28. Id.; see Kerry Capell & Joseph Weber, Caution: Single-Stock Futures Ahead, Bus. Wk. 38 (Feb. 26, 2001) ("most people ought to run, not walk, from [security futures]").
29. Melissa Allison, OneChicago Ready and Waiting for Single-Stock Trade, Chicago Tribune C7 (June 23, 2002); see Melissa Allison and Bill Barnhart, Back to Single-Stock Futures, Chicago Tribune (statement of CFTC Chairman James Newsome that "the upfront disclosure rules about the risks inherent in these markets are extremely important").
30. Mehta, supra, n.7.
31. Partnoy, Futures & Derivatives Law Report at 8.
32. Id.
33. David Roeder, Futures Vs. Options, Chicago Sun-Times (March 27, 2001); see Mehta, supra, n.7 (statement of Gene Mueller, director of marketing for financial products at the Chicago Board of Trade, "[i]n terms of capital requirements this is the cheapest way to trade stocks bar none.").
34. 15 U.S.C. §78g(c)(2)(B)(iii)(II).
35. Partnoy, Futures & Derivatives Law Report at 8.
36. Rozenzweig, Kenneth M., An Introduction to Single Stock Futures Margin Requirements, Futures & Derivatives Law Report 1 (November 2001).
37. 17 C.F.R. pt. 41 (CFTC margin requirements); 17 C.F.R. pt. 242 (SEC margin requirements). See Jeff Sommer, Investing: Diary; Accord on Margin Rule For Single-Stock Futures, Sec. 3 N.Y. Times 8 (July 28, 2002) (reporting margin requirement); see OneChicago, OneChicago Overview for the Media <http://www.onechicago.com> (last updated Sept. 23, 2002) (OneChicago, a joint venture of the Chicago Board Options Exchange, the Chicago Mercantile Exchange and the Chicago Board of Trade formed to trade security futures, stating that it requires a 20 percent margin for security futures).
38. Rozenzweig, Futures & Derivatives Law Report at 8.
39. SEC Rule 15c3-3 Reserve Requirements for Margin Related to Security Futures Products.
40. 15 U.S.C. §78f(h)(1); 7 U.S.C. §2(a)(1)(D)(ii)(I); see Securities Industry Association, Single Stock Futures Background <http://www.sia.com/ssf/> (accessed Oct. 8, 2002) ("a firm wishing to sell [security futures] will need to be registered simultaneously as a broker-dealer with the SEC and as a futures commission merchant with the CFTC.").
41. 17 C.F.R. pt. 41 (rule associated with the final settlement price); 17 C.F.R. pts. 1,41, 190, 240 (rules associated with disclosure).
42. OneChicago, OneChicago Launches Successfully http://www.onechicago.com/060000_press_news/press_news_2002/11082002.html (accessed Nov. 22, 2002).
43. David Roeder, Nasdaq, London Plan Single-Stock Futures, Chicago Sun-Times 52 (March 27, 2001); see LIFFE, Nasdaq Form Partnership For Offering Single Stock Futures, 33 Securities Regulation & Law Report 476 (April 2, 2001); see also NASDAQ LIFFE Markets, NQLX Announces Additional Security Futures Contracts, http://www.nqlx.com/NQLX/PressRelease/NQLX expandsRelease.pdf (accessed Nov. 22, 2002).
44. Melissa Allison, OneChicago Ready and Waiting for Single-Stock Trade, Chicago Tribune N7 (June 23, 2002); Terry Savage, Single-Stock Futures a Market For Professionals, Chicago Sun-Times (November 7, 2002) available at http://www.suntimes.com/output/savage/cst-fin-terry072.html (accessed January 30, 2003).
45. Tribune staff, OneChicago: Single-Stock Futures Trading Launch Set, Chicago Tribune N2 (Sept. 25, 2002).
46. David Roeder, Chicago Markets to Duel in '01, Chicago Sun-Times 54 (Dec. 19, 2000).
The name game: Preventing trademark infringement against newly formed businesses
By A. Jay Goldstein and Christina M. Berish, FagelHaber LLC
One, two, even 10 years after forming a new business, it is not unheard of for a company to receive a demand to discontinue the use of their name. Long after its creation, the company discovers through receipt of a cease and desist letter that an entity with an identical or significantly similar name already owns superior rights to that name.1 Unfortunately, at that point, the company may have invested substantial sums in advertising and marketing the company's name and may have also established customer goodwill. Accordingly, the company, with perhaps a loyal clientele, must now change its name or face litigation. Why wasn't the superior rights holder of the name detected at the pre-organization stage?
A corporation or limited liability company entity can be organized with the Illinois Secretary of State under the name of a company already organized in another state because state governments do not search for name duplication as part of their approval process. During the approval process, most states only verify that the company's name is distinguishable2 from names of other companies previously organized in that state. States, in general, do not review federal trademark records, their own state tax records, or the organization records from other states. This system allows a company to organize in one state, even though the company's name may violate the federally or state registered or state common law trademark of another company.
As such, the government leaves the task of preventing trademark infringement to the individual company and the corporate lawyer. Therefore, an attorney organizing a company with the Illinois Secretary of State should inform his/her client about the possibility of trademark infringement, the consequences of trademark infringement and the methods of prevention.
This article will begin by providing a brief summary of trademark acquisition and infringement. Next, methods of preventing name duplication and possible resulting trademark infringement. Finally, this article will discuss the financial and trademark benefits of registering or reserving an Internet domain name when organizing a company.
Trademark rights & infringement
A company can acquire ownership rights to its name in two ways. First, under the Lanham Act of 19463, a company can register its name as a federally registered trademark. This registration grants the company exclusive control over the mark with regard to a particular product or service for a defined period of time, usually 10 years, with 10-year renewal periods thereafter (provided that a trademark owner reapplies before the registration period ends). Any "confusingly similar" use of the name by a third party is infringement.
Second, a company can develop an exclusive right to its name under common law. Basically, the right to a name develops through the earliest, valid, commercial use. The first individual, "to make a lawful, commercial use of a mark to identify her product or service acquires the right to exclude others from using the same or a confusingly similar mark for the same or a related product or service."4 This right exists in areas where the mark is identified with the owner, a territory referred to as a "zone of actual goodwill."
The zone of goodwill extends to areas where the name has become identified with the owner's goods or services. This zone of goodwill includes the "zone of actual market penetration" where the owner has developed goodwill through actual sales and the "zone of reputation" where the owner has developed goodwill through advertising or word-of-mouth.5 These areas do not necessarily coincide with state boundaries. Therefore, a southern Wisconsin common law owner of a mark may possess rights to that mark in a surrounding area such as northern Illinois.
Common law trademarks are infringed upon in one of two ways. First, by a subsequent federally registered trademark owner.6 In these cases, a court may prohibit the common law mark's use even though it was in use prior to the federally registered mark. A court may also elect to "freeze" each owner's respective geographic area and allow concurrent ownership.7 Concurrent ownership allows each respective user of the mark the right to continue using such mark in a specified geographic area. Second, any subsequent use of that mark in the common law owner's "zone of goodwill" will infringe upon the owner's rights. In these cases, the senior user's common law rights are protected through common law trademark infringement and unfair competition law.
Trademark searches
Since infringement can occur through various scenarios, before organizing a company, a corporate attorney should recommend that the client authorize a thorough search for previously acquired common law and registered trademarks. A comprehensive search must include both federal and state trademark registrations, state entity names, domain name registration records, as well as common law uses.
1. How to search for a federally registered
trademark
There are at least three methods of searching for a federally registered trademark. First, an attorney can utilize the Trademark Electronic Search System (TESS) located on the United States Patent and Trademark Office's Web page.8 Second, an attorney can visit a Patent and Trademark Depository Library. In Illinois, the Chicago Public Library and the Illinois State Library in Springfield house these depositories.9 Finally, a private company, such as Thomson & Thomson, can be hired to conduct the search.10 Private companies typically charge $240 - $870 for a federal and common law search. The price will vary depending on the breadth of the search, reputation of the company and the requested turnaround time.
2. How to search for a common law trademark
Since common law trademark rights develop through usage, a number of techniques exist to search for an owner of these rights. State entity organizational records offer an excellent starting point. These records can usually be accessed from a Secretary of State's Web page.11 Next, business or telephone directories may provide an additional source on businesses in the area. Third, legal databases such as LexisNexis offer business locator searches and articles. Finally, a private company could be hired to conduct the search.
Registering a domain name
When organizing a company, a corporate attorney may wish to offer to register or reserve an Internet domain name for the business. Registering the company's Internet domain name will provide the company with substantial benefits. Not only will the company be able to create a Web page for marketing purposes, but registering the domain name at the organizational stage will prevent "cyber-squatters" from buying the domain name and then attempt selling it back to your client at an increased price.12
Clients not interested in marketing online may still wish to register an Internet domain name for t0.he trademark benefits that a Web page could provide. Registering and using the company's domain name on the Internet may also cause others to be on notice of the company's use and ownership of the mark. Finally, registering the company's domain name will impair the ability of other individuals or businesses to use that domain name in a way that "dilutes" the goodwill associated with the company's name.
In order to determine if a name is available as a domain name, the attorney can search the domain name registration records by performing a WHOIS13 search. If the name is currently registered, the WHOIS search will provide the name of the current registrant. If the name is available, the attorney could register it on behalf of the client. There are a number of domain name registrars available which charge approximately $15 - $35 per year pending on the level of services offered.14
Conclusion
When a company receives a cease and desist letter and is faced with the cost of litigation and/or the necessity of changing its company name, it may surprise them to learn that such problem could have be easily averted if their attorney had only presented and explained such preventive measures at the pre-organizational stage.
_______________
A. Jay Goldstein is a member of the Chicago law firm of FagelHaber LLC. Mr. Goldstein concentrates his practice in corporate and related health care matters.
Christina Berish is a third-year student attending the University of Michigan Law School and a summer intern at FagelHaber LLC.
1. The 2001 Amendment, P.A. 92-33, to the Illinois Business Corporation Act prohibits companies from using the same name under different organizational entities. For example, if the XYZ Corporation is incorporated in Illinois, the Secretary of State will not authorize an LLC to use the name XYZ. See 805 ILCS 5/4.05(8)(b) (2001).
2. The Illinois Secretary of State considers names "distinguishable" when not "substantially the same as a name on record," and when containing a significant difference.
<http://www.library.sos.state.il.us/departments/business_services/distinguishable.html>.
3. 15 U.S.C. § 1051-1127 (2002).
4. Cotter, Thomas F., "Owning What Doesn't Exist, Where it Doesn't Exist: Rethinking Two Doctrines From the Common Law of Trademarks." University of Illinois Law Review, p. 491 (1995).
5. Id. at 492.
6. Berlandi, Brian L., "What State Am I In?: Common Law Trademarks on the Internet." Michigan Telecommunication and Technology Law Review, p. 106 (1997/1998).
7. Thrifty Rent-a-Car System, Inc. v. Thrift Cars, Inc., 639 F. Supp. 750 (U.S.Dist. Mass., 1986), affirmed by Thrifty Rent-a-Car System, Inc. v. Thrift Cars, Inc., 831 F.2d 1177 (U.S.App. 1st Cir., 1987).
8. <http://www.uspto.gov>.
9. A complete list of the patent and trademark depository libraries is available at: <http://www.uspto.gov/web/offices/ ac/ido/ptdl/ptdlib_1.html>.
10. Thomson & Thomson <www.thomson-thomson.com> (800) 682-8833.
11. The search function on the Illinois Secretary of State's webpage is available at: <http://www.sos.state.il.us/services/services_business.html>.
12. Landau, M.B., "Problems Arising Out of the Use of 'www.trademark.com': The Application of Principles of Trademark Law to Internet Domain Name Disputes." Georgia State University Law Review (February, 1997).
13. See <http://www.netsol.com/cgi-bin/whois/whois>.
14. See e.g., <directnic.com>; <register.com>; <verisign.com>.
%20Initial.GIF)