Trademark lawyers Bill Finkelstein and Cheryl Hodgson discuss what can happen when a small local business does not register a trademark. Local businesses in one geographic area such as a restaurant don't always think to register a trademark. Without registration, they acquire rights only in their geographical area of use. What happens if someone else is using the same trademark in a different part of the country and one of them decides to expand? Here is the transcript of our conversation:
Cheryl Hodgson: This raises an interesting question because we've seen this. I know I've been involved in a case recently with a situation where sometimes, people don't register at all or they wait a long time to register. That can get into an issue that's called territorial rights. In the United States, one can still acquire some rights without registering which seems like it's a little bit contradictory.
Bill Finklestein: In this country, we've come from a tradition of, if you will, small shopkeepers, small farmers, as Jefferson would say, where you don't want to force every single person in a small local business to register a name. My local dry cleaner who has a business area of 10 square blocks, to force her to file an application in Washington, even though the fees aren't that great, you still have to hire expensive lawyers like yourself.
It's just not necessary. What the law allows is my dry cleaner to have territorial rights over 10 blocks. Basically no one else can name their dry cleaner the same name as hers. Talk about territorial trademarks by the way. I don't want to pick on my dry cleaner, but the name of her dry cleaning is Express Dry Cleaning. That is about the worst trademark I could think of because as we said before, it's very descriptive. Assuming she had a good trademark for her dry cleaner, it would only extend to the area of her use and reputation, as far as she had customers. If people came from 10 blocks or 20 blocks, that would delineate, define her zone of trademark rights.
We see this very often in the restaurant business. I've done a lot of trademark work in the restaurant areas. You have. We see this often where people have a small restaurant. They don't think about it. They give it a name. Maybe they'll get a state registration in the state of California or a DBA in Los Angeles County, which again gives very, very limited rights.
Unfortunately, most of the time, it's not an arbitrary name like a Pepsi, Xerox, or any of those made-up kinds of names. It's more common names or somebody's last name, surname. They'll just be going along, tripping along their own way in their own little business for many, many years.
Then unbeknownst to them, someone in Tennessee, Maine, or someplace else came across the exact same name. Maybe it's their surname as well. The next thing you know, they start their own restaurant business. As long as the two of them, one stays in Maine and the other stays in California, there's no problem.
Cheryl: They're never going to run into each other.
Bill: Right, although the Internet has created a potential for an overlap that never happened before. Generally, those two can coexist. What happens when the one in Maine decides to franchise or extend.
Cheryl: Around the United States.
Bill: Next thing you know, they’re in the Midwest. Next thing you know, they’re in Arizona or Nevada, and they’re in Vegas where you have a lot of people going back and forth between California and Vegas. Then you have this potential for running into each other.
The only solution really in terms of each of them is someone should have filed, should have, being the operative words, filed first for a federal trademark registration, because when you file, you get your claim on file, you get your rights from the date you file. It establishes that beachhead we talked about, to give you time to develop, whether it's developing the business, product, or developing a larger geographic breadth to a certain extent if you file first.
The caveat to remember there is even when you file, let's say you file on January 1, 2013 for a trademark registration for restaurant services, any other restaurant in this country that's been in business up to that date will always be able to use their name in their locality and have that protected zone of use and reputation, whatever it may be.
Even filing the application doesn't cut off the prior users.
It just cuts off anybody subsequent which is still very, very helpful obviously because there could be somebody in Michigan who all of a sudden comes up with the same name and starts. There are only so many ways to name hotdog places or hamburger. to be continued