• Bank Name Robbery: Choosing and Policing Strong Marks
  • March 20, 2006 | Author: John C. Pickerill
  • Law Firm: Fredrikson & Byron, P.A. - Minneapolis Office
  • The banking industry often adopts trademarks that are difficult for consumers to differentiate and almost impossible for owners to protect. Names like First National and Community Federal have left consumers confused and bankers handcuffed. This tendency to choose similar marks has created a trademark landscape not unlike the old west, in which the law is helpless to protect an honest but weak trademark from competitors. However, with a little creativity, a bank can set itself apart in this muddled marketplace by choosing a mark that will resonate with the public and protect against the competition.

    When banks operated in geographic isolation from one another, there was little need to differentiate from competitors. As a result, banks often chose marks that merely described aspects of the corresponding services, such as First Federal for the first federally-backed bank in an area or Deadwood Bank for the bank in Deadwood. Unfortunately, marks that describe the services or geographic area are considered weak under trademark law. In today's competitive world of Google® searches and international commerce, it is increasingly important to break through the competitive clutter with a strong, distinctive mark.

    In choosing a mark, it is important to remember the function of a trademark. A trademark is any word, phrase, symbol, design, sound, smell, color, product configuration, group of letters or numbers, or any combination, used by a company to identify its products and services and distinguish them from products and services of others. A trademark is NOT a corporate name filing with the Secretary of State or a Department of Commerce registration. These governmental requirements are only concerned with ensuring that a business name is literally unique for governmental purposes; they do not consider marketplace factors or trademark law, in which literal differences are often differences without a "distinction."

    As discussed above, terms that merely describe some aspect of the services are considered "descriptive." To avoid inhibiting competition by limiting the availability of language needed to fairly compete, descriptive marks are initially unprotectable. For example, the term "FDIC" is an industry term common to most banking services, so the competitive need for this term to be available for use outweighs any single bank's trademark interests. Descriptive terms are only protectable if consumers start recognizing the terms as having a secondary meaning in indicating the source of a single owner's specific services, rather than merely functioning as a descriptive phrase. Establishing this "secondary meaning" in the minds of consumers is difficult to achieve and even more difficult to prove, especially if a mark is highly descriptive.

    Trademark owners are usually better served by distinctive marks. Marks that are applied arbitrarily (such as APPLE for computers) or that are completely fanciful (such as KODAK for cameras) are immediately protectable and afford great latitude in policing geographic and industry market areas. Such distinctive marks also gain advantages in the U.S. Trademark Registration system. A distinctive mark can be immediately registered on the Principal Trademark Register, receiving nationwide rights, the possibility of treble damages and attorney's fees in litigation, and other benefits. Descriptive marks are relegated to a Supplemental Register until the owner can prove "secondary meaning." Supplemental registrations do not receive presumptions of ownership or the monetary and litigation advantages enjoyed by Principal registrations.

    For example, if a bank adopts a descriptive mark like SAFEMONEY BANK and a competitor subsequently enters the exact same market with MONEYSAFE BANK, it will be difficult for SAFEMONEY to prevent the use of this equally descriptive, albeit similar, mark. SAFEMONEY BANK's Supplemental registration is little help, because it carries no presumption of rights. As a result, SAFEMONEY would be forced to change its own name, or conduct a $50,000 "secondary meaning" consumer survey and a six-figure trademark lawsuit, just to gain a 50/50 chance of chasing MONEYSAFE out of the market.

    On the other hand, if a bank adopts a more distinctive mark such as the fictional IVORY PILLAR BANK, it could use a Principal Trademark Registration to challenge subsequent use of a mark like PILLAR IVORY BANK anywhere in the country, even if the services are not identical. More importantly, IVORY PILLAR can easily leverage the distinctiveness of its mark with consumers, creating a unique and recognizable market presence with confidence that competitors can't steal or erode the goodwill of the mark.

    How does a bank choose a distinctive mark? It just takes a little creativity. First, define the bank's characteristics and attitude. Should it evoke images of safety and strength, warmth and community, cutting edge growth, etc.? Maybe survey the competitive landscape to define a niche. Then, brainstorm terms that reflect this unique personality. Have fun. Use analogies, synonyms, foreign words, internet searches, dictionary terms. Combine, divide and invent terms until one feels right. Finally, make sure no other banks are using a similar mark.

    The choice of a mark can have huge consequences on a bank's long-term success. With a little brainstorming and some strategic thinking, your consumers and competitors will soon find out there is a new, strong and distinctive sheriff in town.