The Opinion of a Small Business Owner In Regards to Trademarking

I thought this would be interesting to post this because so many of us will go on to create our own businesses in the fashion industry. Yes, I believe trademarking a brand is important in order to protect itself from piracy and confusion in the market, but at what stage? I think we tend to hear a lot that we need to apply for trademark protection at the creation of our brand, but is it necessary? I for one did not even know there were common law protection of a brand or that "a work is copyrighted automatically once it is in tangible form" (Page 506) until I further explored the law. I asked my employer, Winky Wu, her opinion on the matter because she is in the process of trademarking her own fashion accessory brand Winky Designs. I wondered why she decided to file for protection now as opposed to when she first created her business almost two years ago. I believe this holds a lot of insight into the minds of small business owners and the importance of the allocation of funds for an emerging brand.

Winky Wu:

Winky Designs is actually still not trademarked but we are technically in the process of getting the application started.  People will always tell you that you should get a trademark done but I think it's overhyped, it's like someone telling you that you need to buy life insurance at the age of 10.  In both cases, the reasons why it's not very practical is the same 1) the costs outweigh the benefits especially when you are so young and 2) your risk of negative consequences are actually quite low.

 

1) The Costs Outweigh the Benefits:

 

• Trademarks are expensive:  To trademark in the US, the application fee is $325 per class (for example, scarves, watches and handbags are in 3 different classes, so if I was to trademark our name across all the product categories that we are in, it would cost us $975 in application fees plus legal fees of hiring lawyers or a trademark company to help us do the research and fill out the applications).   When I first started the company I had limited funds, and I just decided to use my resources in more productive ways. According to the United States’ Small Business Administration (SBA), approximately 90% of all small enterprises fail within the first two years of operation, so when you are starting out, you don't even know if you're going to make it long enough to have anything worth trademarking.  So why not wait and see how the business goes before spending that money?
• Trademarks are limited by country:  This USPTO trademark protects you in the USA only, and so if you want to protect your mark internationally you need to pay additional certification fees and international application fees are also very expensive (e.g. $200 per class per country). Winky Designs sells in 3 classes across 25 different countries, and so in order to "truly" protect ourselves we would really have to break our bank!  It's a tough decision, you just need to balance out the costs vs. benefits of trademark protection and see how much you can afford.  
• Trademarks take a really long time: Before even doing an application, you need to do some research to see if there are any conflicting marks out there. Then you need to do the application and submit it.  The total time for an application to be processed may be anywhere from almost a year to several years, depending on the basis for filing and the legal issues that may arise in the examination of the application.  While your application is being processed you have no protection (so if your idea takes off, someone can copy you before your trademark even comes through).  I think you might be able to retroactively take action but by then it might be too late.
• Even if you had trademark protection, would you actually take action against an infringing company? We all know that trademark registration is supposed to "protect" you, but if people want to copy you, they will do so anyway (look at all the fake designer products out there!).  The trademark just gives you a good case to take legal action to stop the copycats, but you still need to hire lawyers, go through the courts etc. which would cost a LOT of money and the process could drag out for years. If LV and Gucci (with tons of money) can't protect themselves, how will I be able to afford it as a small startup business?  Realistically, IF someone were to copy the WD mark, the most I could do is send out a threatening legal letter and if they didn't stop, I'm not sure that I would actually take legal action unless WD was really taking off and we had some financial backing.   I would probably be better off spending my time & money to come out with fresh new designs, differentiating on quality and encouraging buyers to buy the real deal (rather than taking legal action).

2) Your risks are actually quite low:

 

• Common-law protection:  As long as you are actively using your mark in "commerce" (meaning that you are selling the goods/services with your mark on it), you are actually protected through common-law in most countries.  All you have to do is show that you were first to use the mark within a geographical area (amongst other factors) and that consumers associate that distinctive mark with your company - that's why we put "TM" after our logo (you put R with a circle around it once you are actually registered). Since Winky Designs sells everywhere and is protected through common law in so many countries, if someone did infringe on our trademark, we could legally take action without an actual trademark registration.  Since you get some "free" protection anyway, I decided I didn't need to pay for trademark registration yet until I got bigger.
• Who wants to copy you anyway? As a new brand, you don't actually have enough brand value/recognition to be worth copying.  If you have a great idea or design, it is more likely that people will copy the design/idea (which is protected by a patent), rather than copying your name/logo (which is protected by a trademark).   I always joke that if my brand got big enough to be worth copying, then that's when I'll really know that we've "made it" and it's a good problem to have.
• Infringement on someone else's trademark: There is also risks that your mark is infringing on someone else's registered mark and they might take action against you (which is actually a real risk). In most cases, they will send you a C&D (Cease & Desist) to ask you to stop using their mark or they will take further action.  At this point, you are likely to stop, rebrand yourself, or sell the goods in another country where they don't have protection.  If they decided to litigate, the most they can go after is the profits you made on your sales (which as a new business, may not be very much ...so it might not be worthwhile for the opposing party to take action against you since their legal fees is likely higher than what they could get from suing you). 

 

Final thoughts - this is by no means the "right" answer, most professionals will tell you to trademark when you start a new business - but from a practical/financial point of view, I didn't think it made sense for my own company for the 7 reasons I listed above!  For a new business, your future is uncertain, you have limited funds, and you have free protection already - so why trademark?  I will however, suggest that any new business owners should do the research to make sure they're not infringing on someone else's mark before they start using their name/logo.  I just went on the USPTO website and searched for "Winky" (it's a public database), and I looked up "Winky watches" and "Winky designs" on Google which gave me a pretty good idea that I was free and clear to use my name before I started.

Week 10 EOC: Lawyer Jokes

A little boy was in a cemetery with his mother “Mommy” the boy asked , “do they ever bury two people in the same grave?”

“Of course not, dear.” replied the mother, “Why would you think that?”

“The tombstone back there said, Here lies a lawyer and an honest man.” …

Read more: Lawyer Jokes – Clean Jokes About Lawyers http://www.greatcleanjokes.com/jokes/work-humor/lawyer-jokes/#ixzz2emteesoq

It was a Tuesday when the judge passed a verdict against a certain lawyers client. On Wednesday the lawyer rushed into the judges chambers. ” Your honor I just found out new information and I would like to file an appeal.” “What did you find out?”, asked the judge. After a few moments of silence the lawyer responded “well I found out my client has another $5000 dollars.…

Read more: Lawyer Jokes – Clean Jokes About Lawyers http://www.greatcleanjokes.com/jokes/work-humor/lawyer-jokes/#ixzz2emtyenQD

A man walked into a lawyers office and asked about the fee. The lawyer responded” it’s 50$ for 3 questions,”  ” isn’t that a lot asked the man” ” yes” responded the lawyer…………….”and whats your third question?”…

Read more: Lawyer Jokes – Clean Jokes About Lawyers http://www.greatcleanjokes.com/jokes/work-humor/lawyer-jokes/#ixzz2emu9TPMV

Children who never come when called will grow up to be doctors. Children who come before they are called will grow up to be lawyers.

http://www.101funjokes.com/lawyer_joke_2.htm

The pope and a lawyer are on the elevator to heaven. When they arrive at the gates, there's a mad rush of angels, saints, and other holy people on their way to greet them.

When they arrive, they pick the lawyer up on their shoulders and carry him off cheering hysterically. The pope is deeply saddened.

St. Peter sees this and goes over to him and says, "Don't feel bad. We get popes in here all the time, it's not every day we get a lawyer."

http://www.jokes.com/funny-lawyer-jokes/hb66us/the-pope-and-a-lawyer-are-on-the-elevator---

Week 9 EOC: Wall Street Journal Opinion

President Obama decriminalizing the personal use of marijuana opens up legal questions on the front of those who have been incarcerated because of it. What will happen to them? There will be appeals everywhere by those busted for marijuana use because hey, The President said it was ok.

This controversial act is corresponding with the release of a documentary deemphasizing the harmful effects of marijuana by Dr. Sanjay Gupta that aired on CNN. Dr. Gupta states that “it [marijuana] doesn't have a high potential for abuse, and there are very legitimate medical applications” (http://www.cnn.com/2013/08/08/health/gupta-changed-mind-marijuana). Can such a statement by a respected medical professional help make the general sentiment public enough to persuade the President to decriminalize the possession of weed? Absolutely. There have been public polls regarding this very issue and Gallup reports that “a record-high 50% of Americans now say the use of marijuana should be made legal, up from 46% last year. Forty-six percent say marijuana use should remain illegal (http://www.gallup.com/poll/150149/record-high-americans-favor-legalizing-marijuana.aspx).” If the president is elected by the people then he should listen to what the people has to say. I believe that it is no more harmful than drinking liquor or smoking something else less dubious- cigarettes. I do not use marijuana but do not see the reason why it is still considered a schedule 1 substance. If we legalize it then tax it, it would become like liquor or cigarettes. “We now know that while estimates vary, marijuana leads to dependence in around 9 to 10% of its adult users. By comparison, cocaine, a schedule 2 substance "with less abuse potential than schedule 1 drugs" hooks 20% of those who use it. Around 25% of heroin users become addicted. The worst is tobacco, where the number is closer to 30% of smokers, many of whom go on to die because of their addiction. I think we should legalize then tax it” (http://www.cnn.com/2013/08/08/health/gupta-changed-mind-marijuana).

Not everyone takes the stance I do, however. An editor for the Wall Street Journal writes, “Not since Nixon have we seen a Presidency so disdainful of the law, but at least Nixon had enough respect for legal appearances to break the law on the sly. This Administration simply declares it won't enforce the laws it doesn't like and calls it virtue. The media then give this a pass because Mr. Obama's decisions mesh with their own policy preferences” (http://online.wsj.com/article/SB10001424127887323324904579044771286022400.html?mod=wsj_share_tweet). The president shouldn’t have gone ahead and made up his own rule. There are procedures needed to make reform happen and President Obama did not adhere to the law. Simply decriminalizing a criminal act does not make the law magically change. The war on drugs is over. An all-time high percentage of people want to legalize marijuana, so give the people what they want.

Your Own Argument and Opinions

I agree with the ruling in Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc. In an increasingly global market it is important to establish responsibility in internet fraud and piracy cases. As shown in the Madrid Agreement, more and more countries are banning together to create an international standard in recognizing copyrights and trademarks. “Under the Madrid Agreement, any trademark registered with the international registry is valid in all signatory countries. (The United States is a signatory.) The Trademark Law Treaty simplifies and harmonizes the process of applying for trademarks around the world. Now, a U.S. firm seeking international trademark protection need file only one application, in English, with the PTO, which sends the application to the World Intellectual Property Organization (WIPO), which transmits it to each country in which the applicant would like trademark protection” (Page 512). It is important for the global community to uphold another countries established trademarks, copyrights, and patents. In order for a brand to become huge on a global scale, there has to be some level of assurance that another brand cannot easily come in and steal a design or logo because there was no protection in that country, especially when the company is a start-up looking to create a name for itself on a global market. “Transnational business is growing with breathtaking speed. The United States now exports more than $1 trillion worth of goods and services each year. Leading exports include industrial machinery, computers, aircraft, electronic equipment, and chemicals” (Page 126). The industry lines of trade are increasingly becoming more blurred as the consumer market moves online in order to reach a wider audience. There are treaties in place for trade and laws in place regarding trade taxes so why is the protection of intellectual property hard to enforce and why are laws slow to catch up to the technology in place for ecommerce?

Rule of law

There are several precedents set regarding one of the issues brought up in my questions- copyright and trademark infringement. It seems commonplace now especially in the fashion industry where there are thousands upon thousands of counterfeits on the black market. The factories making them seem hard to punish because when one shuts down, another one pops up somewhere else to take its place. “Although authors still routinely place the copyright symbol (©) on their works, such a precaution is not necessary in the United States. However, some lawyers still recommend using the copyright symbol because other countries recognize it. Also, the penalties for intentional copyright infringement are heavier than for unintentional violations, and the presence of a copyright notice is evidence that the infringer's actions were intentional” (Page 506).  It is vital for a large brand to protect itself internationally against design thieves especially since it is quite prevalent in large countries like China where intellectual property is not as upheld as it is in the European Union or United States.

It is interesting to note the affect that the internet is having in creating more opportunities for infringement and pirating to happen. “Once again, the Internet is challenging intellectual property laws that were not conceived with this technology in mind” (Page 511). There is a continuing grey line as to where the responsibility lies in the seeking of damages regarding copyright infringement. In 2011, a precedent was set regarding third party liability among internet piracy. The case, Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 658 F.3d 936 (9th Cir. 2011), intended to prove that an internet server was liable for damages because they willfully allowed web domains from China sell counterfeit Louis Vuitton goods. Lawyers representing Louis Vuitton sent those owning the server eighteen notices regarding the infringement but they went unheeded. The courts eventually found in the luxury brands favor stating:

“First, with regard to the contributory trademark infringement claim, the Court noted that “websites are not ethereal; while they exist, virtually, in cyberspace, they would not exist at all without physical roots in servers and internet services. . . . Appellants had direct control over the ‘master switch’ that kept websites online and available.” Therefore, the servers themselves, as distinct from the infringing websites, were a “means of infringement” under federal trademark law. Second, with regard to both claims, the Court held that defendants' assertion, that "contribution to infringement must be intentional for liability to arise", was without merit. Rather, proof that defendants had actual or constructive knowledge that the users of their services were engaging in infringements or knowingly failed to prevent infringing actions is sufficient. Third, with regard to the contributory copyright infringement claim, the Court maintained that, as is the case with trademark law, "intent may be imputed" because of the knowing failure to prevent infringement and “there is no question that providing direct infringers with server space” constitutes a material contribution to direct infringement because this "substantially assists" direct infringement”               (http://www.fashionapparellawblog.com/2012/01/articles/fashion-cases/louis-vuitton-sets-a- new-standard-in-federal-trademark-and-copyright-law/).

This shows that the laws are catching up to the ever evolving technology making it easier for intellectual piracy. In the end, this may not stop all counterfeits hitting the black market, but it sends a clear message. Intellectual property is valuable and worth protecting. Big brands such as Louis Vuitton will go through extensive measures to attack any kind of infringement upon their designs and trademark.  

Reasoning of the Law

Interview with Brian Chau (Commentary in Italics)

1.  How important is it for a company to develop brand recognition through trademark?
Depends on the industry. Trademarks are important where there is little customer recognition of the merits of your product or where you have a large number of competitors. For example, Coca-cola's trademark is far more valuable than Apple's trademark because Apple's products can themselves, while Coca-cola's can't.

He explains the importance of trademarking especially when the market is saturated with similar products. I thought he gave a great example with Coca-Cola. There are plenty of other colas in the market and through a trademark, Coca Cola was able to create a lifestyle image around the product. As they became better known, it was that much more important to register their trademark to ensure other would not infringe upon what the company built. “A trademark is any combination of words and symbols that a business uses to identify its products or services and distinguish them from others” (Page 509). Even though there are plenty of fizzy drinks on the market, the brand logo distinguishes it from others similar products.

2.  Why is it necessary for companies in the fashion industry to protect their product through trademark registration?
You get trademark protection automatically, but trademark registration gives you benefits you would have on top of common-law trademark protection, such as presumed notice by infringers,
cross-jurisdictional enforcement, etc. Given the ease of copying in the fashion industry, it's important to have all means available to stop infringers.

Brian brings up an interesting point here. Under common law, the first person to use a mark in trade owns it. Registration under the federal Lanham Act is not necessary. However, registration has several advantages:

·         Even if a mark has been used in only one or two states, registration makes it valid nationally.

 

·         Registration notifies the public that a mark is in use, which is helpful because anyone who applies for registration first searches the Public Register to ensure that no one else has rights to the mark.

·         The holder of a registered trademark generally has the right to use it as an Internet domain name. (Page 509)

It is interesting to note that there is protection of a brand mark regardless of federally registering it or not. I agree that it is probably in the brands best interest to trademark the logo because it is very easy to steal and replicate designs. One can see this just by typing “fake Louis Vuitton” into a Google search.

3.   If I make a design that unbeknownst to me is a reasonable facsimile of someone else's design, what legal recourses will the offended party take against me?
This is both a copyright and trademark issue. Copyright may not apply if you can show that you independently designed it, without access or copying another's design. Trademarks on the other hand, they can demonstrate that if a potential customer would be confused by your design and think that the object came from the original designer, then they may be able to sue for passing off (unregistered) or trademark infringement (registered). They can either sue for an injunction (stop using it) or damages (payment).

Brian’s standpoint on copyrights are interesting. I think it would be difficult to prove you did NOT access another designer’s design for the sole issue that the designs looks similar enough to bring before a court. “The holder of a copyright owns the particular expression of an idea, but not the underlying idea or method of operation” (Page 506). It is very difficult for brands to go after copyright pirates and seek damages. We can see this by the amount of counterfeits there are out in the market now.

4.   In your opinion, can it be argued that the common practice of copying new fashion designs in affect forces designers to come up with fresh new ideas?
That's one side of the argument. The other side is that fashion designers invest significant resources in developing their ideas and no one would create if it would be immediately stolen by a third party.

I have to agree with both arguments. Yes, it does force designers to come up with the newest greatest ideas, but on the other hand, these designers are investing time, money, and effort into creating a tangible form of their artistic expression. This is why it is important to have copyright laws in effect to at the very least, dissuade others from stealing a designer’s work.

5.   When in the startup of a business is it advisable to trademark your brand?
You can either do it before you use it as a proposed use, or after you start using it. It depends on the type of business, how important the trademark is going to be, and the strength of the trademark. If it's
really distinctive, it's easier to apply for a trademark; if it's not, it's really hard to get one without showing that customers know your mark in the marketplace.

I believe it also depends on the strength of the brand. I don’t see a use in spending the money to trademark a logo if they are not even big enough for anyone to care about. Brian speaks about the strength of the trademark which might be hard to figure out. It really depends on the trajectory of the brand itself and whether the owners see it exploding into a well-known brand.

6.   How long does it take for an application for a fashion trademark to be approved?
Depends - if it doesn't get opposed by a third party, likely in 4-8 months (in Canada). If it becomes opposed or the examiner thinks it is unacceptable, it can be much longer.

7.   How long do fashion trademarks last?
Trademarks have no set expiry date; but if you don't use it, it is vulnerable to an expungement action from a third party to get rid of it.

Perhaps this is different in Canada, but according to the textbook, “Initially, the trademark is valid for 10 years, but the owner can renew it for an unlimited number of 10-year terms long as the mark is still in use” (Page 509). It really depends on the strength of the brand and whether it has become well-known in the 10 years it has been in use. If after 10 years, it is still obscure, then I agree someone else should be able to use the logo without fear of infringement.

8.   Are fashion trademark rights transferable?
In Canada, yes. I think there are some restrictions in the US, but I'm not sure what they are.

9.  When starting a business, should I license my company as LLC or INC?
This is not my area of expertise; I can't help since my work is primarily in the

10.  What are the legal advantages and disadvantages of a sole proprietorship?
This is something you can probably google, but off the top of my head, the advantages are simplicity and ease of creation, disadvantages are no liability protection, tax disadvantages and inability to persist after the death of the sole proprietor.

The Questions

1.       How important is it for a company to develop brand recognition through trademark?

2.       Why is it necessary for companies in the fashion industry to protect their product through trademark registration?

3.       If I make a design that unbeknownst to me is a reasonable facsimile of someone else's design, what legal recourses will the offended party take against me?

4.       In your opinion, can it be argued that the common practice of copying new fashion designs in affect forces designers to come up with fresh new ideas?

5.       When in the startup of a business is it advisable to trademark your brand?

6.       How long does it take for an application for a fashion trademark to be approved?

7.       How long do fashion trademarks last?

8.       Are fashion trademark rights transferable?

9.       When starting a business, should I license my company as LLC or INC?

10.   What are the legal advantages and disadvantages of a sole proprietorship?


These questions are of interest to me because these are pertinent issues we have to face once we decide to become small business owners. “For much of history, land was the most valuable form of property. It was the primary source of wealth and social status. Today, intellectual property is a major source of wealth. New ideas—for manufacturing processes, computer programs, medicines, books—bring both affluence and influence” (Pg. 502). The protection of our intellectual property is one we should look carefully on and research upon embarking on creating our own brand. “The high cost of developing intellectual property, combined with the low cost of reproducing it, makes it particularly vulnerable to theft” (Pg. 502). As designers and professionals in the fashion industry, I believe many of us feel we have ideas and designs that are unique and worthy of exploration by perhaps leveraging it to start our own business or land a lucrative position in a large company. But what if someone were to steal our designs or unique ideas? We must know the law to see where we can be protected. We are fortunate to live in the United States where there is a high value in intellectual property so there are laws to protect it. “Some commentators suggest that the United States has been a technological leader partly because its laws have always provided strong protection for intellectual property” (Pg.502). Brian is from Canada and expresses there are very similar laws governing intellectual property in his country as well. Because of the Madrid Agreement, there are some 92 countries that recognize another participating country’s trademarks. This international agreements make it easier for a company to protect its brand because there are less complicated steps to take. The internet also makes commerce a global stage and with many company doing e-commerce, it is incredibly important to protect your brand internationally.

 I also asked questions on the most advisable way to structure a business, as an LLC or S class. As I continued to read the chapter, I started to understand it is probably most advisable to obtain an LLC structure because of the easier tax filing and less financial risk in terms of bankruptcy. “Members are not personally liable for the debts of the company. They risk only their investment, as if they were shareholders of a corporation” (Pg 377). Capital and investment in building a business is enough to risk. I would rather not risk losing my personal assets as well if the business does not succeed and I need to file for bankruptcy.