The Educated Networker: Trademarks and Network Marketing

From Nothing to Everything

At first, a trademark may be the least valuable of assets. Famous marks such as Coca-Cola, Microsoft or IBM were nearly valueless at one time. However, for a mature company, the brand name may be its single most valuable asset. Valued names such as GE, Disney or Intel add billions of dollars to the balance sheet.

Similarly, there was a time when the names Avon, Mary Kay or Tupperware had little or no value. And yet, decades later, the goodwill associated with those direct selling brands would allow their products, if the companies so chose, to be sold in any retail venue in the world. As they say, “mighty oaks from small acorns…”

Protection of trademarks is as vital to direct selling companies and distributors as trademark protection in the retail field. Customer or distributor recognition of unique names or logos may well be responsible for generating billions of dollars in additional sales.

For this reason, all leading direct selling companies have devoted substantial budgets to protecting their trademarks and “good names” in the United States and throughout the world. In addition, distributors will note that direct selling and network marketing companies go to great lengths in distributor agreements and policies to outline permissible and licensed distributor use of company trademarks.

It is a good idea for direct selling companies and distributors to have a basic understanding of how our trademark system works in the United States.

How it all Works

The use of trademarks originated in medieval England when craft guilds required their members to place their individual mark on products so that the craftmaker could be traced in the event the product was defective. In time, shoddy craft-makers realized the benefit of associating their product with a mark of a quality craftsperson. From that point forward, the English Common Law system attempted to develop a body of law which would protect a trademark associated with a merchant’s goods. Today, in the United States, a merchant’s trademark is protected both by common law as well as federal and state trademark registration statutes.

A trademark may be a word, phrase, logo, etc., which is strictly associated with a product or service. It may be defined as a word, name, symbol, device, or combination, used by a manufacturer or merchant to identify his or her goods and distinguish them from those sold by others.

To receive trademark protection, the mark must be distinctive and distinguishable from others. The most distinctive of marks are those which are purely arbitrary or fanciful. Such marks would include those which have no meaning or connotation other than that of identifying the source of a particular product. For instance, in the field of cameras, the mark “Kodak” is purely arbitrary and distinctive. As a general matter, the name of a company will not receive protection. Generic and descriptive trademarks are generally not considered distinctive and protectible. For instance, a company could not receive trademark protection for the trademark “BEER.”

Trademark protection is not achieved by adopting a trademark, but by its “use” in association with the product. Thus, the first user of the mark will probably receive primary protection. A mark, however, which is improperly used or adopted into the general language of the product, may be lost as far as protection. For instance, such famous marks as aspirin, thermos and escalator have been lost because the public now views these names as descriptions of generic products, and the U.S. Supreme Court ruled that the mark “Monopoly” was lost because it had become the generic description of board games in general.

Once a trademark has been used and adopted, it receives common law trademark protection against subsequent use by another which is confusingly similar to that of the trademark owner. Federal legislation which protects trademarks is known as the Lanham Act. Under federal legislation, a company registers its trademark with the Patent and Trademark Office with a written application, a drawing of the trademark, five specimens or facsimiles of the trademark as it is actually affixed on or in connection with the goods and filing fee. (Actually, a company may file an “intent to use” a mark, even before actual use, and the protection will relate back to the date of filing of the intent to use.) Assuming there is no objection, the company is issued a certificate of registration and it may use the symbol “®” in conjunction with the trademark. This registration is prima facie evidence of the registrant’s right to the exclusive use of the trademark. A registered mark that has been in continuous use for a period of five consecutive years generally becomes incontestable. After the fifth year, the trademark owner must apply for continued use of the mark. The registration period is for 20 years and the mark can be continuously renewed.

It’s for Real

Trademarks may not seem that relevant to the average Networker, but if given some thought, it is the lifeblood of their business.

For more information on trademarks read the articles “It’s Our Name – Live With It” and “Chasing The Competition.” Or, watch the video: How Important is Your Company Name? Learn about Trademarking Your Company Name.

This entry was posted in Consulting, Direct Selling, Distributor Education, Home-Based Business, Internet Marketing, MLM, MLM Articles, MLM History, MLM Startup, Network Marketing, Party Plan, Trademarks and tagged , , , , , , , , , . Bookmark the permalink.