Category Archives: Trademark

Protecting Your Brand in an Expanding Market

What’s in a name? For many businesses, everything.

Time, money, and ingenuity combine to establish critical words, phrases, and images that not only identify a product, but attract and retain consumers. Although use of a distinctive mark in the marketplace can provide the user protection against infringement by competitors, disputes over who used a mark first are common in expanding industries where even novel branding can duplicate or mimic the branding of a competitor.

A prime example is the brewing industry. With a plethora of new breweries launching each year, not to mention the myriad of beers kegged, bottled, canned, and distributed all over the country each day, branding and protecting your brand is a challenge. Take, for example, the name “Hoptimus.” Although seemingly novel, the word “hoptimus”  identifies multiple beers from different breweries. Despite the clever use of pun, it may be difficult for any brewery who shares a common name with competitors to exclude another from the use of their creative (but shared) word without engaging in a battle of evidence over who used the word first.

The lesson to be learned from the brewing industry is to invest in researching and protecting your mark, and do it now. {See previous post: Ten Ways To Protect Your Trademark.} A comprehensive third-party search of trademark databases and more, followed by a careful legal review of your options and a federal registration filing makes sense for many new businesses and may cost less than you think. (The Karnopp Petersen eTip team can do that for a fixed fee – think “no billable hours.”) That “due diligence” can pay off in many ways, not the least of which can be avoiding a dispute down the road that forces you to rename or rebrand. And while some companies are able to charge ahead to success despite a change in name after spending time and resources developing their brand (click here for an example), such a change is disruptive and costly and worth working to avoid. Remember that, clever though your name may be, witty minds can be wired alike, and your creative name could quickly become an industry-wide term if you do not take steps to protect it.

Candy Crush (Trademark) Saga: App Company will “Sugar Crush” You for Using its Pending CANDY and SAGA Trademarks Ltd., the evil geniuses behind the highly addictive (to some) mobile, candy matching game Candy Crush Saga, has made headlines recently over its enforcement efforts for the company’s claimed trademarks, CANDY and SAGA.  King already has a registered trademark and logo for CANDY CRUSH SAGA and a slew of other marks for similarly named games.  Some observers have expressed shock and outrage over the implications of King’s pending registrations because they seem to claim ownership over relatively common words in a wide array of products beyond mobile apps or video games, including blank video cassettes, paper hats for use as clothing, amusement parks, and scriptwriting services, to name a few.  Other observers have noted that King’s enforcement efforts have put a strain on seemingly unrelated video games that use the words CANDY or SAGA in their titles.  Most notably, King has filed an opposition to Kickstarter darling Stoic Studios’ trademark application for its THE BANNER SAGA mark for Stoic’s Viking-themed, strategy role-playing game.

A review of the United States Patent and Trademark Office (“USPTO”) records shows that both King’s CANDY and SAGA trademark applications are currently pending and have not been approved.  Both applications were initially denied or partially denied by the USPTO examining attorneys that were assigned to review each mark.  The examiner found CANDY to be “confusingly similar” to another registered mark KANDY in one of King’s claimed trademark categories.  The examiner reviewing the SAGA application found it to be confusingly similar to identical already registered marks and denied the application completely.  King was able to overcome these initial denials by submitting carefully crafted responses.  The scope of the CANDY application was trimmed to satisfy the examiner’s comments.  Interestingly enough, King argued that the SAGA mark was a weak mark because so many other video games use “saga” in their titles and that its application should therefore be approved despite the similarity of its marks with other registered marks.  King’s CANDY trademark application has now been approved by the examiner, but it has not yet been registered.  The mark will be published in the Official Gazette for 30 days where it may face opposition from parties that believe registration of the mark would damage them.  SAGA on the other hand is currently suspended while awaiting proof of a foreign registration of that mark.  As mentioned above, King has already started its enforcement efforts for both marks.

Despite all of the excitement over King’s CANDY and SAGA marks, King’s trademark applications and enforcement efforts are relatively common.  King makes this point in its posted explanation of its approach to IP on its corporate site today.  Whether you see King as a “trademark bully” or a smart protector of its valuable intellectual property, we on the e-TIP team thought the story was a great way to remind our blog readers about the importance of considering infringement risk and potential barriers to registration that could arise when selecting a mark.  In our experience, getting an IP attorney on board at the early planning stages to help vet names and assess risk could avoid unnecessary expense in the future and hopefully keep you from embarking on your own Trademark Infringement Saga.

A Word to the Wise – Avoid the “Accidental Franchise”

Caution with licensing, distributorship agreements and the like can help you avoid the pitfalls of franchise law!

We like to think we know a franchise when we see one.  Among some of our favorites:  Krispy Kreme, Cold Stone Creamery, and Snap Fitness (after we’ve visited the first two).  What many fail to realize, however, is that your business relationships can create “franchises” under the law – with all the accompanying legal requirements – even though that wasn’t necessarily your plan.  Read on to avoid the “accidental franchise.”

The FTC (Federal Trade Commission) defines a “franchise” as any continuing business arrangement with the following elements:

  1. The right to use a common trademark in the operation of the business;
  2. The imposition of significant control, assistance, and/or support over the method of operating the business;
  3. The payment of a fee, including but not limited to initial fees, royalties, advertising fees, training fees, and fees for equipment.

If a business relationship has these three elements, it is a franchise – period.  That’s right, the intent of the contracting parties is irrelevant.

Why does it matter?  If a franchise relationship exists, a host of legal requirements kick in.  For example:  federal law requires that the franchisor provide a detailed franchise disclosure document to the prospective franchisee at least 14 days before signing any agreement or accepting any payment.  Some states have additional franchise laws, may require registration with a specific state agency… and more.  And failure to comply can be very costly.  For some scary examples of that cost – including a company that started out not charging a fee, but later triggered state franchise law (and ultimately a $1.5 million verdict!) by charging for some manuals – you can read more here.

As one expert puts it, the “accidental franchisor” has essentially given the franchisee a winning lottery ticket they never knew about.  The franchisee may be able to terminate the agreement, recoup amounts paid to the franchisor and additional damages, and recover any attorney fees paid along the way.  Even worse, some state laws also impose fines and categorize the sale of an unregistered franchise as a crime.  No thanks.

What types of business relationships can create “accidental franchises?”  The most common examples are trademark licensing agreements and distributorship agreements.

Trademark Licensing Agreements:  Here, you simply grant someone a license to use your trademark in the operation of their business.  You’re in business to make money, and were likely paid a fee.  Already, two franchise elements are met.  (Example:  a sports team that licenses the right to use its logo on t-shirts, and gets paid in return.)  If you go on to provide training or promotional assistance that constitutes a sufficient amount of control (e.g., you provide support in the operation of the business that sells the t-shirts), you’ve now become a franchisor!

Distributorship Agreements:  In this circumstance, you enter into an agreement with someone who will offer and sell your products for a profit, presumably using your trademark (Mary Kay cosmetics, for example).  Generally, distributorship arrangements do not constitute franchises because the definition of a “fee” is not met.  (A “fee” does not include payment for the purchase of a reasonable amount of initial and ongoing inventory at bona fide wholesale prices.  What a mouthful.)  However, once the distributor begins to sell displays, sales kits, advertising, etc. (items not intended for resale), the exception may not longer apply and the fee element may be triggered.  Finally, just as described above, some friendly marketing and training assistance could trigger the control element.  Poof . . . a franchise is born!

Maybe you want to create a franchise—even make the “Franchise 500” someday.  Good for you!  But if that’s not your plan, watch out:  franchise laws and all their requirements can apply to many business relationships that we may not think of as franchises.  In order to avoid creating an “accidental franchise,” create the business relationship so that at least one franchise element (common trademark, fee, control) is missing.   Better yet, let your lawyer watch for it!  (And always share your Krispy Kremes.  Please.)