in its parent state and register as a foreign company doing business in a new state; (2) dissolve the current company and form a new company in a new state; or (3) form a new company in a new state then through a merger or acquisition acquire the old company or its assets.
However, a fourth option, domestication, has been gaining momentum making it much easier to relocate a company. With domestication, an existing company can be transferred to a new jurisdiction without the hassle of acquiring third-party consents and regulatory approval that may occur with a merger. Additionally, since the resulting business entity after domestication is the same entity as the original entity, it may retain its “age” and Federal Tax Identification Number, which may be useful when acquiring corporate bank accounts, lines of credits and special government exemptions.
When registering a trademark, applicants are frequently instructed by the Trademark Examiner to disclaim an element of their mark in order for it to be registered on the Principal Register. In fact, the U.S. Patent & Trademark Office has reported that approximately 29% of first Office actions contain a disclaimer requirement. The trademark examiner usually requests that the applicant amend the application to include the following disclaimer:
“No claim is made to the exclusive right to use [disclaimed component] apart from the mark as shown.”
Before registering a trademark, companies and entrepreneurs should see whether a third party is claiming rights to an identical or similar trademark, especially one that is used with a similar type of product. By conducting a trademark search to identify prior users, the company may be able to avoid costly legal disputes that could arise in the future.
We don’t know if Google conducted a trademark search and found the “Hanginout” mark used in connection with “Computer application software for mobile devices for sharing information, photos, audio and video content in the field of telecommunications and social networking services”. Nevertheless, they proceeded with using and filing a trademark application for “Hangouts” because, presumably, they thought there was no likelihood of confusion.
Conducting a trademark search before using a trademark in commerce should be a no-brainer for all companies looking to develop a successful and long-lasting brand. Unfortunately, it is not uncommon for a startup to create and fall in love with a company/brand name without conducting a proper trademark search only to then find out the mark is already being used by a prior user with superior rights.
Unlike many other countries, the United States has what is called a first-to-use trademark system. That means that the first entity to use the mark within a territory acquires a right of priority to use that mark over all subsequent users in that location. Under common law, the first user (a.k.a. “senior user”) has superior rights to use a mark within a territory, regardless whether or not it has been federally registered with the U.S. Patent & Trademark Office (“USPTO”). In fact, if a subsequent junior user registers an identical or similar mark with the USPTO, the prior senior user still has exclusive priority to use the mark in its territory as well as its zone of natural expansion. Nowadays, when it is very common to sell products and services over the Internet, that territory could be large and thus extensively limit the use of the junior user’s mark, even if it has been federally registered.
Trademarking your name is a common practice that has recently gained traction within the college football scene. Many coaches such as Ohio State’s Urban Meyers, Kansas State’s Bill Synder, and University of Washington’s Steve Sarkisian have all filed trademark applications with the USPTO for their names and phrases that include their names.
This practice is nothing out of the ordinary, but has led to a controversy where college football coaches are able to profit off of their names while players cannot receive compensation when their names are used on products like jerseys, video games, and photographs.
For more information about the controversy occurring on campuses nationwide, check out this article written by Steve Berkowitz of USA TODAY Sports.
If you are interested in filing a trademark for your name, please contact one of our trademark attorneys today. We would be happy to provide you a free 30-minute consultation to discuss your options and the trademark process.