Trade Name Vs. Trademark: Know the Difference

The terms "trade name" and "trademark" sound similar, but it's important for business owners – especially those just starting businesses – to know the difference. The law makes a definite distinction between the two, and it's important to avoid choosing a trade name that's too close to a registered trademark, as this could expose you to a potential lawsuit.

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.

A trade name is simply 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. Legally registering a trade name is an important step in branding for a company, but it doesn't provide an unlimited brand name or use of the name legal protection. State laws vary on requirements for registering a trade name, but most states require registration either with the state government or through your local 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 IRS, separate from your personal income tax return.

The Small Business Administration (SBA) website provides links to 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 might find more than one "Joe's Painting and Roofing Co." operating in different cities in the same state.

However, even though registering a trade name does not provide legal protection in the way that registering a trademark does, selecting a trade name should still be done thoughtfully, as it is the initial step in establishing an identity for your company in the marketplace.

A trademark is a more significant step identified with establishing brand recognition in the marketplace. A trademark can be associated with, or 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.

A trademark requires 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 that governs federal trademark requirements.