What Is the Penalty for Violating a Trademark?

By Cindy Hill

A trademark is a symbol, word or phrase that identifies the source of a product or service. Trademarks are valuable business assets that help consumers distinguish a particular brand in the marketplace. Trademark violations can diminish a brand's value and popularity, costing a business sales and profit. A lawful owner of a registered trademark can protect that trademark by bringing a civil lawsuit. Civil litigation penalties for trademark violation include injunctions and monetary damages.

Cease and Desist Letter

Lawful trademark owners may begin enforcement of a trademark violation by sending the unlawful trademark user a cease and desist letter. Negotiating an agreement to stop the trademark violation is preferable to proceeding with litigation, according to trademark attorney Gregory H. Guillot of GGMark. To avoid the penalties that might result from a trademark violation lawsuit, the person engaging in trademark violation might agree to change her business logo or marketing phrase to avoid confusion with the lawful trademark.

Injunction

Owners of trademarks that have been registered with the U.S. Patent and Trademark Office can bring a civil lawsuit requesting the penalty of an injunction against a person who violates the trademark. An injunction is a court order directing the person who violated the trademark to stop using the trademark unlawfully. An injunction may also order that any goods bearing the trademark be seized and destroyed. Faced with an injunction, the trademark violator must either change her trademark to one that is not likely to be confused with a lawfully registered trademark of another company, or cease doing business.

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Monetary Damages

A trademark violator who is sued by the owner of a lawfully registered trademark may be ordered to pay monetary damages. These fiscal penalties are based on lost profits calculated from the sales the trademark violator made while using the trademark illegally. If the court finds that the trademark violation was intentional, such as a case in which the violator is selling goods that he is trying to pass off as coming from a known popular brand, the court may impose penalties of three times the amount of actual lost profits.

Attorneys' Fees

If a trademark violation lawsuit is not settled by agreement prior to trial, and the trademark owner prevails, the court may order the violator to pay the trademark owner's attorney fees and costs of litigation in addition to other penalties. Trademark litigation is an expensive endeavor and the attorneys' fees and costs can be substantial. Avoiding trademark litigation by negotiating a resolution prior to the expenses of trial is a preferable course, according to Guillot.

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How Do I Know If I'm Violating a Trademark?
 

References

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FASB Rules for Trademark Costs

Trademarks are federal grants that allow businesses to exclusively use specific words, names, symbols and logos. Since exclusive use of the trademark benefits the company, trademarks are counted as an asset, known as an "intangible" asset. How the costs associated with a trademark are treated in a company's financial reports is governed by FASB rules -- part of the US Generally Accepted Accounting Principles -- and will depend on how the trademark was developed, its useful life and whether the fair market value of the trademark fluctuates.

What Happens When You Violate a Patent?

Patent rights are so important the founding fathers mentioned them in the U.S. Constitution. This respect for patent rights encourages companies to develop new technologies because the courts may punish those who violate those rights. Such punishment is commensurate with the damages suffered by the owner of the patent.

How to Identify a Trademark

According to the United States Patent and Trademark Office, a trademark is essentially the same thing as a brand name. It may consist of a word, phrase, symbol or any combination thereof to establish an association between the mark and a particular product, service or celebrity. In effect, it helps the consumer distinguish one manufacturer from another. Because a trademark is unique by design or suggestion, it stands apart from generic words and symbols, making it easy to identify.

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