What Happens if You Don't Search and Clear a Trademark?
If you don't clear a trademark before using it, your mark may infringe an existing mark. If this happens, you will most likely be forced to stop using your mark, and will probably have to destroy all packaging, advertising and other materials bearing the infringing mark.
Often the most damaging result of having to stop using a mark is the loss of customer recognition of your product or service, and the accompanying loss of business. Common sense dictates that if yours is a small service business in which customers find you by your location as well as your name, then you stand to lose much less than does the large manufacturer whose products are purchased primarily because of brand name devotion. Nevertheless, because of the potential expense of litigation, even small service businesses risk a significant monetary loss.
Furthermore, if you know about a prior right in a trademark that is superior to your own, and willfully continue business, infringing that mark, you stand to loose a lot more than giving up the mark. You will probably have to pay monetary damages to the other party, which is usually disgorging all your profits except those you can prove are not due to the infringing conduct. This is an extremely difficult burden of proof for you to carry.
Finally, if the mark you infringe is federally registered, you will have to overcome a presumption that you infringed willfully. If you cannot overcome this presumption, you can be liable for triple money damages, attorney fees, and more. If the other party thinks they can nail you for monetary damages, they may not be satisfied when you stop using the mark, they will probably sue you anyway. Trademark litigation is more expensive than most, and fees and costs alone average $75,000 if you go all the way to trial.
Many businesses think they will simply stop using the allegedly infringing mark if it ever becomes a problem. This is very short-sighted since you may be sued before you have the chance to stop using the mark. There are three good reasons a business may sue instead of issuing an ultimatum to stop your use of a mark. First, they may want to foreclose your opportunity to have a court judge the matter in a location convenient to you in the event you sue for a declaratory judgment to determine whether or not you are in fact infringing. The second reason is that the owner of a mark may believe you should pay them monetary damages, and may not want to let you off the hook by simply halting use of the mark. The final reason for suing before issuing an ultimatum is to intimidate you, thereby giving the company a superior settlement posture. It is true that not all business owners care to get involved in litigation. However, you will never know for certain which businesses are likely to be aggressive and which will be more reasonable, until it is too late.