First and foremost, let’s discuss the nuts and bolts of trademark law: a trademark is any word, phrase, symbol, design, or other recognizable expression that an individual or entity uses as an indicator of the source of goods or services. Essentially, if you would like for a word, phrase, or design to uniquely identify your restaurant or culinary product, then you intend to use that word, phrase, or design as a trademark. The standard used to determine if one party is infringing on another party’s trademark is whether the two marks are confusingly similar to consumers. Courts apply a number of factors to determine whether a likelihood of consumer confusion exists, including but not limited to: the degree of similarity between the marks in sight, sound, and meaning, the sophistication of the customer base, and the relatedness of the goods or services provided. Instances of actual consumer confusion, where a customer confuses your restaurant for an unaffiliated restaurant, are a factor in determining likelihood of confusion, but courts do not always find that a likelihood of consumer confusion exists even when there are instances of actual confusion.
Often overlooked when opening a new restaurant, trademark issues can have a significant impact on an establishment’s bottom line and can potentially be the downfall of an otherwise profitable restaurant. How so? To illustrate potential pitfalls, I present two hypothetical scenarios in the context of a fictional local restaurant:
Chef/owner John Doe opened Restaurant Alpha in Atlanta on May 1, 2009. In the interest of avoiding attorney’s fees, John opted not to investigate whether anyone else was already using “Restaurant Alpha” before he settled on the name. John has operated Restaurant Alpha peacefully for several years. The quality of the food, friendliness of the staff, and beautiful décor of Restaurant Alpha has established the restaurant as a mainstay in the community. John invested a significant amount of money into marketing and building his brand, and Restaurant Alpha is well-known throughout the greater Atlanta metropolitan area.
Scenario #1 – What you don’t know can still hurt you:
On the eve of the restaurant’s anniversary in late April 2014, John receives a cease and desist letter from Peter, the chef and owner of an unaffiliated restaurant named Restaurant Alpha in Seattle, WA. John learns from the letter that Peter owns a federal trademark registration for “Restaurant Alpha” for use in connection with restaurant services that was filed on December 1, 2008. John’s mistake in choosing the identical name for his restaurant was inadvertent. He had never heard of a Restaurant Alpha in Seattle or Chef Peter, nor did he believe that he was infringing another party’s trademark. Nevertheless, a trademark attorney informs John that he is indeed infringing on Peter’s registered trademark. With little to no likelihood of a successful defense in the event of litigation, from a practical standpoint John is faced with two options: 1) change the name of his restaurant, destroy all menus, signage, and advertisements in his possession bearing the name Restaurant Alpha, and reach out to any third parties currently running advertisements or promotions featuring the mark requiring them to pull the ads from the marketplace; or, 2) take a license from Peter (if offered) to use the name in a limited capacity in a limited territory and pay Peter a license fee to use the name, while being subject to additional onerous terms.
Scenario #2 – Local participation may vary:
One of John’s friends from Colorado tips him off that another restaurateur, Bill, has opened a restaurant named Restaurant Alpha in Denver and it is quickly becoming a popular spot amongst the locals. Somewhat concerned, John hires a trademark attorney to investigate the restaurant and its use of “Restaurant Alpha.” The trademark attorney discovers that Bill began using the name Restaurant Alpha in connection with his restaurant on October 1st, 2014, and that Bill filed a federal trademark application for “Restaurant Alpha” for use in connection with restaurant services on November 1st, 2014. John’s attorney informs him that, without evidence that Bill knew of John’s restaurant and that he had adopted the mark “Restaurant Alpha” in bad faith in an attempt to benefit from Bill’s hard work and marketing dollars, it would be very difficult to stop Bill from using the name in Denver. Up to this point, John has been a “common law” user of the trademark “Restaurant Alpha,” meaning that his exclusive right to use the mark extends only to the geographic area in which the mark is being used. In this case, John’s common law rights would likely extend only to Atlanta and the surrounding counties. Further, if John elects not to spend the money to challenge Bill’s trademark application, Bill could become the owner of a federal registration for “Restaurant Alpha” even though John used the mark first on a common law basis. Bill’s registration would not prevent John from continuing to use the mark in Atlanta, but John could not expand outside of the Atlanta market. Bill, however, would be free to franchise or expand across the U.S., provided he does not use the mark in Atlanta.
Strong trademarks are the building blocks of successful businesses. They are the core of your brand – the name of your restaurant, the design on the front door, and the name of a signature dish or cocktail. The hypotheticals above are just a few examples of scenarios in which a few thousand dollars spent on the front end on trademark clearance and trademark application filing fees could prevent incurred costs of tens of thousands of dollars in legal fees to defend a trademark dispute in the future.
For questions or comments, contact Chase E. Scott at (678) 365-4420.