Trade Name vs. Trademark: An Overview
The terms trade name and trademark sound similar, but it's important for business owners—especially those who are in the initial startup phase—to know the difference. Selecting and registering trade names and trademarks is an important part of establishing a brand presence and recognition in the marketplace for a company and its products, so it's a process that should be considered carefully. The law makes a definite distinction between the two—a trade name refers to the company's official name, while a trademark provides a company's brand with legal protection. While they may not be the same, companies should avoid choosing trade names that are too close to a registered trademark, as this could expose owners to a potential lawsuit.
- Trade names and trademarks are distinctly different from a legal perspective.
- A trade name is an official name under which an individual or company conducts business.
- A trademark offers companies legal protection for a particular brand, which may be associated with a trade name.
A trade name is the official name under which an individual as a sole proprietor or a company chooses to do business. A trade name is commonly known as a doing business as (DBA) name. Registering a trade name legally is an important step in branding for a company, but it doesn't provide an unlimited brand name or legal protection for the use of the name. State laws vary on requirements for registering a trade name, but most states require registration either with the state government or through a county clerk’s office. The practical function of registering a trade name is primarily for administrative and accounting purposes, such as filing a corporate tax return with the Internal Revenue Service (IRS) which is in addition to your personal income tax return.
The Small Business Administration (SBA) website provides search tool for the specific trade name registration requirements in each state. Registration requirements for trade names are really geared more toward making the tax collection agencies aware of your business than they are toward providing any substantial brand name protection. In many states, registering a trade name doesn't prevent anyone else from operating a business under the same trade name, which explains why you may find more than one company named Joe's Painting and Roofing operating in different cities in the same state.
Although registering a trade name doesn't provide legal protection in the way that registering a trademark does, selecting a trade name should still be done thoughtfully. That's because it's the initial step in establishing an identity for your company in the marketplace. As noted above, registering a trade name doesn't give you trademark rights—that is a separate process.
A trade name does not provide companies with trademark rights which is a different process altogether.
A trademark is a more significant step identified with establishing brand recognition in the marketplace. A trademark can be associated with or it can be part of your trade name and can be used to provide legal protection for the use of names, logos, symbols, or company slogans. Two easily recognized examples of trademarks are Nike's swoosh symbol and Coke's "Coca-Cola" written in its distinctive script. Trademarks are easily recognized as they are accompanied by the trademark symbol—™.
A trademark requires a separate registration from a trade name, and this must be done at the federal level rather than just at the state level. The registration of a trademark guarantees an individual or business the exclusive use of the trademark, establishes legally that the trademark was not already being used by any other business entity prior to your registration of it, and provides official government protection from any other business subsequently infringing on your registered trademark. It also provides legal liability protection against someone subsequently claiming that you are infringing on a previously registered trademark.
In registering a trademark, you or your business can directly register the trademark, or you can choose to have a lawyer who handles intellectual property law or trademark registration do it for you. Having an intellectual property lawyer handle the registration provides an extra layer of insurance that the registration is done properly and completely and that a thorough investigation has been conducted verifying that the trademark has not been previously registered by any other person or company.
It is common practice to register a trademark at the state level in addition to fulfilling federal trademark registration requirements, even though the majority of states follow the guidelines of the Lanham Act—also known as the Trademark Act of 1946—that governs federal trademark requirements.