Register Trademarks,
Domains to Avoid 'Net Confusion

by Nina C. Yablok, Esq. and Edward B. Driscoll, Jr.

As more and more businesses establish Web sites to promote their businesses, the legal issues of the World Wide Web become increasingly important. By the time you're done reading this article, you'll understand how that confusion has developed, and how to avoid losing your business's name and trademarks to an unscrupulous competitor.

A Brief Background On Trade Names

A trade name simply is any name you use for your business. Whatever name you use for you business is a trade name, whether it's Acme Widget or Joe Smith's Widget Co.

In the U.S., the general rule when it comes to trade names is that whoever uses a name in commerce first has superior rights to anyone using a confusingly similar name in the same marketplace.

Let's look at the significant concepts in the sentence above.

1. Use in Commerce--you have to use the name in commerce, not just reserve it, not just register it, not just think about it or tell your family.
2. Superior Rights--this means you can continue to use the name, and at the same time stop someone else from using it.
3. Confusingly Similar--your rights cover not only exact duplicate names, but anything that would confuse an average consumer.
4. Marketplace--traditional trade name law is marketplace specific. This relates to "confusingly similar." If you're selling widgets and someone else is selling mufflers, how confusing is a similar name going to be? But if you're both selling to the same customers (the same marketplace)--a less similar name could still be confusing.
5. No need for registration--note that the rule does not require that you register any trade name. Registering your trade name with the United States Patent and Trademark office may make it easier to prove when you used the name in commerce; and registration may give you some procedural advantages. However, registration of a trade name or trademark is not required for name protection. Your rights come from using the name, not registering it.

But here comes the Internet and domain names and--BAM--the old rules just became part of a quagmire that will have your head spinning.

Domain Names

Many companies use their company name as their domain name--but many do not. Many companies that have had non-descriptive business names, such as the owner's name, are opting for descriptive domain names so people can find them more easily online. The relative ease and lack of expense in getting a domain name, and putting up a Web site, has increased the number of domain names to millions in only a few years. Each of these domain names may infringe on an existing business name of an existing business.

Not only are there millions of new domain names on the Internet--but the definition of the marketplace (remember, a name must be confusing in a particular marketplace in order for it to be considered infringing) has expanded. In the past, a conflicting name in another state might not bother a locally-based company. Who cares if there's an American Widget Group in Ohio if you're based in California and your widget clients never come from more than 10 miles away?

However, if you hope to generate business using the Internet, having a business name like Acme Widgets in Ohio (for example), when there are businesses using the same name in 10 other states may be more name confusion then you care to tolerate. Because when someone goes an Internet search engine and looks for your company name, they will get Acme Widget companies nationwide.

Network Solutions, Inc. ('NSI'), under contract from the National Science Foundation, assigns most domain names in the United States It does so on a first come, first granted the domain name, basis. Furthermore, it only looks at exact duplicates--it doesn't do the kind of "is this confusingly similar to something already registered" analysis that the trademark office or a court would do.

NSI doesn't check your business license; it doesn't check your phone listing; it doesn't check anything. Consequently, if you asked for microsoft.com before Microsoft did, you would have gotten that domain name--in fact, many people registered the names of large companies in the early days of the Internet, even though they had nothing to do with the company who's name they registered.

NSI's system has allowed both innocent problems (two companies with very similar names having a conflict over similar domain names) as well as intentional problems (competing companies gobbling up any name that sounds even vaguely like your company name).

For example, I have a client whose competitor registered his company name as a domain name. When my client went to start up his Web site and tried to get the domain name, he was told it was taken. Since his business name has a hyphen in it, he tried to get the domain name without the hyphen; however, that also was taken by the same competitor.

By and large, NSI would like companies to sue each other in cases like this. NSI wants a court to decide who has the right to the domain name, and then NSI will obey the court order. But suing someone for trade name infringement is a long and costly process. Not only don't you want to do it--but as an attorney, I can think of a lot better ways to spend my day. However, there is one instance in which NSI actually will take some action without a court order.

Trademark Registration

Under NSI's current policy, the owner of a federal trademark registration in the United States or a registration in a foreign country may challenge use of an identical domain name. If you send NSI your trade name registration, along with proof that you asked the owner of the trade name to stop using the conflicting name, and after some additional internal procedures, NSI will put the name on hold. That means neither the original user of the domain name, nor you can use it. You still have to go to court to get a final disposition of the domain name. However, as a practical matter, once this other person has his or her Web site closed down--they are very likely to negotiate with you to release the domain name to you.

The reason why this is such a quagmire is that NSI's policy is at odds with traditional United States trade name law, in the following ways:

1. The concept of confusingly similar is absent. Only identical matches are dealt with.
2. The concept of marketplace is eliminated. This is not really NSI's problem. The Internet has erased a lot of traditional commercial boundaries.
3. Registration of a trade name will give you rights that are superior (at least in terms of putting a domain name on hold) to those of the first user. In other words, even if they were using the name long before you registered the trade name, you can still get NSI to put a hold on the name if you register before them.

What does this mean in practice? Let's look at an example. You own "American Widgets" and you've used that name for 40 years. You've never registered the trade name, which you certainly don't have to do. You've stopped a few people from using similar names. You even stopped someone from selling widgets under "America's Widgets" because it was too close to your name.

You get americanwidgets.com as your domain name. Your arch competitor, Universal Widgets goes to NSI and gets american-widgets.com, which they get because it's not identical to your domain name (although NSI's concept of identical is not always clear, and it's possible NSI might reject a name that only differs in the use of a hyphen). Because of their more creative use of search engines, they start getting more hits on american-widgets.com than you do on americanwidgets.com.

As the final insult, they decide to register American Widgets as a trade name, using their domain name as proof that they use the name in commerce. They are granted registration because the trademark office only looks at conflicting registered marks. The U.S. Trademark office doesn't care that you've been using the name for years, so long as you never registered it. Or perhaps your competitor goes to another country where they can get a trademark registration in a few days. Then, using their registration, they go to NSI and put a hold on your americanwidgets.com domain name.

The fact that you probably will be able to undo the hold by going to court and arguing the traditional "first person to use the name in commerce has superior rights ..." rule, is of small comfort to you. What should you do?

Does this mean that you should register any name you are using as a domain name? Not necessarily. But it does add an additional reason for registration. The decision will be based on several issues, including the competition in your area of commerce; the amount of time and money you're investing in both your name and your Web site; existing similar domain names; and, how much money you want to spend.

Another consideration is the fact that U.S. trademark registrations take about a year to process. The entire domain name--trade name issue is being examined by both international and U.S. groups for more efficient solutions. So you might register your trade name only to have the rules change before your registration comes through.

The cost of a trade name registration varies from attorney to attorney. Generally, the initial fees should run approximately $200-$250 plus the filing fee of $245, and perhaps a trade name search, which should run about $75-$100. However, the total fees are harder to pinpoint because the U.S. registration scheme is a "challenge" system. In other words, the Trademark Office can and will challenge your registration to try to narrow its scope, while you have to defend your right to a broad registration without any disclaimers. This will add to your initial legal fees.

The only way to really determine whether registration is worth your while is to talk to an attorney. But you've invested a lot of time, energy and money in a name for your business. If you are advertising on the Internet, the cost of a consultation should be nothing compared with the risk of losing your name on the Internet.

Edward B. Driscoll, Jr. is a marketing consultant and author of numerous books and articles on sales and marketing. Nina Yablok is a San Jose, Calif.-based attorney who specializes in representing mid-size, privately held businesses. She has developed an expertise in trademark and domain-name issues.

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