That sinking feeling in your stomach. For small business owners, that feeling comes with the territory. Sometimes, it's butterflies. Other times, you're flying down a roller coaster.

But when you get accused of violating a law, it can feel like an anvil got dropped.

So, what do you do when someone tells you you're violating their trademark? Here are 5 steps to follow that will give you a better sense of how this works.

Step 1: Understand these four key parts of how trademarks work.

First, understand what trademarks are. A trademark is a business's brand that lets customers know who the source of that good or service is. You create a trademark when you use branding in commerce in connection with that good or service. And they exist to prevent confusion in the marketplace. For more information about the basics of trademarks, read our blog post "Trademarks 101."

Second, understand how trademarks are protected. There are three ways a trademark can be protected under U.S. laws. The most powerful way to protect a trademark is to have it registered at the federal level. You do this through the United States Patent and Trademark Office (the "USPTO"). Federally registered trademarks create a legal presumption. That presumption is that the trademark owner has exclusive rights nationwide. You can also register a trademark at the state level (the USPTO has links for all states on this page). But that only protects the trademark in that particular state. Finally, even your trademark isn't registered, you still get automatic protection. This "common law" protection is limited to your geographic area.

Third, understand how priority works. When it comes to trademarks, priority is crucial. Who has "priority" to use the trademark? Some people get confused here. The true owner of a trademark is the first one to use that trademark in commerce. Let's say someone files for a registered trademark with the USPTO. They started using this trademark a month ago. You've actually been using that trademark for ten years with the same kind of product. That federal registration creates a "presumption" that they own the trademark. But you were the first to use it in commerce. That means you're the true owner of the trademark.

Fourth, when it comes to trademark enforcement, you use it or lose it. Owning a registered trademark takes responsibility. Not only do you have to keep using the trademark, you also have to enforce your rights. In other words, you risk losing your trademark rights if you don't call out infringers.

Step 2: Document everything.

Create a new folder on your computer. Save everything that has to do with this infringement accusation. If you were contacted about this accusation by email or in a letter, save a copy and put it in that folder. If you received a phone call, write down what was said. Take screenshots of your items or listing—whatever is at issue here—and save them in the folder. Look up who this accuser is, take more screenshots, and save those in the folder. Assign a date to these records.

Step 3: Identify how you've been contacted.

This is important. An accusation of trademark infringement can come in different forms. How you should respond really depends on how they've contacted you.

  • Informal heads up. Sometimes, the person will reach out assuming the best and that it was an honest mistake. The tone is friendly, and they're politely asking you to take down your use of the trademark.
  • Formal heads up. This may or may not be a follow-up to the informal heads up. Here, the accuser is still trying to be cooperative. But patience is waning. The accuser tells you that there will be consequences if you don't stop using the trademark.
  • Cease and desist letter. Now things are serious. Cease and desist letters can come from the accuser or the accuser's attorney. They threaten litigation if the infringement does not stop. Sometimes, they'll offer a settlement payment or some kind of license or shared ownership of the trademark. (Technically, those "heads up" notices could be considered cease and desist letters. I'm separating them here to show how different the tone can be.)
  • Takedown notice. Sometimes the accuser won't notify you directly of trademark infringement. Instead, you'll receive a notice from the owner of a website hosting platform (such as Etsy or Facebook). Due to a recent law called the Digital Millenium Copyright Act (or the "DMCA"), copyright holders can go through a process with a website platform to take down items that violate copyrights. When platform tells the alleged violator about the accusation, that's called a DMCA takedown notice. As the name suggests, the DMCA applies to copyrights and not trademarks. But some platforms have created a process so that trademark infringement can be reported just like copyright infringement. 
  • Complaint and summons (AKA a lawsuit). Usually, a cease and desist letter will get sent before a business starts a lawsuit over trademark infringement. But it's not a requirement.

Step 4: Analyze the infringement accusation.

In this step, you're really trying to answer this question: "Well, shoot, am I really infringing on their trademark?" Consider these points.

Layers of trademark protection. Remember those three layers of trademark protection? Trademarks registered at the federal level, trademarks registered at the state level, and unregistered trademarks. Which type of trademark is at issue here? The notice might not be clear. If it is unclear, do some searching on the "TESS" page of the USPTO's website. (I know, they love their abbreviations over there.) See if there's an existing or pending registration.

First use. Does the accuser say when he or she first started using the trademark in commerce? If so, did you start using it before or after them? Remember that the first to use in commerce is the true owner. 

Likelihood of confusion. This part gets complicated. Keep in mind the whole point of trademarks: to prevent customer confusion. The accuser will need to show a likelihood of confusion in the marketplace to prove infringement. Courts consider different factors for this, but I'll spare you the boring legalese. Are you selling completely different things? How similar is your branding to theirs? How likely is it that customers would be confused by both of you using the trademark?

These topics might highlight some red flags for you. But this isn't a complete list of things that can come into play when analyzing trademark rights. For a comprehensive analysis of infringement accusations, see a trademark attorney.

Step 5: Choose your reaction.

Now it's time to do something (or nothing). Proceed with caution. All these actions could have legal consequences, so be careful. Legal representation is recommended.

Remove. You may decide to remove items that are the subject of the infringement accusation. This removal might be temporary or permanent. Removal might minimize the damages you owe for trademark violation. But it can also suggest fault.

Clarify. You might choose to respond and ask for more information. For instance, a cease and desist letter might be very vague. A response could ask for more information about dates of first use, registration details, and geographic locations. If you do reach out to the accuser, do in the form of an email, letter, or some sort of text message. Don't pick up the phone. You want to leave a record of this communication in case you need it later on.

Negotiate. Sometimes an accuser would be willing to give you a license to use the trademark. Other times, you might be able to come to an understanding as to how you can both use the trademark.

Contest. Do you think that the accuser's rights to that trademark are meritless? If so, you do have the option to fight and challenge their claims to exclusive rights in that trademark. You can "oppose" a pending federal registration. You can file a petition to "cancel" a registered trademark. You might even be able to take this to court and ask for a variety of remedies.

Sit tight. Finally, you could do nothing. Sometimes, bullies send cease and desist letters to scare and intimidate business owners. Sometimes they don't have a strong argument for their rights to the trademark at issue. They don't expect you to call their bluff. Be careful though. If you are in fact infringing, then you could be punished for this continued infringement.

There's no one-size-fits-all solution when you get accused of trademark infringement.

These 5 steps aren't meant to give you an actionable to-do list. But, hopefully, you're not feeling as sick to your stomach.

Want to talk things out with an attorney and figure out your next steps? Let's grab a consultation call. Indie Law doesn't handle trademark litigation matters. But there's a lot you can do before you enter the fighting ring with the accuser. If litigation or a challenge is on the horizon, we've got great recommendations for you.

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