Federal Trademark Registration Vs. Common Law

This is a question that I am often asked, it goes something like this… Company A contacts me and wants to use a particular mark for its line of products, however, it did a google search and found that Company B was currently using the identical mark for a similar product(s). We perform a trademark search and learn that Company B has not registered the mark so, Company B’s use is based on common law. The question then from Company A is if Company A moves forward and registers the mark, will it have superior rights over Company B. Said another way, does a mark that is registered have superior rights over a mark that relies on common law.
Answer: No… and yes.
Let’s go a bit further with the facts: We learn that Company B started using its mark about 2 years ago, but again never filed for federal trademark registration. We also learn that while Company B has a website that displays its common law mark, it currently focuses its marketing efforts in three (3) states, Indiana, Illinois and Kentucky.
With those facts, Company B will have senior trademark rights over Company A in those states it does business in, even if Company A registers the mark with the United States Trademark Office. Those senior rights being based on the simple fact that Company B began using the mark in those three states before Company A.
Using the mark in commerce and not filing for a trademark registration results in seniority, however again, when relying on common law rights, seniority is limited to states you are actively doing business in. So under our facts, if Company A elects to go forward with applying for a trademark registration, and is successful, Company B may still have seniority in those states it is currently doing business in, Indiana, Illinois and Kentucky, but Company A, because of its federal registration, would be able to claim seniority in the remaining 47 states. Should Company B later want to expand its market into a fourth state, Company A, with its federal trademark registration could effectively prevent Company B from doing so.
As I mentioned earlier, I am asked this question, or something similar often, and to some, the answer causes some confusion. Remember, relying on common law rights only protects you in those states where you can actively show marketing efforts, while a federal trademark registration protects you in all 50 states. Had Company B pursued federal trademark registration when it first started using the mark a couple years back, it would have then established seniority in all 50 states even though it was only actively marketing in three states. It could therefore expand its marketing efforts in additional states when it was ready, since it had established seniority with its federal registration. Also, with federal trademark registration, Company B would have given the world (including Company A) notice that it had senior rights to the mark in all 50 states. And maybe most important to Company B, had it registered its mark versus relying on its common law rights it would not later have to deal with a Company A entering the marketplace with an identical mark and possibly registering the mark, thereby restricting Company B’s future use.
In short, federal trademark registration has its advantages.