Many small business owners wrestle with the decision of whether to register a trademark or service mark with the United States Patent and Trademark Office (USPTO). Regardless of what is preventing you from pursuing a federal trademark registration, a recently filed lawsuit against Starbucks is a good reminder of why this decision should be a no brainer.
If you are not a regular customer of Starbucks, you may not know about the “Unicorn Frappuccino®,”* a multicolored concoction that magically changes flavor and color, which was sold for only four days in April 2017. And if you do not live in Brooklyn (or anywhere near New York City) you probably do not know about The End, a small café that started selling its colorful, and allegedly healthy, “Unicorn Latte,” in December 2016. As you will see, The End’s decision to file a trademark application months before Starbucks started using the same mystical creatures’ name may turn out to be the best business decision it ever made.
While the right to exclusive use of a trademark or service mark depends on many factors, priority of use is a fundamental principle in trademark law. Generally, the exclusive right to use a mark goes to the first person to use it in connection with a good or service. Under common law, these exclusive rights are limited to the geographic market in which the user has priority. Thus, when similar marks are used by different entities in geographically remote markets, say New York City and Seattle, each user will have the exclusive right to use its mark in its respective market. By contrast, the owner of a federal trademark registration, subject to some exceptions, is deemed to have nationwide priority as of the application date, and, therefore, the exclusive right to use the mark in every market in the United States. How’s that for some magic? Here is how it works:
In December 2016, when The End started using “Unicorn Latte” to sell colorful beverages, it acquired the exclusive, common law right to use its mark. This right, however, would have been limited in geographic scope and probably would not have extended far beyond Brooklyn. At best, this means no unicorn-themed drinks for Starbucks in New York City. But the Unicorn Latte had such a successful launch, The End decided to file an application with the USPTO to register its mark in January 2017. This was a wise decision and may be the linchpin in The End’s lawsuit against Starbucks.
Though federal registration is not necessary to protect or enforce trademark rights, it confers significant benefits. These include, among other things, nationwide priority, blocking counterfeit goods at the border, and statutory and, in some instances, enhanced damages. As mentioned above, nationwide priority means the filing of an application constitutes constructive use of the mark in every market in the country. Thus, upon registration, The End will be deemed to have priority, nationwide, as of January 2017. This is critical for The End since it filed its application three months before Starbucks started using the arguably confusing unicorn mark for its colorful drinks. Without having filed the application, The End would be left with the limited scope of its common law rights in the New York City market and Starbucks would have been free to use the unicorn mark in every other market in the United States. Instead, presuming the USPTO issues a registration and The End can prevail at trial, it may be entitled to substantial financial compensation, including treble damages and attorneys’ fees if Starbucks willingly infringed the unicorn mark.
The cost of engaging counsel and applying for a trademark registration may seem daunting to some small business owners, but The End’s story exemplifies that an ounce of prevention may truly be worth a pound of cure, especially when it involves protecting and enforcing trademark rights.
If you have any questions about this post or registering your trademark, feel free to contact me at (804) 447-7621 or email@example.com.
* Starbucks has a federal trademark registration, but it is just for the word mark FRAPPUCINNO. U.S. Reg. No. 3,535,367.
This post is for educational and informational purposes only. It is not intended to be a solicitation or legal advice, and is not intended to either create or constitute an attorney-client relationship. Readers are advised to seek counsel for legal advice.