Establishing Trademark rights is arguably the most important aspect of starting an online brand. Your trademark is your identity. Even if someone sells the same product as you, let’s say an Avocado slicer, even if it came from the exact same factory, it’s not the same. Your trademark gives that Avocado slicer uniqueness.
Trademark rights are also important because one could argue that it represents the value of your business. That’s because a Trademark isn’t just the brand, but the goodwill of your business. For those of you who don’t know what Goodwill is let me try to quickly explain. Some would say simply that Goodwill is your brand’s reputation. However, I would argue it’s a little more nuanced. To me Goodwill is more like the je ne sais quoi a business that is developed over time. In financial terms, Goodwill is often the reason why one would pay above book value for a company. In the context of Amazon you can get a sense of goodwill by looking at the reviews, the velocity of sales. All of these metrics that make a listing valuable really pertain to the goodwill of a company.
But what does Goodwill have to do with trademark. A lot actually. You see, a trademark cannot exist without its corresponding goodwill. This is because we don’t want trademarks to end up like domain squatting, where someone can just park a cool name in the hopes that one day someone will want to use it. That’s why, in order to establish trademark rights, you have to show the trademark office you are actively using the brand in commerce or intend to in a relatively short period of time.
Now, why am I mentioning this? Now that you understand what Goodwill is, let’s look at it form the perspective of selling a business. When you sell your business, one of the schedules we have to prepare is a determination of how the purchase price is allocated to different asset classes. . With respect to eCommerce companies, materially all of the valuation is often allocated to the Trademark and Goodwill.
So, knowing now that the trademark rights you intend to establish today is likely going to be what drives the value of your company tomorrow, you can see why it is important to take your trademark rights seriously from the start.
The other reason to care about your trademark rights is because you don’t want to find out later on that you might not have those rights. Amazon sellers especially, often rush to file for a trademark so they can turn on their A+ content via brand registry (enforcement only comes once the mark is registered/approved). This means the business owner will think of a name, file for a trademark, manufacturer a bunch of stuff and start selling on Amazon.
The problem is what happens if the trademark doesn’t get approved? First, your brand registry rights will be revoked, A+ content will cease. Further, you will never have an exclusive right to sell on that listing. Even worse, all of the energy, time and effort you put into building that listing generating sales velocity, obtaining reviews, will essentially be for nothing. And that’s assuming that you weren’t also infringing on someone else’s mark, a common reason (likelihood of confusion) why the trademark office will deny a trademark.
With that said there is a simple solution. Do your homework. First, you need to understand that trademark rights in the United States are common law. Common law means that t’s not necessarily about when you filed for the trademark, it’s when the mark was first used in commerce. For example, say you want to apply for a trademark XYZ Pianos in 2024. You search the USPTO website and see nothing that even comes close to your trademark. You feel confident so you go ahead and apply.
Then, just as Trademark is about to be approved, suddenly a company called XYZ files an opposition stating that their website (XYZpianos.net) has been in existence since 2021. So, even though the Piano company didn’t register their trademark, they can establish they have a prior right to use the mark based on the fact that they started using the mark before you did.
Now add to this situation the following: You invested $50,000 in XYZ piano inventory to sell on Amazon. Now XYZ piano from 2021 is threatening to sue you if you don’t stop immediately. All of those listings you had built up, designed, established with lots of genuine positive reviews, all goes to waste.
So how could this be avoided. While you can never fully avoid the possibility that there is prior use out there, more comprehensive searching helps mitigate the risk. For our law firm, we use a third-party service that researches the mark, not just based on what’s on the USPTO website, but everything it can find on the web about that mark, or anything potentially close. And while yes it does cost more, seeing the amount of money and legal headache such a search can prevent, it’s hard to say it’s not worth it.
