You could still lose your business even with a business name registration!
Are you dreaming of the day when your business becomes a reality? According to the Kauffman report, entrepreneurship has been on the rise of 84% since 2017. The rise on entrepreneurship. So you decide to join the race and take the first step of having your business registered. This includes conducting a search of your business name to make sure no one else has registered that business name within your state. Search is clear, you pay the necessary individual state filing fee and shortly after you receive your state registration for your business.
A year after successfully promoting your business, through a website, buying domain names, brochures, and commercials, you receive a “Cease and Desist” letter stating that you are infringing upon another’s trademark name. The letter states you are using their trademark name which also happens to be your business name to cause consumer confusion and capitalize from their goodwill. Believing this has to be a mistake, you contact an Intellectual Property attorney who proceeds to inform you that this is not only possible but could be detrimental to your business.
Registering a business only protects you within that specific state
A business registration allows for one to register a business in your state only. In other words, you could have XYZ, INC. In New York and XYZ, INC in Wisconsin. The reason you want to register your business is to protect your personal and tax liability. It is important to register your business in the state where you will be conducting the majority of your business transactions to ensure that you are in compliance with your state regulations. SBA’s Business Name Registration page has more information about the process, plus links to the registration authorities in each state.
A trademark protects more than just a business name
A trademark protects the value and goodwill of the brand in the marketplace. A slogan, business name, and logo may all be protected by a federally registered Trademark. Trademarks, unlike a business registration, are nationally recognized. Once you receive a federally registered trademark you have the exclusive right of stopping another company or individual within the U.S. from using your name to sell the same goods and services to the public, regardless of successfully registering a business with their state. With a trademark, unlike with a business registration, you can control the message of the company and ensure the quality of the products that you are selling. This is why companies such as “Fendi” and “Burberry” use a trademark to signal to consumers that any product bearing their trademark name is of the highest quality.
In the example above, because the business owner failed to secure a trademark for their business name another company has beaten them to it and has demanded they stop using their business name immediately. Now the business owner will have to make costly and drastic changes such as rebranding, buying new marketing materials, etc. to not infringe upon the trademark. Had this business owner spoken to an Intellectual Property attorney, he could have been advised as to the pitfall of only having a business registration to protect one’s business but also securing a trademark to protect one’s intellectual property. If you find yourself in this position, all is not lost, a good intellectual property attorney can help you find other options for both companies to exist amicably.
Businesses should leverage every asset available to be competitive in the marketplace and it starts with a trademark.