When Does a Firm Need To Register a Trademark?

Question: How do you recommend we, as a company, determine if we should trademark our name? Answer: A simple yet effective process is for the executive team to ask themselves, “Do we want to be able to stop another competing business from using our name or something confusingly similar?” If the answer is “yes,” you want to obtain a registered trademark. A trademark is a limited monopoly in the right to use a word, phrase, or logo in connection with particular goods or services. Although you will develop common law rights to your business name by virtue of using it in the marketplace (even if you never register it), if you want nationwide protection, and for other good reasons (some of which I touch on below), you will want to register your trademark with the USTPO. Federal registration provides benefits, both strategic and legal, beyond those afforded common law owners, such as putting the public on notice of the registrant’s claim of ownership of the mark; creating a legal presumption of the registrant’s ownership of the mark and the registrant’s exclusive right to use the mark nationwide on or in connection with the goods and/or services listed in the registration; allowing registrants the right to bring an action concerning the mark in federal court; providing a basis to obtain registration in foreign countries; and the ability to file the U.S. registration with the U.S. Customs Service to prevent importation of infringing foreign goods. In order to file for federal registration, your company must conduct business in interstate commerce. Generally speaking, if your company uses the mark on the web, this requirement is deemed satisfied. If you have not yet actually begun using the trademark in commerce, you can file a trademark application based on your intent to use the mark, provided you, in fact, have a bona fide intent to use the mark in interstate commerce. Q: What is all the fuss I hear from business/management over meal and rest periods in the workplace? A: You’re likely picking up on the fallout from a recent decision that came down from the California Supreme Court captioned “Murphy v. Kenneth Cole Productions, Inc.” Under California law, subject to just a couple of limited exceptions, non-exempt employees must be afforded the opportunity to take a ten-minute paid rest break for every four hours of work and must take at least a thirty-minute, uninterrupted, unpaid meal break for every five hours of work. Employees are entitled to receive one hour of pay for every day they miss rest or meal periods. The issue presented in the Murphy case was whether the “one hour of pay” constitutes a “wage” or a “penalty”. What’s the big deal you ask? If you’re a non-compliant employer in California, the answer is “a lot”! “Wages” are subject to a three-year statute of limitations. “Penalties” are subject to a one-year statute of limitation. The Murphy court, much to the joy of class-action lawyers and the chagrin of California employers, determined that the “one hour of pay” remedy provided under Labor Code Section 226.7 constitutes a “wage,” thus allowing employees to seek damages going back in time for a period of up to three-years, in addition to waiting time penalties and attorney fees. Employers should consider new policies to ensure non-exempt employees are afforded the meal and break opportunity the Labor Code provides. One option is to have your employees certify, under the penalty of perjury, in their time records that their entries are accurate, including those reflecting their meal and rest periods. Q: We’re in negotiations to sell our business. I hear terms such as “pre-emptive rights,” “drag-along rights,” “tag-along rights,” and the like. What language is this? A: These are industry terms in the mergers and acquisition world. They describe various rights afforded shareholders. In your world, these terms are relevant if you roll over some of your sales proceeds into equity in “Newco” (verbiage to describe the new company the buyer may contemplate forming to operate your business on a go-forward basis). A thorough discussion of the definition and impact of these terms, and numerous others, is beyond the scope of this column. However, the three you mention can be explained as follows: “Preemptive Rights” ~ the right of certain stockholders to maintain ownership of a constant percentage of a company’s stock. Such stockholders have the first opportunity to purchase new stock in the company proportionate to the percentage of shares already held; “Drag-Along Rights” A right that enables a majority shareholder to force a minority shareholder to join in the sale of a company. The majority owner doing the dragging must give the minority shareholder the same price, terms, and conditions as any other seller; “Tag-Along Rights” A contractual obligation used to protect a minority shareholder (usually in a venture capital deal). Basically, if a majority shareholder sells its stake, then the minority shareholder has the right to join the transaction and sell their minority stake in the company. This concept is also sometimes referred to as “co-sale rights.” Ira Rosenblatt is a business and corporate lawyer and a co-founder and director of Stone, Rosenblatt & Cha, a business law firm in Warner Center. Rosenblatt has earned Martindale-Hubbell’s highest rating (“AV”) for legal ability and ethics and is listed in the Martindale-Hubbell’s National Bar Register of Preeminent Lawyers. He can be reached at [email protected].