Category — trademark

Oftentimes, people become new business owners by purchasing an existing business. Current business owners may also buy businesses to expand their line. The assets from these sales may include trademarks from the business. As such, business owners need to be aware of a few items before signing the purchase agreement.

First, business owners should be aware of what marks they are actually buying. Sometimes, the seller will transfer a mark that has no relationship to the business to be sold, but the mark just happened to get listed in the schedule of assets because, well, it’s always been that way. Other times, the house mark—the main mark used by a business–gets transferred, but a subsidiary mark gets left out. To remedy this, business owners should insist on separate schedules to the sales agreement that list the intellectual properties being sold with the business.

Second, because trademarks are a bundle of rights similar to real or personal property, the marks may be encumbered by security agreements. For each trademark listed on the schedule of assets, you should clear the chain of title of each mark to ensure that the mark is free of any security interests.

Third, business owners should be sure to get an assignment of each individual mark from the seller. Trademarks are assigned to new entities all the time and the process is very simple, but, because of this, this step is often overlooked. Once the schedule of trademarks is confirmed, you should ask your trademark counsel to begin drafting assignments for each mark to be signed at the closing.

There are many other important factors for business owners to take into account when buying a business and the associated trademarks including representations and warranties, licenses, and valuation. Check with your trademark counsel early in the process to avoid headaches after closing.

In today’s world, business owners need to stay connected to the global economy. One way to do this involves operating a Web site to advertise your goods or services to your customers. To start the process, a business owner must register a domain name with a registrar such as GoDaddy. The selection of a domain name is tricky business, not only because of the lack of domain names available, but also because of the trademark issues involved.

That’s right: domain names can serve as trademarks and the bad faith registration or use of a domain name can be grounds for legal action. A trademark owner who believes that another registrant has registered or is using a similar domain name in bad faith has two options. The first option is to bring an action under the Uniform Domain-Name Dispute-Resolution Policy (UDRP). When you sign up for a domain name, you agree to arbitrate any disputes regarding your domain name under the terms of the UDRP. The end result of a UDRP action may be the transfer of the domain name to the trademark owner. The second option for an aggrieved trademark owner is to bring an action in federal court under the Anti-cybersquatting Consumer Protection Act (ACPA). Under the ACPA, the trademark owner files suit in federal court and may seek transfer of the domain name at issue and damages up to $100,000.00 per domain name.

Marc Randazza analyzes several common defenses under the ACPA in this post. He also discusses the advantages to the UDRP process versus defending an ACPA claim, at least for those accused of bad faith registration or use of a domain name. Under the UDRP, the only relief available is the transfer of the domain name. Moreover, the process is conducted through an arbitrator or arbitration panel by way of pleadings only. There is no discovery or oral arguments. Conversely, in defending an ACPA action, not only are the options for relief greater (transfer of the domain name and statutory damages), but the aggrieved trademark owner gets to choose his venue. As such, you, the new business owner using your new domain name, may get haled into a far-off federal court. Defending such an action can be very expensive. In addition, an action in federal court would almost certainly require discovery, which only makes the process more expensive.

There are several other issues relating to domain names and trademark law, but they are beyond the scope of this post. Business owners need to be aware of the possibility of infringing someone else’s trademark with their domain name could subject them to legal action and choose their domain name carefully. With careful planning, however, you can avoid these situations.

Many business owners want to use as a trademark or service mark a phrase that incorporates their geographic location. For example, a house cleaning service in Charlotte might want to apply for the service mark “CHARLOTTE MAIDS”. Like immoral, deceptive, or scandalous marks, geographically descriptive marks may not be registered on the Principal Register at the Patent and Trademark Office.

Section 1052 of the Lanham Act forbids registration of not only geographically descriptive marks, but also marks that are primarily geographically deceptively misdescriptive. An example might be, using our scenario above, if our Charlotte-based house cleaning service attempted to register the service mark “NEW YORK MAIDS”. The Lanham Act does provide an exception for marks that act as an indicator of regional origin, which I’ll discuss in a future post.

Business owners should take this into account when thinking of a service mark for a new service or product.