Trade Names Versus Trademarks Understanding Why You May Need Both
August 23, 2013 by Barbara Berschler
In the course of my practice, I am often asked to explain the difference between a trademark and a trade name. Understanding the role that each plays in the life of a business is important so that the owner can take appropriate steps to protect its interest in one or both of these forms of intellectual property.
What Is a Trade Name and How Can You Protected It?
Once you have chosen the legal form under which your business will operate, you need to identify the official name of the owner of that business. If you will be a sole proprietor, then your name will be the one that identifies the owner, for example, Susan Smith. If John Wilson and Susan form a partnership, then the name of the owner of the business might be “Smith & Wilson. “ On the other hand, Susan and John could operate as a corporation or limited liability company and might name their entity “Smith & Wilson, Inc” or “Smith & Wilson, LLC.”
Depending on the State where Susan chooses to run her business, she may need to register her sole proprietorship or partnership name with the appropriate State and local authorities.[i] / If she will operate as a corporation or limited liability company, she will first have to form the entity in the State of organization before the entity can come into existence. Part of the formation process will require her to identify the official name of her entity in accordance with the naming conventions required by that State’s law.
Although the business owner has been identified with an official name, the owner may wish to use another name in the market place. In Susan’s case, if she is a caterer, she might want to identify her business as “Heavenly Spread.” This other name will be her trade name, also referred to as a fictitious name. Owners operating in this manner usually will make the distinction clear when entering into agreements by signing as “Susan Smith dba (or T/A) Heavenly Spread,” even though they drop the dba designation when marketing to the public.
Because no one will know who actually owns Heavenly Spread when Susan announces the opening of her catering establishment using the Heavenly Spread name, she will have to register her fictitious name in accordance with the State’s fictitious name regulations where she conducts her business. Such registration is necessary so that if anyone needs to contact her as the owner or has a complaint with Heavenly Spread, there will be a record with the State identifying the owner of that trade name.
What Is the Difference Between a Trade Name and a Trademark?
A trade name is an alternative name that a business owner can use. By contrast, a trademark or service mark, which can be a word, phrase, symbol, design or combination of such, indicates to the consuming public that there is a specific provider that stands behind the goods or services being offered which is different from another provider of similar goods or services.
It is possible that the owner of a business will adopt the same words for its official name or trade name and its trademark. Prime examples are “Dell” and “Ford.” However, the family names did not become trademarks immediately. Rather, it took time for those words to take on the characteristics of a trademark, meaning that in the mind of the public those words came to stand for the providers of specific goods, namely, computers and cars.
In the case of Susan and John, they can choose to adopt “Heavenly Spread” as their service mark in connection with their catering business. However, before adopting any mark, it is wise to have a professional search done to be sure that others who provide similar services are not already using the mark for their business.
What Are Some Steps You Can Take to Protect Your Trademark?
As a business owner you only acquire rights in a mark by using it; therefore, one major step that must be taken to protect your rights in your mark is to use it continuously and frequently. Do not be afraid to display it prominently, whether on your website, labels, or marketing materials.
Another protective step is to use the symbols TM SM ® near your mark.Use of these symbols shows that you are claiming ownership rights in the mark.
“TM” stands for trademark and “SM” stands for service mark. You do not need to have any special governmental approval in order to display those symbols. However, depending on the geographic area where you conduct your business, your trademark protection may be limited to that geographic location. This means that while your business is focused in Maryland and Virginia, someone else operating in Texas or Oklahoma may use the same mark for a similar business and not be guilty of infringing on your rights.
If you qualify to obtain federal registration of your mark, meaning that you are actually using the mark in interstate commerce, you can apply to the United States Patent and Trademark Office. Once you complete the registration process, you are authorized to use the ® designation with your mark. Federal registration provides you with more muscle to restrict others from using your mark as it means that, generally, your ownership rights extend throughout the United States.
A third step you should take to protect your mark is to choose it carefully. If your mark is merely descriptive, meaning it describes your services or goods, you may not qualify for federal registration. Or, even if you do, there will be many others using similar terms, making it harder for you to distinguish yourself. Such an outcome defeats the very purpose of having a mark, which is to enable you to distinguish yourself from your competition.
Therefore, while it could be harder, and may even cost you money to identify, choosing a strong mark gives you a higher level of protection. A strong mark means a word mark that may be a made-up, arbitrary, suggestive or fanciful word or phrase. Some strong marks that come to mind are: “Xerox,” “NIKE,” “Apple,” “VW Beetle,” “Footlocker.”
What you should take away from this discussion is that while a business owner may use the same words for the business’ official name or trade name and its trademark, each iteration serves a different purpose. By understanding the distinctions, you will know how best to protect your interests in the various ways you go about presenting your business to the public.
For additional information about the trademark/trade name distinction, go to the SBA’s blog at:
[i] / Establishing a business in any jurisdiction can require the owner to apply for multiple registrations and permits or licenses. Those requirements are beyond the scope of this Blog.