Trade Names and Trademarks and Why Your Business Should Know The Difference

“I’ve already registered my trade name, I don’t need to register my trademark…”  These words, or similar ones, are something I hear often from small business owners.   While the two terms may sound similar, they are definitely not the same thing legally and confusing or ignoring the difference could set your business up for bigger (and far more costly) problems down the road.

What’s In A (Trade) Name?

A trade name (also sometimes known as a “d/b/a”, a fictitious name, or an assumed name) is simply the official name you have chosen to call your business.  Trade names usually come up in the case of sole proprietors (and sometimes informal partners) who prefer to market and operate their business using a name other than their own personal ones.

For example, Jane Smith owns a small bakery she operates as a sole proprietorship but sells to the public as “Jane’s Cupcakes”.  In this case, the trade name would be “Jane’s Cupcakes”.

Trade names and the laws governing them are controlled entirely at the State level.  Typically, States want to be able to identify and collect tax revenue from the individual or individuals behind the trade name.  For most businesses here in Arizona, the actual registration to conduct business is handled by way of the application for a Transaction Privilege Tax number.  As a result, there is no actual legal requirement to register your trade name in Arizona.  However, for those that would like to, the process is relatively inexpensive and straightforward and is handled through the Arizona Secretary of State’s Office.

But as the AZSOS website helpfully points out, “A trade name does not grant exclusive rights to a business name, nor is a trade name similar to a corporation or limited liability company (“LLC”).”  In other words, even if Jane registered her trade name, there is nothing that prevents another person from opening up a different “Jane’s Cupcakes” (practically speaking, the integrated AZSOS and Arizona Corporation Commission databases would probably “red-flag” and reject such a successive attempt to register a “Jane’s Cupcakes” by someone other than Jane, though I am not sure if this is the case in other States).  This brings us to the subject of trademarks.

What Is A Trademark?

A trademark is a particular word, phrase, symbol, design, or any combination these, that serve to identify and distinguish your business’ products or services from those of another.   Thus, while a trade name deals only with the name of the business itself, a business could assert trademark rights in not only its name, but in a logo, slogan, specific product or service names, and even the visual look of its products or its stores (with certain exceptions, which we’ll talk about in a later blog post).

For example, Jane might have a logo she has been using in connection with her baking services, or perhaps she has a particular specialty cupcake, the “Carb Bomb”, that is far and away her biggest seller.   Jane could apply to register that logo or the Carb Bomb as her trademarks in order to protect the goodwill she has built up with that logo and that product, respectively.  Doing so serves to put the public (and, more importantly, any competitors) on notice of her usage of these marks, her rights in the properties, and legally protects her right to use such trademarks exclusively.

When it comes to registration, Jane can register her marks at the State level (most states have mechanisms for local businesses to register their trademarks, usually for a modest fee and even more modest effort) or at the Federal level through the United States Patent and Trademark Office, or she can do both.

While the requirements are far more complex, and process more involved, Federal registration of a mark is far and away the most useful and prized by trademark owners (and their attorneys) because it grants the owner the exclusive right to use the registered mark on a nationwide (as opposed to just within the State) basis in connection with the goods or services listed in the registration.   By registering her marks with the USPTO, Jane guarantees herself the right to exclusive use of the marks, establishes legally that her marks are not already being used by another, and gives herself the ability to sue an infringer of her trademarks in Federal court for statutory damages and, under certain circumstances, her attorney’s fees.

The Bottom Line

At a minimum, we always recommend registering your marks at the State level, at least as a stop-gap measure until the process of Federal registration (which can take up to a year or more) can be completed.

However, if your business currently sells (or even just plans to sell) its goods or services across state lines or online or internationally, then Federal registration of your trademark or trademarks is something which should be seriously considered.

Relying strictly on your trade name, and not taking steps to obtain full protection of your valuable trademark rights, can leave your business vulnerable to customer confusion, lost sales, and damaged reputation from competitors and other third-parties co-opting or trading off of your brand’s reputation and goodwill for their own financial gain.

Ben Bhandhusavee is the Managing Attorney for BhandLaw, PLLC, a Phoenix business and technology law firm focused on creative intellectual property, Internet and digital media matters, and complex corporate M&A and technology transactions.  Ben can be reached at (602) 678-2970 or by e-mail at bbhand@bhandlaw.com