Last week, I discussed equitable remedies in breach of contract situations. I would like to shift gears for a while and do some information specifically aimed at startups, as this upcoming weekend is Startup Weekend Honolulu at the Box Jelly, coworking space. If you have not signed up, you can check out the info here, and recommend trying it once as it is a very unique experience and you meet a lot of people. My goal with the next month’s worth of posts is to deal with frequent misconceptions by people who are starting up their business.
Anyway, this post and the next one is aimed and clearing up some of the notions about the various “trade” legal aspects. Namely, I will be discussing the difference between trade names and trademarks, and what is a trade secret. I frequently run across clients and people who are very confused when they first start out their business and it is crucial for your legal protection of your business that you get the differences.
Trade Name vs. Trademark: Explaining the Difference
A trade name is NOT the same as a trademark. While, both are definitely a part of trade and business they both operate and serve different roles. Let’s use an example to walk through the way these two legal concepts are different.
Let’s say Mr. Joey Nakamura wants to sell his specialty brand of shave ice. Let’s say Mr. Nakamura ignores my very first Draw the Law post, and does not want to create some kind of business structure with limited liability. Therefore, he is a sole proprietor, but he does not want to sell his specialty brand of shave ice under his personal name. So he registers a trade name and does business as JN Specialty Shave Ice. This is his trade name.
While, developing his shave ice Joey then decides to create several unique flavors that are his signature products. So he creates the Joey Jabuticaba and Nakamura Nectarine and begins packaging and labeling the bottled flavors as such. These products in the marketing world are his brand names, which are advertising and marketing terms, but in the legal world these are his trademarks.
Thus the difference is a trade name functions to identify the particular business, and for a lot of people they know this as “doing business as”, but the concept actually includes corporate, llc, partnership, and fictitious names. It is simply the name you are using to identify your business.
Trademarks, are any words, names, symbols, or devices (or a combination of those things) that are used to identify and distinguish your goods from those of others and to indicate the source of the goods (or services for service marks), even if the source is unknown.
Where the Confusion Comes In
Why do people mix these two up? Well, it is very easy because many businesses use their name to identify their goods and services, for instance here in Hawaii, “American Savings Bank” and “Hawaiian Airlines” both are a trade name and trademark. Your name can function both as a trade name and as a trademark, so long as it does not infringe on the rights of another. Furthermore, a single business can own dozens of different trademarks to identify their various brands.
Why is the Distinction is Important?
Well, for some starting businesses they start out and register a business, then want to use another name. Therefore they register a trade name thinking they are protected from trademark infringement. As shown above, they are different and function so. Further, when you start using your trade name you may be giving rise to trademark infringement on your part. That’s right your name may be causing confusion in the marketplace because it may exist as someone else’s registered trademark. At that point you would have to get a new name, which as experienced marketers will tell you is a blow to your marketing strategy and will force a costly re-branding.
So be careful when choosing your business name and be careful on how you market your product or service. See you next week, when I talk about trade secrets. Startup competitors I'd definitely say you might want to check that one out as well.
*Disclaimer: This post discusses general legal issues, but does not constitute legal advice in any respect. No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction. Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.