Entrepreneurship 101- The Risks of an Unregistered Trademark
Resources and budget often deter small businesses from getting a trademark on their branding assets. Furthermore, the process may also seem too expensive and complicated—which intimidates business owners filing their application themselves. But it all boils down to which risk is higher: Spending a bit more on a trademark or; leaving your brand unprotected. Read on to consider the risks of an unregistered trademark.
What is a trademark?
A trademark creates an intangible intellectual property right over certain aspects of a business. It offers legal protection in that it is representative of ownership of names, logos, sounds and even specific colors associated with a business. The impact of trademarking your business can be gauged by the fact that certain brand names like Pampers and Band-Aid have been so commonly used that they’ve become a way to refer to the generic product itself (diapers and adhesive bandages).
Risks of not getting a registered trademark
- Loss of market share
Setting up a business is expensive and time-consuming. At the outset, most startups do not have a lot of capital to spare, and getting a registered trademark might seem like a luxury. However, what entrepreneurs often fail to consider is that customers tend to form positive associations with brands. Perhaps the biggest risk an unregistered trademark is that another company can register a similar trademark and put a halt to your business. Trademarking ensures that the uniqueness of the brand is preserved and prevents copycats from stealthily stealing market share. Being caught in such a situation will make a business vulnerable to unnecessary litigation, damages, or an order to recall products and stop selling in a particular region.
- Loss of Consumer Confidence
If competitive parasitic businesses manage to forcibly steal your name and start selling under it, it will not only lead to loss of profits but also a loss of consumer confidence. It takes years to build up a loyal consumer base, and only seconds to destroy it. If a competitor starts selling substandard products (similar to yours) under your name, it will lead to a sharp decline in consumer satisfaction. In the digital world, word travels fast. A couple of bad reviews may be all that it takes for your customers to start scrambling for alternatives.
- No legal recourse
You could potentially be forced to rebrand and overhaul your business just because someone registered your business logo or name before you did. In such a situation, having a trademark would have guaranteed legal recourse upon breach of the trademark. The breach of a registered trademark gives rise to a right of action in Federal Court because the registration of a trademark is accompanied by the legal presumption that only the business to which it is registered can use it.
- Loss of Investor Confidence
A registered trademark can prove to be a great asset to the business because better security drives growth; it boosts investor confidence and attracts better business partners. When and if a business needs to be sold, it adds value to the sale price of the business as buyers are more likely to be interested in purchasing businesses that are well protected.
Does my small business/side hustle really need a trademark?
Despite the several disadvantages of an unregistered trademark, it is worth mentioning that if you have a small business that operates only in one state, then you might not need a registered trademark as desperately as businesses which operate across state lines do. This is because by virtue of being granted a business license, nobody else can use your business name. However, even such businesses can potentially benefit from trademarking. This is because, when and if they choose to expand their business across one state, they already have the right to use the same name that they’ve been using.
How do I register a trademark?
The US Patent Trademark Office (USPTO) website contains information regarding all currently registered trademarks. Their electronic search feature allows you to look through their database to ensure that the trademark you’re trying to register has not already been taken by another business. If available, you can apply for registration of your trademark by completing an online application. The processing time for the application is around 6 months. Once the trademark is granted, you have public ownership of your name/logo/design etc. across the nation. From here on out, the trademark registration only needs to be renewed once every few years.
What makes a good trademark?
To make sure that your trademark registration is not rejected, it is best to stay away from generic names, names/logos that look or sound familiar to pre-existing trademarks, and names or logos that suggest obscenity.
Keeping all of these factors in mind, it becomes obvious that the initial cost incurred at registration is well worth it. In fact, it is minuscule in comparison to the cost of litigation or damages. Thousands of businesses lose trademark rights each year. The registration process might initially seem daunting and overly technical, which is why it might even be advisable to hire professional help. There are plenty of competent law firms that can help streamline the process for you.