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Businesses looking to start a crowdfunding campaign to launch a new product should protect their brand with a federal trademark registration, attorneys at Gerben Law Firm write. They discuss the steps businesses should take before filing trademark applications and how they can protect their marks during the campaign.
By Josh Gerben and Eric Perrott
Josh Gerben is the founder of Gerben Law Firm PLLC, a trademark law firm that has secured over 4,000 federal trademark registrations for clients since 2008. Eric Perrott is a trademark attorney with Gerben Law Firm. Josh and Eric have worked on trademark matters for clients ranging from startups to multinational corporations. They can be reached at email@example.com and firstname.lastname@example.org.
When crowdfunding a new product or service, a strong brand and savvy marketing can transform an otherwise lackluster campaign into a huge influx of capital for a company. Shrewd business owners know that they need to protect those brands from copycats, infringers and look-alikes, and that they should do it as soon as possible . However, when simultaneously launching and financing a brand through crowdfunding websites like Kickstarter and Indiegogo, there are dozens of pitfalls that could be potentially disastrous for the brand’s success. Thankfully, by taking a few preventative steps before an issue arises, business owners can concentrate on meeting their campaign’s “stretch goals” instead of worrying about their trademarks.
As most startups find out, one of the hardest parts about launching a new product or service is funding. You may have a revolutionary idea or even just something to make a small part of someone’s life better. But if you don’t have people with money backing you, then your good ideas may remain just that—ideas. In the old days, you needed a few big, wealthy investors to back your project. But now with crowdfunding websites, a new project can get the financial backing of thousands of contributors, each paying a small amount to fund a product that they believe in.
Crowdfunding has successfully launched thousands of brands, such as: HUDWAY (a glass navigation device); TICWATCH (a smartwatch); Exploding Kittens (a card game); Bragi (headphones); Dwarven Forge (game pieces); and OUYA (video game hardware).
You’ll notice that all of the brands above have something in common in addition to their crowdfunding success: each of the business owners registered their trademarks. However, we’ve noticed that the vast majority of crowdsourced brands don’t apply for a trademark and essentially “roll the dice” in selecting and investing in a name. Suffice it to say that the risks associated with this kind of gamble far outweigh any possible cost savings! Here are the steps that you can take as a business owner to understand the risks of using a trademark in the marketplace and the benefits of filling to reserve rights in that trademark as early as possible.
Deciding on a name for a new brand or new product is hard. It should be memorable, but not too over the top or abstract. It should play in your particular marketplace but shouldn’t be too niche. There are a lot of marketing considerations to keep in mind, but once you find that perfect name, it’s a huge relief. However, before your business launches its crowdfunding campaign, you should consider the implications of using that trademark. If you don’t, you could be investing a significant amount of marketing capital into a brand that you either won’t be able to protect in the future or that is already in use by someone else.
Before an entrepreneur launches a crowdfunded campaign, there are two main trademark considerations:
A trademark only exists if it is distinctive, meaning that it isn’t merely descriptive of the product or, worse, the generic designation for that product. For example, the company that launched the wildly popular “Fidget Cube” campaign on Kickstarter raised more than 6 million dollars. But when they tried to apply for a “Fidget Cube” trademark with the U.S. Patent and Trademark Office, the USPTO issued a final refusal. It said that “fidget cube” is “merely descriptive” of a type of fidget device and therefore, doesn’t represent one company exclusively.
Can and do these types of descriptive trademarks ever become legitimate trademarks? Yes, but only after extensive marketing, advertising, market penetration, and other efforts to make consumers associate the descriptive phrase with one single company. Brands like American Airlines and National Rent-A-Car are examples of descriptive trademarks that are now recognized and protected by federal trademark law.
The strongest trademarks (and also the most likely to gain USPTO approval) are arbitrary and have no connection with the product, like crowdfunded darling EXPLODING KITTENS, or fanciful/made-up words like BRAGI for wireless headphones. However, they can also be the hardest to market because consumers won’t have a prior connection to the word or phrase. Suggestive trademarks still have some connection to the product but require consumers to take an additional step. For example, Dwarven Forge hints at something to do with the fantasy genre and suggests that the products might be heated and hammered in a forge. But the mark requires the consumer to take an extra leap in logic to arrive at “game pieces.”
Once you’ve determined the distinctiveness of your trademark, the next step is to analyze whether another company or individual is using a confusingly similar trademark for related goods or services. If someone else is already using a similar mark, then the senior user of the mark may enforce its rights against a junior user to prevent a likelihood of confusion.
Most business owners will do a quick search of the USPTO website and the internet for evidence of existing uses of the trademark in which they are interested. But in most cases, these kinds of searches are simply not thorough enough.
There are many factors that go into determining risk level, but primarily a likelihood of confusion occurs when two trademarks are similar in sight, sound, or meaning (or general commercial impression) for the same or related goods or services. So, for example, EXPLOSIVE CATS for a card game would likely be confusingly similar to EXPLODING KITTENS, even though they don’t share any of the exact same words. KICKSTARTER and KEEKSTARER for crowdfunding services would also likely be confusingly similar.
It is important to analyze whether the goods and services are related. KICKSTARTER for engine oil may be able to coexist with KICKSTARTER for crowdfunding, because the two are simply not related and, in context, share very different commercial impressions. But analyzing whether goods and services are related is not always as obvious as it may initially seem. For example, hotels and restaurants are generally considered related by the USPTO because hotels typically have restaurants in them. And wine and cheese have been considered related because they are complementary to each other when used.
Experienced trademark attorneys can help analyze this risk level and many offer attorney opinion letters and risk assessments as a part of their practices. Whether your business hires a professional or seeks to analyze the risk on your own, it is important to consider the wide range of factors to determine whether a trademark is protectable and whether using the word or phrase would open you up to potential legal liability.
Once you’ve assessed your level of risk, then you should consider filing an intent to use application with the USPTO in order to reserve rights before you launch your business’ crowdfunding campaign.
One of the cornerstones of U.S. trademark law is that, for a trademark to exist, it must be in use in the U.S. That seems simple, but in reality, the use requirement can be tricky. Preparing to sell a product is not the same as selling a product. A company can do all of its pre-launch marketing and even have pre-sales and still not qualify for “use” under U.S. trademark law. A company can launch its Kickstarter campaign and, halfway through, raise millions of dollars and still not establish use under the law.
So how does a business owner stop others from sneaking in at the last moment and establishing trademark rights in a word or phrase that has been in development by the business owner for months, or sometimes even years?
The USPTO allows business owners to file a trademark application under an “intent to use” basis, meaning that you have concrete plans to use the trademark in the future in the U.S. and wish to reserve rights while you establish use.
When an intent to use application is filed, the USPTO will treat it like any other application: perform its examination and either refuse or accept the application for registration. Once the application is accepted for registration, you will have up to three years to prove use. However, you must be aware of deadlines—every six months an extension must be filed until you can submit proof you have begun to use the mark, or you can lose your early filing date. Also, if you file your “proof of use” too early, the resulting application could be void.
Crowdfunding has democratized startup funding and allowed for new products that wouldn’t otherwise have been able to get the capital to launch in the marketplace. However, with each new product, there are considerations that every business owner should make before launching a crowdsourced campaign. Realize that federal trademark registration of your product or your brand must be a priority. First, determine if the word or phrase you are considering using is capable of gaining trademark protection. Next, determine if another company or individual is already using a confusingly similar brand name in your industry.
And finally, work with your attorney to determine the best time to file an intent to use trademark application and follow up on necessary deadlines after your original filing. By taking these precautions, business owners can increase your chances of not only a successful crowdfunding campaign, but a long-lasting brand that will disrupt the marketplace and become a household name.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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