Month: May 2010

Startup Myth – First Come First Served for Domain Names

Frequently I encounter businesses seeking to protect a brand name. In discussing the actions taken to date taken, owners frequently state that they have registered the domain name corresponding to the desired brand name. Frequently, they believe that their name is “reserved” or protected because they have already successfully reserved the domain name. It is also often stated that because they were the first registrant of the domain name that they may do as they please with the domain name. Two common  incorrect beliefs include that one is entitled to operate a website with the domain name or freely sell the domain name. This is often not the case.  Just because one registers a domain first does not mean that the domain name can be lawfully used or sold. Not only does merely registering a domain name frequently confer only limited rights in the domain name or the underlying name, it is also possible that use of the registered domain name may lead to negative consequences.

The most known scenario is where one registers a domain name which is substantially a name in which another party has rights. If I (somehow) was the first registrant and operator of ibm.com, it would not be of much value. Ignoring the .com domain suffix, the relevant part of the domain name just contains the “IBM” trademark. Most people understand and agree that there could be trouble in this scenario, as IBM is a household name. However, most domain name registrants don’t realize that this scenario can occur with lesser known brand names as well. So being the first to register a lesser known domain name may place one in the same questionable situation.

A lesser known scenario is where one registers and uses a name which is similar to the name in which another party has rights. If I sought to register ibmsoftwaresolutions.com, my status as the first registrant of the domain name is again not very helpful in establishing rights in a “IBM software solutions” brand name nor in operating a similarly named website. Again this may not seem surprising using the IBM name as the context. However, as above, this scenario can occur with lesser known brand names as well.

There are times when registering a domain name may be helpful in establishing some level of rights, but being the first to register a domain name does not automatically lead to superior rights in the domain name or in the words contained in the domain name. Use of that domain name or attempted sale of the domain name can lead to loss of goodwill in the name, cease and desist letters, domain name arbitration, trademark actions, or anticybersquatting protection act claims, among possible consequences.

Top Startup Trademark Mistake – Failure to Research and Protect the Business Name

For emerging businesses, the business name is often synonymous to its branding. The business name may be used in the first product name, domain name, and advertising. A lot of time, money, and thought can be expended while creating that business name and building goodwill in it. An often overlooked aspect of this process is researching and protecting the business name when it is desirable to do so. Inexperienced business owners frequently believe that because they have formed a corporation, limited liability company, or filed an assumed name certificate with that new name that they are lawfully permitted to use the new name in their branding and that the new name is protected from use by others. This is an incorrect belief and may lead to problems in the future.

One reason why the belief is incorrect is that the standards and requirements for a state permitting a business name to be used are different than the standards for granting a trademark registration. A business may be formed for tax, legal, securities, or other many other non-branding purposes. A business name used for those purposes is not used for branding and not generally publicized and warrants a lower standard in registering that business name. Contrast that scenario with a business name which is explicitly used in advertising and in connection with sales of goods and services to consumers. To illustrate, most of the flying public thinks of American Airlines as a source for travel. However, AMR Corporation, a holding company for American Airlines is not generally recognized by the flying public.

A second reason why the belief is incorrect is that business names, product names, and other sources of brand names are not centrally stored. Brand names can be located in many different registries, or even be unregistered. Today, businesses can more easily reach out to consumers across the country (or world) thanks to the internet. A common example affecting startups is where an internet based business incorporates in one state and focuses its branding efforts in a different state. Thus, a business may incorporate in Delaware and focus its initial branding activity in Kansas. A second startup may later organize in Kansas with a similar name and product. Each business would likely have no problem registering in the respective states. In this case, there may eventually be a clash between the two companies. One of the businesses may be forced to changes its branding and/or compensate the other business for the damage to that business’ brand. For a business with limited funding, this could be a business ending mistake.

In closing, it may be prudent to perform a detailed search, submit a trademark application, and use the new business name. Such action can minimize the chances of unlawfully using another entity’s brand name and increase protection for one’s own brand name.