The Limits of Common-Law Trademark Rights on The Internet

DEREK FAHEY, ESQ.

What are Common-Law Trademark Rights?

Common-law trademark rights arise through actual use of a mark in commerce rather than through federal registration. Those rights are generally limited to the geographic markets where the goods or services are sold, where customer goodwill has developed, or where natural expansion may reasonably occur. Continuous use is ordinarily required to preserve the protectable interest.

When Can an Unregistered Mark Prevail?

The first user of a mark in a particular market is often called the senior user. A senior user may establish enforceable rights even without a federal registration, provided the mark has been used continuously. Those rights, however, normally remain geographically limited.

If another party later obtains a federal registration, the senior user’s existing territory may be preserved, but the registration can effectively freeze the senior user’s future expansion beyond that established market. This is one reason federal registration can be important even when common-law rights already exist.

How Does Internet Use Affect Geographic Scope?

Internet commerce complicates the traditional geographic analysis. Courts have used tests such as the zone of market penetration, which may consider sales volume, growth trends, the proportion of actual to potential customers, and advertising activity. Other courts examine the zone of natural expansion.

Some decisions recognize the internet as a relevant market or territory, but maintaining a website alone has not automatically produced nationwide common-law rights. The strength and geographic extent of an online user’s rights depend on actual commercial activity, consumer recognition, jurisdiction, and the evidence showing where the mark has penetrated the market.

Businesses operating online should document sales, customers, advertising, and expansion, and should consider federal registration before relying exclusively on geographically limited common-law rights.