By using a trademark, the trademark owner is given common law trademark rights
Before the Lanham Act in 1946, which established trademark law by statute, trademark law and the concept of trademarks as a property right developed in English common law. Common law trademark rights are acquired by use of the trademark. An 1879 US Supreme Court decision stated that a trademark “is a property right for the violation of which damages may be recovered in an action at law…” In other words, trademark owners can recover damages caused by trademark infringers by bringing a lawsuit based on their common law rights.
So how does the common law trademark rights work in practice? If Company X used ACME as a trademark for beer in the Boston area, Company X acquired common law trademark rights for ACME in connection with beer in Boston and the surrounding areas. If a third party infringed the common law rights of Company X by using ACME to sell beer in the Boston area, Company X could recover damages and prevent them from using the ACME trademark by suing their competitor for trademark infringement. However, a company in San Francisco could sell a beer called ACME in the Bay Area without infringing the Company X’s common law trademark rights to ACME in the Boston area.
As demonstrated above, once a business begins using a trademark, it acquires common law rights to the exclusive use of that trademark for the goods and services it is used in connection with only within the geographic location the trademark is used. An issue that started to occur prior to the passage of the Lanham Act in 1946 was that trademark infringement was becoming common whereby infringers would purposely use large regional companies’ trademarks in areas the regional companies had not entered yet. To prevent bad faith infringers from escaping consequences of their bad faith trademark infringement, Congress passed the Lanham Act to give companies the opportunity to get trademark protection across the country. One of the main benefits of a federal trademark registration, is that it allows trademark owners the exclusive right to their trademark across the country rather than just in their geographically protected area under common law trademark rights.
The Lanham Act, aka the Trademark Act of 1946, established the trademark registration system
Even though we have a federal trademark registration system today, common law trademark rights still exist. In some cases, a small company, or a company which will only be around for a short period of time, can rely on their common law rights to protect their trademarks. However, for any company looking to expand into several states, regions, or nationally, it makes sense to spend the time and money securing a federal trademark registration to be protected from trademark infringement across the country.
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