Overview : Trademarks
Please watch the educational series of videos on trademarks below. The total running time is about an hour. If you are a small business owner, I guarantee that watching these videos will be worth your time.
3 Common mistakes small business owners make when it comes to registering trademarks
Small businesses make three common mistakes when it comes to registering trademarks:
- they don’t register trademarks that need to be registered;
- they spend too much money registering worthless trademarks; and
- they waste too much time filing trademark applications that have no chance of being approved by Canadian Intellectual Property Office.
Small business owners make these three mistakes because they don’t know what they don’t know and because they are afraid to ask a lawyer due to less than stellar reputation of the legal profession.
So what are trademarks and why do we need them?
Trademarks can take many forms.
The traditionally recognized forms of trademarks are:
- word trademarks (either for the name of a product or a service, or a slogan); and
- design trademarks (for logos).
Recently, many jurisdictions (Canada among them) have started allowing registration of some of the so-called non-conventional trademarks such as
- color trademarks;
- sound trademarks;
- shape trademarks;
- animated trademarks;
- hologram trademarks;
- smell trademarks;
- taste trademarks; and
- texture trademarks.
Regardless of the form of a trademark, its function is to distinguish products and services of one business from identical or similar products or services of another business.
For example, hundreds of fast food places sell burgers with very similar recipes. The function of a trademark is not to make customers choose a burger over a pizza. The function of a trademark is to make customers who already decided that they want a burger to choose a particular one.
In this sense, the function of the trademark is to address the question “which?”, rather than “what?”
So if you have a successful burger, you want to make sure that consumers never confuse it with other burgers. How do you do it? You mark the exterior of your restaurant with your trademark, you come up with a unique name for your burger, you place your trademarks everywhere in the restaurant, including menus and the uniform, and you make sure you place your trademarks on the packaging of the burger when you wrap it up for the customer.
So to sum things up, the function of a trademark is to distinguish your products and services from identical or similar products and services of others.
When you understand what the function of a trademark is, it becomes even more important to understand what it is NOT.
Trademarks vs. Trade Names
First of all, trademarks serve a very different purpose from trade names. Trade names are used to identify a business or a company (that’s why they are also often called “business names” or “company names”). Trade names are the “who” of the business. Customers deal with a business bearing a particular trade name.
As stated above, trademarks are used to identify products or services. They are used to identify that, which your business offers to the public. Customers buy products and services bearing the trademark.
In very simplistic terms, customers buy trademarks from trade names.
Every business registered with the Registrar of Companies or incorporated (provincially or federally) has a trade name. But neither the reservation of a corporate name nor the formation of a corporation create an absolute right to use the business name of the corporation in that jurisdiction.
Rights in corporate names are treated like rights in unregistered trademarks, which means that unless you are actually known under that name in a specific geographical area, there is not much you can do to stop others from adopting a similar or even identical name.
Even if you register a corporate name that no one else had thought of before, it does not give you the right to stop others from using it, unless you can prove that other person’s use of the name creates confusion.
Just because you came up with a fancy company name that helps you attract customers for whatever products or services you are offering does not mean that your name, or brand, is a trademark. If you are not using your trade name as a trademark, your don’t have trademark protection for your trade name.
A trade name can be registered as a trademark, but only if you use it as such, that is, to identify products or services.
Let’s say, your company is called Awesome Software Inc. and you make software. If you phrase your marketing materials to say that “Awesome Software Inc. offers such great titles as Text, Calculator and Presentations”, you are using “Awesome Software” as a trade name, but not as a trademark. If you phrase them to say “We offer Awesome Software™ Text, Awesome Software™ Calculator and Awesome Software™ Presentations”, then you are using “Awesome Software” as a trademark, even though it is also your trade name.
The classic example is, of course, Microsoft® Windows® or Microsoft® Excel®. We don’t buy Microsoft, we buy from Microsoft. But because “Microsoft” is a part of the name of the product we buy (and part of the reason why we buy it), it is also protected as a trademark in its own standing.
On the other hand, corporate registries don’t really check if the name submitted for registration violates any prior rights. In other words, just because a provincial corporate registry approved your company name for registration does not mean that you don’t violate someone else’s prior right (in a trade name or a trademark) and that you will not be compelled to change it in the future.
You could probably register a company called Microsoft Awesome Software Development Inc. in British Columbia today. But if you started using that name in your business, it wouldn’t be long before you get a letter from Microsoft’s lawyers demanding that you immediately cease using that name and possibly also pay a hefty amount for infringement of their trademarks.
So when should you consider registering your trade name as a trademark?
There are two types of customers who may be interested in what you have to offer. The customers from the first category buy your services or products after looking for these specific services or products, as in “I’ve heard that AirSucker AS-78 is a great vacuum cleaner, I would like to buy one of these”. They really don’t care who makes this particular vacuum cleaner, because they already know what they want. Unless your company name also happens to be “AirSucker”, you would not gain anything with customers from the first category if you register your company name as a trademark.
On the other hand, the customers from the second category buy your services or products after looking for you, as in “I’ve heard that ABC makes great vacuum cleaners, which model would you recommend?” They are willing to rely on your expertise, because they already made the decision to buy from you. If you have a significant number of customers from this category and your business is more than just you personally, you should definitely consider registering your trade name as a trademark.
Trademarks vs. Product Itself
As I explained above, the function of trademarks to distinguish products and services of one business from identical or similar products or services of another business. What this means is that trademarks are not designed to grant their owners monopoly over the products or services themselves.
This means two things: you cannot claim the generic name for your product to be your trademark and you cannot “trademark” the functionality of your product.
Indeed, if you sell wizmos, you can’t stop others from also selling wizmos by claiming that “WIZMO” is your trademark. Remember, the function of a trademark is to allow you to help customers find your wizmos among wizmos offered by your competitors, not to allow you to corner the market for wizmos altogether. This is often referred to as using the trademark as an adjective, as opposed to as a noun.
You should also make sure that your once original trademark does not become generic, in which case it will stop functioning as a trademark. This was the case or almost the case with Aspirin, Kleenex, Xerox, Thermos, Jacuzzi, Linoleum and several others. This is where you should be very careful about your marketing strategy. From the marketing perspective nothing can be better than millions of customers using your brand name as in “I need a kleenex” or “Let me google that for you”. However, from the trademark law perspective, such use should be discouraged, because it may lead to the death of your trademark rights. Instead you should promote the use of “I need a Kleenex tissue” and “Let me use Google search engine for you”.
Of course, most small business owners would say that it is a great problem to have. But even though too much fame may not seem to be a problem at the early stages of your business, this should become a consideration as you grow your business into something that will have resalable assets.
Similarly, if the shape of your product is driven by certain functionality, you are not allowed to claim this shape as your trademark, simply because this would give you the monopoly on the functionality (which Is a proper subject of patent protection, but not trademark protection).
The most famous examples of when companies unsuccessfully tried to claim trademark protection over the functionality of their products in Canada was in connection with LEGO blocks and the shape of a 3-head electric razor. In both these situations, the court found that what the companies really were attempting to protect was a monopoly to make the product, not to distinguish their product from similar products of others.
Trademarks don’t give an absolute monopoly over words and images
There are two substantial limitations to the monopoly that trademarks grant their owners.
First of all, trademarks do not exist in a vacuum. They only provide protection in connection with specific products and services that the trademark owner offers to the public. For example, Apple Inc. does not have a monopoly over the use of the word “Apple”. Their trademark gives them the right to prevent others from using the word “Apple” in connection with computers and software. However, it does not prevent others from using it in connection with apples, restaurants, cigarettes, candies, gas stations etc.
This makes it very important to create a proper connection between the trademark and products and services. If it is your trademark, you want to make sure that it covers all of your products and services.
For example, if you’re a steakhouse and you are using the trademark “We love animals”, you should consider extending your trademark to take-out and delivery services if you offer them.
If you are considering whether somebody else’s trademark will prevent you from offering your products and services using a particular name or design, you should check for which products and services that other trademark is registered and used.
For example, if you are planning to run a daycare using the trademark “We love animals”, just because there is a restaurant under the same name, should not be a problem, because the services offered by the daycare and the restaurant are very different.
Secondly, the word “use” has a very particular meaning in trademark law. Not every use of a word that constitutes a trademark qualifies as “use” in the legal sense.
In connection with products, a trademark is considered to be used if it is placed on the products themselves or on their packaging or if consumers of such products are otherwise made aware of the trademark when they obtain the products. In connection with services, a trademark is considered to be used if it is used or displayed in the performance or advertising of those services.
Mentioning a trademark in a blog post does not constitute the use of a trademark, unless the trademark is registered for writing blog posts or similar services. Using your iPhone to make calls does not constitute the use of the iPhone trademark. Moreover, unless you’re claiming to be an authorized dealer, you will not be “using” the iPhone trademark if you decide to sell your used iPhone on Craigslist.
Registered and Unregistered Trademarks (® vs, ™)
Unlike most other countries, Canada provides some limited protection to unregistered trademarks. They are also called “common law trademarks”.
If a business owner is using an identifier (be it a name, slogan, logo, etc.) as a trademark, this identifier is by this fact alone an unregistered trademark.
The owner of an unregistered trademark may prevent competitors from using the same or similar trademark in connection with the same or similar products or services. This sounds good but to be able to do it, you would need some very serious evidence of your unregistered trademark being well known in the area where it is used without permission by the competitor.
On the other hand, trademark registration provides multiple advantages over unregistered trademarks.
First of all, the protection automatically extends to all of Canada, regardless of whether anybody knows about your trademark in a specific area.
It is important to note, however, that a trademark registration only extends to Canada, but not to other countries. Canada is the only civilized country in the world that is not a party to the Madrid Agreement or Protocol, which means that unlike most other businesses, Canadians cannot file for what is called an international trademark registration where all you need to do is check boxes with names of countries where you would like to have your trademark protected. If you need to obtain protection outside Canada, you will need to file separate trademark applications in every such country.
Secondly, a registered trademark constitutes a serious, if not an impossible hurdle for anyone else who wants to register an identical or a similar trademark in association with identical or similar products or services. The trademark office only checks for registered trademarks when it decides whether your trademark application will be allowed.
What this means is that even if you have a pre-existing unregistered trademark, your competitor can still register the same trademark. The good news is that you will be able to oppose such registration (if you find out about the trademark application before it gets approved) or cancel it (by filing a lawsuit against the competitor). The bad news is that it will cost you a ton of money to do it, even though you are 100% in the right. There is a big difference between being right and being able to do something about it.
In addition to these, there are several other procedural advantages of registering your trademarks. In simple terms, if at some point in time you can see yourself taking your competitors to court over unauthorized use of your trademarks, your lawyer’s job will be much simpler (and thus it will cost you significantly less) if your trademarks are properly registered.
You should also know how to properly mark your products and marketing materials. If you are using an identifier as an unregistered trademark, you should place a ™ symbol next to it. On the other hand, if your trademark is already registered, you should use the symbol ® to tell the public that you have invested in serious legal protection of your business assets.
Some countries, for example the United States, have very strict laws about misleading use of the ® symbol in connection with unregistered trademarks. So if you registered your trademark in Canada only, and you sell your products marked with the ® sign to the U.S. market, you may be in serious trouble there, even though the product originates from Canada where you do have a registered trademark. So be careful.
When should you register your trademarks
There are five situations when you should register your trademarks.
Firstly, you should register your trademarks if your business would suffer if you were forced to change the name of your business, your products or your services. As explained above, even if you have a prior right to your trademark, the last thing you want to do is spend a couple of years and several tens of thousands of dollars trying to prove this to a judge. It is a lot more cost efficient to simply register the trademark.
Secondly, you should register your trademarks if your customers find you BECAUSE you are using a distinctive name for your business, your products or your services. If you anticipate having at least $5,000 worth of additional sales in the next 15 years attributable to a distinctive name you are using, get it trademarked.
Thirdly, if you expect that you may expand your market to other areas of Canada, you should register your trademarks. An unregistered trademark will protect you in the area where you originated your business. But as your business grows, the last thing you want is to discover a competitor using your trademark in a different province with impunity. Trust me, it happens all the time!
Fourthly, if you are considering franchising your business or even expect that it may be a possibility in the future, you should register your trademarks. When you a running a franchise, your product is what you are selling to your franchisees, not what the franchisees are selling to end users. A registered trademark adds value to your proposition in the eyes of your franchisees, because they are buying a system and a recognizable brand from you. If you are franchisor and you don’t have your trademarks registered, it sends a message that you are not serious about your business.
Finally, if you are building your business to be able to sell it some point (and you should, unless you are building a job for yourself), you should register your trademarks because they would be another asset of your business that will have an independent money value. For example, the worldwide value trademarks of Apple, Google, McDonalds, IBM and Coca-Cola is estimated in tens and hundreds of billions (yes, with a ‘B’) of dollars. Or think about the favourite trademark of my daughters – hello kitty. The protectable brand is really all they need to make a ton of money. Your small printing store may not reach these heights, but just think about this: a huge chunk of the total value of your company can lie in something you can’t touch, its trademarks!
So to sum it up – if you would be upset if you had to change the names you use in your business, if you make extra money because of some unique identifiers you use for your business, or if your exit strategy includes expansion, franchising or sale of your business – get your trademarks registered!
What is the registration process
The registration process is quite long in Canada.
First, you file the trademark application. In this application, you need to describe the trademark and set out the products and services in association with which you are asking the trademark to be registered. You also need to state the basis of registration. The two most common basises of registration are “use in Canada” and “proposed use”.
You would file your trademarks with the “use in Canada” basis if you are already using your trademark in Canada
To recap, a trademark is used in association with products if you place it on your products or its packaging, and it is used in association with services is you use it while rendering or advertising your services).
Alternatively, if you are only planning to make the world a better place by bringing your trademark to the market, you would use the “proposed use” basis. The application is filed online, together with the government fee of $250.
Then the application just sits in the Canadian Intellectual Property Office for 6 months without anybody looking at it. When a trademark examiner finally looks at it in 6 months, in 70% of the cases the examiner will find something they don’t like in your application and will send you what is called an “office action”. It could be that you missed another trademark that may prevent registration of your trademark, it could be that your trademark is not registrable, because the examiner considers it to be “clearly descriptive or deceptively misdescriptive”, it could be that the way you worded your statement of wares and services is not specific enough to meet the required standards, and it can be a dozen other reasons.
If you receive an office action, you will have 6 months to respond with your reasons why the trademark should be registered or with amendments to make the examiner happy. If this satisfies the examiner, you’re all set. Otherwise, you will receive another office action. You only get two kicks at the can. If after your second response the examiner is still of the opinion that the trademark is not registrable, your application will be refused.
If you convinced the examiner that your trademark is registrable, your application will be advertised in the Trade-marks Journal. This opens a two-month formal oppositions period, during which anyone can file a statement requesting that your trademark be denied. This is a rare occurrence, but it happens every now and then, especially if your trademark happens to be similar to a well-known trademark owned by a corporation with a substantial legal budget.
If nobody contested your application or if you were successful defending it during the opposition period, your application will be allowed. Now you will need to pay another government fee of $200. At this point, if you filed your application based on the “use in Canada” basis, you will get the certificate of registration of your trademark. If you filed the application based on the “proposed use” basis, you will need to file a declaration of use, informing the Canadian Intellectual Property Office that you have started using your trademark. Once you file the declaration, you will get the certificate of registration.
Again, this is a long process that normally takes anywhere between 18 and 24 months. If you are lucky enough to not receive an office action, you may be done in about a year. If you are unlucky to attract an opposition proceeding, the process make take as long as 3 to 5 years.
You are not required to have a trademark agent assist you in the filing of your trademark application. However, a trademark agent can save you a lot of time and frustration. If you look at the trademarks database, you will see thousands and thousands of trademarks that were abandoned after the applicant received the first office action. Unfortunately, this is what often happens when you file a trademark application yourself. The work of a good trademark agent does not stop with the filing of the application. It covers the whole process from start to finish. And responding to these office actions is just an expected step in the process.
Trademark Tips & Tricks
There are several things you should do as you are building your brand strategy.
Use Google to search for the brand you came up with. Unique ideas tend to visit more than one person. What you consider to be a unique brand name may already have tens of thousands of links on the web.
Use http://namechk.com. This website allows you to register your brand as a user name on over a hundred various social media platforms. You may not want to build your Facebook page or have your own YouTube channel yet, but the last thing you want is to have a big with fight your competitor who would register such usernames before you.
Register domain names with your brand name in them. I was an attorney of record in a trademark litigation case where a large international corporation decided they did not want to renew a domain name registration to save $20 in annual fees. They ended up paying over $120,000.00 in legal fees to obtain a court order against the individual who registered this domain name instead. Don’t repeat their costly mistake.
Use the ™ sign next to your unregistered trademarks. This way you are telling the world that you are treating your brand as a trademark. Keep using it until you register the trademark
Finally, if your situation matches at least one of the five scenarios described above, consider registering your trademarks!