Small Business Horror Story #5: Trademark Denied

The first step in starting a business is to choose a name.  In my article on How to Start a Business in Las Vegas, I say, simply, “make sure no one else has it.”  Maybe I need to elaborate.

In addition to ensuring no one else has the entity name by checking with the Secretary of State, making sure no one else has licensed the name with local business license bureaus, and making sure you can reserve a domain with your company name, you want to check the federal trademark database.

Whether you go to all this trouble really depends on the type of company you have and its potential for growth.  If you are Joe’s Mobile Detailing, chances are you’ll stick within state or even city boundaries and don’t need to worry about federal trademark protection.  However, if the name of your company or product is something you can promote regionally, nationwide, or even globally, you’ll want to make sure you can adequately protect the name from others using it.

Here’s the story:

A small business created a green product for sale to businesses and consumers.  They paid for graphic designers to design the labels, paid a printer and a bottle manufacturer to create the bottles, printed marketing collateral to promote the product, and introduced it to the marketplace, landing a game-changing contract with one of the big-box warehouse stores.  They got the product onto the store’s shelves and WHAM, got hit with a cease and desist because the name of their product was pretty similar to another product 1) that served the same or similar purpose, 2) that had already been on the market, and 3) that had already secured a federal trademark.

The company had to pull its product off the store’s shelves, change the name, redesign the labels, reprint the labels and marketing collateral, spending another $20,000 on top of the original $15,000 it took to create it all.  The company lost the contract with the warehouse store because the store didn’t want to get dragged into a lawsuit.  Last I heard, the company was on the verge of bankruptcy.

The moral of the story?  Do your homework or hire someone to do homework before you commit time, money, and effort to a name you won’t be able to protect.