What we're talking about 

A trademark is a sign (usually a brand name or a logo) that's registered in one or more territories around the world, in connection with a business' particular products or services. Trademarks are a form of intellectual property (IP), existing alongside other IP rights such as copyrights and patents. You'll probably recognize these classic examples. Businesses register trademarks to make sure their sign isn't used by anyone else, which would risk confusing people. A trademark offers the exclusive use of a sign in a particular territory for selected products and services. 

Trademark infringement occurs when, whether by accident or design, a brand steers too close to another's sign without permission. Whoever owns the rights can then start legal proceedings. Although similar principles apply around the world, trademark infringement law differs by territory. This guide will cover US law; the World Intellectual Property Organization can point you in the right direction if you're based outside of the US.

Why it's important 

We'd hope that you haven't intentionally set out to riff off another business, but you'd be surprised at how many original names and logos for brands and products are similar to those already registered by other companies. Pleading ignorance won't cut it. You may find yourself having to change the name of your business, rebrand completely, destroy stock and pay damages and legal fees. At the very least, an accusation of trademark infringement is an expensive and time-consuming inconvenience. 

Brand protection is a big deal to major corporations. They have the resources to be constantly on the lookout for trademark infringement, ready to take perpetrators to task. Rather than planning what you'll do in the event of a warning, it's important to take preventive steps to foolproof your brand identity and promotion methods, particularly online.

Things to note 

Know about the ‘likelihood of confusion’. You can infringe someone's trademark without producing a carbon copy; the standards you'll be held against are nuanced and hinge on the idea of likelihood of confusion. You should be reasonably well-acquainted with this from the off. The basic question is whether the sign you've used is so similar to an earlier registered trademark that it could cause people to be confused and believe that your goods and services come from the owner of the earlier rights. Here's more on the basic factors of likelihood of confusion. 

Be aware of trademark dilution, tarnishment and free riding. As you go about securing your brand, there are a few other types of trademark infringement to know. These are designed to offer additional protection for trademarks that have developed a reputation through use. A big brand may accuse you of trademark dilution if it feels your brand is going to reduce the exclusive nature of its sign – even if you use it for different goods and services. On a similar basis, the brand may argue that your use of its trademark tarnishes its mark or detracts from its value. It may also argue that, by using its trademark, you're building a brand based on its hard work. In each of these instances, there doesn't need to be any consumer confusion – eg, if you use a logo similar to that of Coca-Cola on one of your products, it could still land you in hot water even if you're, say, an IT consultancy and it's obvious the two brands aren't associated.

Some stuff doesn't qualify for trademark protection. Trademarks can be separated into different categories of protection, determined by how distinctive they are. Trademarks that are ‘fanciful’ (a made-up word – eg, Pepsi), ‘arbitrary’ (a real word that's unrelated to the product sold – eg, Apple) and ‘suggestive’ (subtly hints at what the company offers – eg, Netflix) are afforded strong legal protection. Trademarks that describe goods and services don't get as much protection. That means you're generally allowed to describe what your product does without risking infringement – but, if you need to use a brand name to describe your product or service (eg, this item is compatible with Apple MacBooks), be careful.

You can be the victim. Although this guide is focused on avoiding infringing on another brand's trademarks, you can just as easily find yourself the victim of trademark infringement. It could be another small business or a large corporation taking advantage of the fact that you're less well-known or operating in a different territory. Dealing with infringers, though, is a guide for another day. 

How to avoid trademark infringement in the US

1. Assess your situation. The best time to take action is as soon as you set up your business, but it's never too late to start. What you do will naturally vary from business to business, but a solid starting point is considering whether your name, logo and brand description are generic or descriptive. Assess how contested your industry is and how aggressive the main players are. You'll need to weigh up the time and effort it'll take to get rid of any trademark-related risks and how damaging an accusation of infringement is likely to be for your brand. 

2. Conduct a trademark search. There are some things anyone can do for free. The US Patent and Trademark Office (USPTO) has a database called the Trademark Electronic Search System (TESS) where you can search for both words and designs. Remember to look for things that might be construed as confusingly similar, as well as exact replicas. Here are some detailed instructions on best practice. 

3. Conduct a wider search. The TESS isn't the be-all and end-all. You should also check trademark databases at a state level, and search the internet. As well as Google, consider browsing online marketplaces like Amazon. Although trademarks registered with the USPTO have the most protection in law, there's some security for less formal trademarks. Even if something is unregistered, you can be accused of ‘passing off’ and have to make changes. 

4. Work with a lawyer if needed. Your searches might pull up a bunch of questions, since there are a lot of gray areas when it comes to trademarking. If you want the uncertainty cleaned up – and feel it'd be a worthwhile investment – consult an IP lawyer. They'll be able to lend an educated eye to the question of whether something is too similar and offer insights on avoiding risk. They'll also be able to help with more comprehensive searches (such as international databases).

5. Document everything. Make a note of all the due diligence you've done, saving screenshots, documents from lawyers, a record of when you started trading, and so on. This will come in handy if someone does come for you further down the line. This evidence will also help if you decide not to register for a trademark of your own, only for a newer company to accuse you of infringement. Under the principle of priority, you have rights that can be used against their official trademark, if you've been around for longer. 

6. Think about insurance. If you're particularly worried about the fallout from a potential accusation, look into business insurance. Some general liability insurance policies will cover trademark infringement litigation. Check you have insurance under Coverage B, which accounts for personal and advertising injury liability. 

7. Consider registering a trademark of your own. If you've worked through all of these steps, chances are that brand identity is pretty important to you. If you can afford the $350 initial application fee, it might be worth registering your assets to put yourself in the most defensible place going forward. 

Key takeaways 

• Small businesses can be accused of trademark infringement by other (usually bigger) brands, but they can also have their IP misused. You need to take preventative action against both. 

• Trademark infringement cases hinge on the likelihood of consumer confusion. How likely is it that someone will get the two brands mixed up? 

• You can do a fair bit of due diligence for free, but you should enlist a professional if you're in a particularly contested space. 

Learn more 

Perspective. From attorney Holly Collins in the Orlando Business Journal, here are five tips to avoid being sued for trademark infringement.

Example. From beauty brand Good Light and sex toy company Bump'n, these are two examples of how an infringement charge can cause disruption for small businesses. 

Tool. The USPTO website is pretty user-friendly; it's a one-stop shop for reliable tools and resources related to trademark infringement.

A version of this article was published in the Courier Workshop newsletter. For more deep dives into essential business concepts, sign up here.