Among the most valuable assets of any successful business are its trademarks. A trademark is the "brand name" or designation of origin used on products – e.g., COCA-COLA® is a trademark for a particular brand of cola. A service mark is the "brand name" or designation of origin for a service – e.g., ALLSTATE® is a service mark for insurance services. In many cases, they are the most important assets of the business. The goodwill, reputation and ability of the public to recognize the company are all dependent upon, and embodied in, the company's trademarks. When litigation ensues, and these trademarks are at risk, the stakes can be very high. Companies may encounter significant problems when adopting marks without consulting with legal counsel about potential conflicts. In such instances, because of another party's prior use of a similar mark, a court may enjoin use of the company's new mark, costing the company the value of its investment (e.g., inventory, marketing materials, development expenses) and causing it to incur the loss of any goodwill already developed in the mark, not to mention possibly exposing the company to substantial damage claims. It is thus appropriate and necessary to perform appropriate back ground work to avoid litigation if possible, and, should litigation becomes necessary, to maximize the company's likelihood of success.
The development of an effective trademark protection program involves careful consideration of the trademarks that the company currently owns and any that it may develop in the future. The key preliminary consideration is to identify and prioritize the most valuable marks – the marks that are most closely identified with the company as well as secondary trademarks – and to assess the adequacy of the company's monetary and human resources devoted to protecting the strength of those marks. This is done through a "trademark audit" which will identify the marks owned by the company and assess each mark's status and level of protection both domestically and internationally.
One benefit of a "trademark audit" is that problems that may potentially impact the strength, profitability and validity of the company's trademarks can be identified and analyzed. These problems may include:
An audit may disclose that no problems exist or that substantial problems exist requiring immediate strategic planning. For example, a successful small company, prior to seeking the advice of trademark counsel, built up substantial goodwill using a mark in a particular geographic area. It was then forced to change its name as a result of its confusing similarity to the mark of a senior registered user which had been operating in another geographic area that the newer company had targeted as a necessary market for expansion. Since the senior user also intended to expand into the new company's existing market, litigation would have been inevitable. An audit disclosed this serious problem, which would have grown more serious were it discovered later. In this sense, an audit is analogous to a medical "check-up," since it may identify problems requiring preventive measures to produce beneficial results.
The key benefit of this preliminary approach is to enable the company to understand the current protection and strength of its marks, determine the adequacy of that protection, and develop a partnering strategy with outside counsel that will maximize the value and level of protection of its marks while minimizing the risk of claims and lawsuits by others. The obvious and principal goal of all companies is to ensure that their goodwill and name/brand recognition will not be compromised.
While companies readily pour millions of dollars into advertising campaigns designed to promote their respective names and trademarks, many companies devote little in the way of resources to protect those assets from a multitude of problems that can arise from an inadequate trademark protection program.
Before implementing a trademark protection program, key brands, their current registration status, and their degree of "exclusivity" should be identified by the company. Some companies have only one or two "key" marks, while other companies have many key marks representing well-known products or services. It should not be left to in-house counsel alone, without the input of company management, to decide what is a "key" trademark or brand and which marks are less significant. Such interaction should also reveal the scope of the trademark protection program, if any, currently in existence and allow identification and analysis of those changes necessary to improve the trademark protection program.
The degree of exclusivity, if any, enjoyed by the company's key marks should also be ascertained as part of the company's trademark protection program. In-house counsel can make such determination through discussions with appropriate company personnel and after analysis of a current trademark search report for each key mark.
Once the company's "key" marks are distinguished from its secondary marks, the company should analyze the steps it has taken to protect the marks and ascertain whether more vigilance is necessary. Again, this analysis may be conducted by in-house counsel, or by outside counsel as part of an intellectual property audit. Factors to consider include: (1) the number of infringers the company has pursued; (2) whether the company has pursued infringers selling related goods and services or whether it limited its pursuit to infringers using the mark in connection with the same competing goods and services; (3) resources spent on various watch services; (4) whether the marks are federally registered; and (5) the strength of the marks.
As an alternative to in-house counsel or company management resolving these issues, outside counsel can perform an "intellectual property audit." An intellectual property audit serves several purposes: (1) to determine the extent of the company's interest in the intellectual property; (2) to determine the scope of rights a third party may have in the assets; (3) to evaluate the company's policies and procedures for creating and protecting its intellectual property rights; (4) to evaluate whether the company's intellectual property rights have diminished or are likely to diminish in the future absent more vigorous protection; and (5) to provide recommendations that will help correct the erosion of existing intellectual property rights and protect such rights in the future. By retaining outside counsel for purposes of the "audit" who are familiar with programs and policies of other companies and knowledgeable about domestic and international trademark law, the company ultimately will benefit from the objectivity and expertise that outside counsel may bring to the process.
While most companies rely upon primary outside intellectual property counsel, it is not uncommon to obtain a "second opinion" to compare and contrast the approach suggested by such counsel. As this service is often provided free or at a reduced fee, the company benefits by obtaining another point of view and the law firm providing the second opinion gains the opportunity to introduce itself. As legal conflicts will inevitably preclude a company from occasionally using its first choice of counsel in a legal dispute, this also provides an opportunity to have another firm on hand that is familiar with the company's trademarks.
Joseph R. (Casey) Mangan, Jr. is corporate counsel for Allstate Insurance Company, handling trademark and copyright matters. He is a seasoned ACC Docket author and co-author of the "Trademarks" chapter in Thomson Reuters/West and ACC's treatise, Successful Partnering Between Inside and Outside Counsel. Mr. Mangan has served on the International Trademark Association's board of directors and currently serves as the advocacy chair of ACC's IP Committee.
Susan L. Lees is the executive vice president, general counsel, and secretary of Allstate Insurance Company and a member of Allstate's senior leadership team. Ms. Lees leads the legal team to guide Allstate's business strategy, ensure sound compliance of government practices and foster a healthy legal, legislative and regulatory environment.
Floyd A. Mandell is national co-head of the Katten Muchin Rosenman LLP's Intellectual Property practice and co-head of the firm's Trademarks practice. He has earned widespread recognition for his world-class intellectual property counseling and litigation practice, which covers trademarks, trade dress, unfair competition, trade secrets, copyrights, high-tech disputes, e-commerce/Internet disputes, false advertising, entertainment litigation and First Amendment litigation.