Trademark Rights Explained: Common Law vs. Federal Registration

Whether a business is launching a new product or rebranding an existing company, selecting a name, logo, or slogan is a crucial decision. Trademarks are powerful tools that identify the source of goods or services and protect the goodwill associated with a brand. Yet many business owners are unclear about the different rights conferred or acquired, and fail to protect their mark to the fullest extent allowed under the laws of the United States.

In this DE Insight, we provide a practical understanding of the key differences between common law and federally registered trademarks—what each protects, where their boundaries lie, and how those boundaries affect a company’s ability to grow or enforce its rights.

Key Differences Between Common Law and Registered Trademarks

A common law trademark is rooted in state law and principles of unfair competition. It is an automatic right acquired by the simple fact of using a distinctive mark in commerce—and the mark can bear the ™ symbol. A registered trademark, however, is a statutory protected right—either on a federal level if filed with the United States Patent and Trademark Office (“USPTO”), or on a state level when registered with the bureau within the specific state. The rights only arise once the USPTO or the state registers the mark. A mark registered with the USPTO can be identified with the symbol ®—reserved for federally registered marks.

Common law rights offer limited protection to a mark. While these common law rights are easy to acquire due to the rights being tied to the actual use in commerce, the scope of protection is restricted to the geographical area where the mark is actively used and has gained recognition. This could mean the protection offered only extends to a specific city, county, or sometimes state, as the protected area would be hard to define with specifics unless a legal battle is commenced to enforce or protect such rights¹. The natural zone of expansion doctrine may extend common law rights to nearby or adjacent geographic zones, and extend to related goods and services, if such extension is deemed to be “natural” (e.g., Nike’s expansion from shoes and apparel into sports equipment and technology). However, easily acquired rights come with a price: enforcing common law rights is a hassle—and costly. The owner bears the burden of proving the existing rights, and must establish first use, distinctiveness, and actual damages if money is sought.

A federally registered trademark, on the other hand, offers a more comprehensive set of legal protections. Registration with the USPTO grants the owner with an exclusive use of the registered mark across the country, and most importantly, grants a presumption of ownership and validity, meaning the burden is not on the owner of the registered mark if a legal dispute arises. The owner of a registered trademark also has the ability to restrict the import of infringing goods by registering the mark with U.S. Customs. Additionally, the remedies available under the Lanham Act—which governs trademarks—provide broader remedies to the owner. This enhanced protection, however, also comes with a cost, which is reflected in the more complex process to acquire those rights. An application must be filed—preceded by an in-depth national search to ensure the singularity of the proposed mark—fees must be paid, which vary depending on the complexity of the mark, and the requirements established by the Act must be met. Importantly, the filing of a petition does not guarantee registration.

Advantages and Limitations: Registration vs. Common Law Rights

Owning common law rights does not prevent others from using the same mark—or a similar one—in a different geographic area. But what happens if another individual registers a mark that a business has been using? Thankfully, it does not erase the existing common law rights. The mark used without registration will still be protected but will be limited to use within the area where the mark acquired recognition. The case of Burger King of Fla., Inc. v. Hoots, 403 F.2d 904 (7th Cir. 1968) illustrates the principle. The Hoots family owned a restaurant under the name “Burger King”, prior to the rise of the national chain we know today. The court allowed the Hoots family to continue using the name, but only within a 20-mile radius of the restaurant. Everywhere else, the federal registration owned by Burger King of Fla. Inc., had exclusive rights.

A common law trademark is also, by nature, unregistered, and therefore not part of an accessible database, meaning the USPTO, will not consider a common law trademark when evaluating a trademark application. Therefore, if a third party registered a mark used in common law, the owner’s only resource to enforce their rights individually. A registered trademark, however, will be available to the USPTO, and a similar trademark will be likely be rejected upon evaluation.

Practical Implications

Businesses, particularly startups or companies with the ambition to grow, should consider registering their mark and logo with the USPTO, and they should consider it as an investment. While the upfront cost may deter a business’s enthusiasm, the long-term benefits, such as the presumed legal rights, brand security and the national level of protection, significantly overcome the costs. Failing to register, on the other hand, may lead to a loss of goodwill, force a change of brand, or significantly hinder the ability to expand. A registered trademark also enhances the value of the business and the business’s goodwill, provides more credibility to consumers and may add value to the business in the event of an acquisition or merger.

Protecting a business’s mark is an important aspect of business planning. While common law rights offer some easily acquired protection, they are limited, uncertain and difficult to enforce. By contrast, federal registration provides an owner with strong and presumptive rights, which are easier to protect and provide more flexibility for the future of the business.

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This DarrowEverett Insight should not be construed as legal advice or a legal opinion. This Insight is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal question you may have. Please reach out to us if you need help addressing any of the issues discussed in this Insight, or any other issues or concerns you may have relating to your business. We are ready to help guide you through these challenging times.

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