Business Trademarks: What’s Really in a Name?

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If you’re thinking of starting a business (or already have a business in the works), make sure that the name you use is not already taken.  Original names are essential for three reasons:  marketing power, clarity, and trademark infringement avoidance.  For example, if you’ve decided to open a coffee shop, it’s fairly easy to determine that the name “Starbucks” is notan option.  But, what about “Smith’s?”  And what happens if the “Smith’s” trademark is an auto insurance company in your town? 

What’s Really in a Name When it Comes to Business Trademarks?

Before attempting to trademark your business’s name, find out if the name is available on the U.S. Patent and Trademark Office’s website.  TESS, the Trademark Electronic Search System database, will indicate whether someone else has already claimed the name or symbol you want to use. 

  • While U.S. trademark protection is granted to the first company to use it in its operational geographic area (regardless of registration), a company that grabs the trademark first will generally have a stronger case in court.
  • In some situations, the similarities between names or symbols may be negligible.  That’s where an experienced business attorney with intellectual property experience can help. 

Often, there’s generally a way to accommodate both companies – especially when it comes to businesses with similar names, but dissimilar products (the “Smith’s” example above); those whose geographical locations may not conflict; and those whose names are too generic (for example, “The Clothing Store”).

Domain Extensions as Trademarks

In today’s marketplace, many businesses have both a physical location and an online presence.  The question then becomes whether to trademark the company name (for example, Amazon), the URL (www.amazon.com), or both.  It’s generally recommended that companies with an internet presence not register their web extensions (such as .com, .net, etc.) with their name unless planning to register the mark both with and without the web extension.  The reason is that other businesses registering the same name can do so by just adding a different (non-registered) extension and cause a great deal of confusion for customers.

A prime example is Craigslist.  The multi-purposed classified ad site is technically a “.org” site, but those who searched for craiglist.com or craiglist.net were often led astray.  The company now has trademarks for all, so typing in the latter extensions now brings you to the main .org site.

To C or LLC? That’s Today’s Question

I just read an interesting post over at The Startup Law Blog, a post written six years ago. The writer lists “12 Reasons For A Startup Not To Be An LLC.” The key word in that post is “startup,” and key thing to understand is the author’s audience, largely captured in the following paragraph from the post:

For tech or growth companies planning to follow the traditional path of regular and ongoing equity grants to employees, multiple rounds of financing, and reinvestment of as much capital into the business as possible, with the goal of an ultimate sale to a big, maybe public, company in exchange for cash and/or stock, LLCs are typically not the way to go.

If that paragraph describes you, then maybe the C corporation should be the entity of choice for you.

As for the C corp, the author makes another important point. We’ve all heard that one reason–if not the major reason–to avoid the C corp is the possibility of double taxation. Well, maybe:

The bogeyman that you will hear about most frequently is the “double tax” bogeyman. You will be told—don’t form a C Corporation because you will be subject to a double tax.

What is meant by this is that if the C Corporation makes money, it will pay tax on that money. And if it pays dividends to its shareholders, they will pay tax on the dividends. This is true. And so if you anticipate your business being a cash cow, and immediately generating so much money that you will earn more than you can reasonably pay out in salary to the owner executives, then maybe an LLC is a good choice for you. But for most growth businesses, whose goal is to raise capital, reinvest capital, grow fast, grant equity incentives, and ultimately be acquired or go public, a C Corporation is the way to go.  For these businesses, the double tax bogeyman rarely appears, and most exits are structured as one layer of tax stock sales. (Emphasis supplied)

In the end, the real lesson, make that two lessons, from the blog post is that one size doesn’t fit all and that there are lots of questions to answer on the road to choosing an entity for your new business venture.

Will you know the answers? Better yet, do you know the questions?

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