U.S. Supreme Court Ruling: Why Trademark Searches Could Actually Save you Money

Skipping trademark searches may cost you your profits if your trademarks infringe on third party’s rights.

When launching a new product or company, the first order of business is choosing a name. In a fragile economy, entrepreneurs or even established businesses may be tempted to skip  robust trademark searches. They may see trademark searches as a legal luxury they cannot afford. This narrow perspective may yield expensive penalties. This week’s U.S. Supreme Court decision in Romag Fasteners, Inc. v. Fossil Group, Inc. underscores why trademark searches can actually end up saving you money.

Mistakes in Choosing and Using Trademarks

Business owners may confuse their corporate filings with their trademark filings. They often assume if the business name is available with the Secretary of State that the name is also available as a trademark. In reality, this is not true. (For marketers looking to understand what a trademark is, click here.) Just because a name is available in state records does not mean that it is available in the marketplace.

Companies may also decide that a mark for goods or services is available by looking at a few pages of Google. Some may even go to the USPTO website and insert their proposed name into the search mechanism. Upon running these simple searches and finding no direct hits, the company may conclude mistakenly that the proposed trademark will not infringe any third-party rights.

If a company does not perform adequate due diligence with trademark searches, it could end up infringing on third party rights. Until now, the courts had been split on whether a defendant could be forced to pay back its profits in the case of innocent infringement. After this week’s Supreme Court decision, the conflict has been resolved. The answer is no. Even without a showing of willful infringement, a court may award profits to a prevailing plaintiff. Thus, the risk of launching trademarks without vetting has increased.

The Supreme Court Case

Fossil had represented that the fasteners on its handbags came from Romag. In fact, the factories in China supplying the fasteners to Fossil were using counterfeit fasteners. In lower court proceedings, Romag succeeded in its trademark infringement claim against Fossil.

The issue before SCOTUS was whether Roman was entitled to recover Fossil’s profits, even though the infringement had not been willful. It had been a significant question until now as to whether innocent infringement versus willful infringement could result in an award of profits to a successful plaintiff. SCOTUS resolved a circuit court split on the issue in a 9-0 decision.

SCOTUS ruled that a finding of willfulness is not required to award profits in a trademark infringement case. While the statute had a willfulness requirement for other remedies, its drafters had not included willfulness for a profits remedy. The court, thus, refused to read a willfulness requirement into the statute.

At the same time, the opinion, stressed that willfulness is “a highly important consideration” in determining whether to award profits to a prevailing plaintiff in a trademark infringement case. In fact, Justice Sotomayor issued a concurring opinion and did not sign the main opinion because she wanted to emphasize that an award of profits could be inappropriate where the infringement was innocent.

How A Trademark Search Helps

While the Romag/Fossil dispute revolved around unknown use of counterfeit goods, rather than choosing a trademark, the SCOTUS opinion is relevant even at the beginning of a trademark’s lifecycle. The case underscores the importance of establishing your good intent to come to market right from the beginning of your business offerings.

Even though willfulness is not required to prove trademark infringement, it is likely that courts will still examine a defendant’s intent in deciding whether to award profits.

Conducting full trademark searches before marketing goods and services in commerce under a trademark helps establish good faith. Assuming the trademark searches do not reveal any potential for trademark infringement, the searches confirm that the trademark owner did her best to not violate third party rights in the marketplace.

The Right Kind of Trademark Search

Only a full trademark search done through specialized databases not available to the general public provides a full overview of market usages.  Full trademark searches identify not only identical uses in the marketplace but also marks that have the potential to be confusingly similar. Full trademark searches illuminate whether your proposed trademarks have the potential to infringe federal registrations, state registrations, and common law trademarks.

There are times when knockout trademark searches may be a less expensive and an appropriate strategic decision for a business. An experienced trademark attorney will review the circumstances around your proposed use. She can determine what kind of trademark searches you require and provide analysis based on existing trademark case law to determine whether trademarks are available for use and/or registration.

If you have questions about choosing a trademark, its availability, or whether to conduct trademark searches, contact us here.