Unfair Competition

Before a business can establish commercial relations with its customers, it must create an identity for itself, as well as for its goods and services. Economic competition is based on the premise that consumers can distinguish between products offered in the marketplace. Competition is made difficult when rival products become indistinguishable or interchangeable. Part of a business's identity is the good will it has established with consumers, while part of a product's identity is the reputation it has earned for quality and value. As a result, businesses spend tremendous amounts of resources to identify their goods, distinguish their services, and cultivate good will.

The four principal devices businesses use to distinguish themselves are trade names, trademarks, service marks, and trade dress. Trade names are used to identify corporations, part-nerships, sole proprietorships, and other business entities. A TRADE NAME may be the actual name of a business that is registered with the government, or it may be an assumed name under which a business operates and holds itself out to the public. For example, a husband and wife might register their business under the name "Sam and Betty's Bar and Grill," while doing business as "The Corner Tavern." Both names are considered trade names under the law of unfair competition.

Trademarks consist of words, symbols, emblems, and other devices that are affixed to goods for the purpose of signifying their authenticity to the public. The circular emblem attached to the rear end of vehicles manufactured by Bavarian Motor Works (BMW) is a familiar example of a TRADEMARK designed to signify meticulous craftsmanship. Whereas trademarks are attached to goods through tags and labels, service marks are generally displayed through advertising. As their name suggests, service marks identify services rather than goods. Orkin pest control is a well-known example of a SERVICE MARK.

Trade dress refers to a product's physical appearance, including its size, shape, texture, and design. Trade dress can also include the manner in which a product is packaged, wrapped, presented, or promoted. In certain circumstances particular color combinations may serve as a company's trade dress. For example, the trade dress of Chevron Chemical Company includes the red and yellow color scheme found on many of its agricultural products (Chevron Chemical Co. v. Voluntary Purchasing Groups, Inc., 659 F.2d 695 [5th Cir. 1981]).

To receive protection from infringement, trade names, trademarks, service marks, and trade dress must be distinctive. Generic language that is used to describe a business or its goods and services rarely qualifies for protection. For example, the law would not allow a certified public accountant to acquire the exclusive rights to market his business under the name "Accounting Services." Such a name does nothing to distinguish the services offered by one accountant from those offered by others in the same field. A court would be more inclined to confer protection upon a unique or unusual name like "Accurate Accounting and Actuarial Acumen."

When competitors share deceptively similar trade names, trademarks, service marks, or trade dress, a cause of action for infringement may exist. The law of unfair competition forbids competitors from confusing consumers through the use of identifying trade devices that are indistinguishable or difficult to distinguish. Actual confusion need not be demonstrated to establish a claim for infringement, so long as there is a likelihood that consumers will be confused by similar identifying trade devices. Greater latitude is given to businesses that share similar identifying trade devices in unrelated fields or in different geographic markets. For example, a court would be more likely to allow two businesses to share the name "Hot Handguns," where one business sells firearms downtown, and the other business runs a country western theater in the suburbs.

Claims for infringement are cognizable under both state and federal law. At the federal level, infringement claims may be brought under the Lanham Trademark Act (15 U.S.C.A. §§ 1051 et seq.). At the state level, claims for infringement may be brought under analogous INTELLECTUAL PROPERTY statutes and miscellaneous common-law doctrines. Claims for infringement can be strengthened through registration. The first business to register a trademark or a service mark with the federal government is normally protected against any subsequent appropriation by a competitor. Although trade names may not be registered with the federal government, most states require businesses to register their trade names, usually with the SECRETARY OF STATE, and provide protection for the first trade name registered. Trade dress typically receives legal protection by being distinctive and recognizable without any formal registration requirements at the state or federal level.