By Attorney Edward Jesson
Copyright and trademark are two different areas of the law that often intersect with each other. A trademark can be any word, phrase, design, or combination of these things that identifies a business’s goods or services. A copyright is an original work by an author with at least a minimum level of creativity, such as a book, painting, photograph, or song. A recent lawsuit involving SweetWater Brewing Company brings some of the nuances and risks involved in these areas of the law to light.
SweetWater Brewing has been using a trout image in its trademarked logo since 1996 after it paid a friend of the founders, Mr. Fuss, $500 to draw the trout in question. Mr. Fuss is now claiming he owns a copyright to the drawing of the trout, and that there was an “understanding” between himself and SweetWater that the value of his rights to the copyright would grow as the value of SweetWater and its intellectual property grew. When SweetWater was recently bought by another company, Fuss sued SweetWater, claiming that he was owed $31 million dollars for the value of the trout drawing. SweetWater has, in turn, sued Mr. Fuss in federal court requesting a declaration from the court that SweetWater can continue to use its trademarks moving forwards without interference from Mr. Fuss.
Had Mr. Fuss been an employee of SweetWater when he drew the trout, or had a comprehensive agreement been entered into between Mr. Fuss and SweetWater at the beginning, the current litigation could have been avoided, saving all the parties lots of money and time.
Generally speaking, under copyright law, the author of the original work owns the copyright. An exception to this general rule is where the work is made for hire. Thus, if the work was made by an employee in his or her scope of employment, the employer holds the copyright to the work. However, if the individual creating the work is an independent contractor instead, that independent contractor will own the copyright to the work. Therefore, it is very important that companies dealing with independent contractors have them sign agreements whereby the independent contractor assigns the copyrights to the company who is paying them.
The trout image was created long before SweetWater grew into the company it is today, and that spotlights a reason why planning for these eventualities before they become bigger issues is so important, even when a business is in its startup phase.
Should you need assistance with navigating the sometimes complex law surrounding copyright and trademarks, the attorney at Jesson & Rains will be happy to assist.
A trademark is a “word, phrase, symbol and/or design” that identifies and distinguishes the goods or services of the owner of the mark from another party. Examples include brand names, slogans, tag lines, logos, and design elements (think, Tiffany blue boxes). In order to get a federal, registered trademark, the mark has to be used in commerce, so normally the owner of the mark is a business or business owner. Someone can apply for a trademark before the mark is used in commerce if the owner intends to use it in commerce, but the United States Patent and Trademark Office (“USPTO”) will not register the trademark until the applicant shows that it is actually being used. Trademarks don’t expire, as long as the mark continues to be used in commerce and the owner files periodic documentation with the USPTO.
The trademark application process is fairly simple, but actually obtaining the trademark can be quite tricky. Not only does the applicant have to worry about the application being denied because the mark is too similar to another in a similar industry (“likelihood of confusion” according to the USPTO), but the applicant has to worry that the USPTO will deny the application for other grounds such as the trademark being “merely descriptive.” For example, the name “Northeast Interiors” merely describes the business (interior design in the Northeast). The strongest trademarks are “fanciful and arbitrary,” meaning they are words that have no relation to the good or service sold (like Apple computers), and the second strongest trademarks are “suggestive” meaning they suggest the good or service without literally describing it (think, Facebook). Unfortunately, most people name their businesses something that describes them for marketing purposes! Is marketing more important or trademarking? This depends on the nature of your business.
A business can also have a common law trademark, but there are benefits to federally registering: first, inclusion in the national database deters others from using similar marks in similar industries; second, there is a legal presumption that the registrant owns the mark and was the first to use it, meaning that in a dispute with another, they would be presumed to be the winner.
A common law trademark is established simply by a business starting to use the mark in commerce. The mark should be identified with the ™ symbol. Only a federally registered trademark can use the ®. A common law trademark is limited in geographic area, so you could have a competitor business open up with the same name in an entirely different state, as long as you didn’t share customers. If a competitor opens in your geographic area, you could sue them for trademark infringement if they did damage to your mark. You would have to prove you were the first to use the mark (unlike having a presumption in federal court).
If you’re thinking of trademarking something in your business, give Jesson & Rains a call!
What is intellectual property?
“Intellectual” property refers to creative works used in business that have economic value. The four most common types of intellectual property (“IP”) are trademarks, copyrights, patents, and trade secrets. Trademarks protect words, names, symbols, and logos that are identified with a brand; copyrights protect artistic works like books, music, and photographs; patents protect inventions; and trade secrets are property that are valuable and have been kept secret and out of the public domain.
We’ll be starting a series explaining each of these types of property in detail over the next few weeks. As the word “property” signifies, intellectual property is an asset. Thus, it is important for both business planning and estate planning. In the business context, it is crucial to determine who owns the IP. Is it the individual who brought it into the business (and will take it with them when they leave) or does the business itself own it? If there is a possibility for litigation, it may be worthwhile to form a separate LLC to own IP so the other business assets stay separate and protected. Next time you look at fast food packaging, you’ll probably see that the company’s trademarks are owned by a separate business.
For estate planning purposes, we want to know about IP just like any other asset – how much is it worth? Who inherits it? So make sure to share this information with your estate planning attorney.
The next blog article will go into trademarks. Stay tuned!
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