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Fund Name Game: Winning with Trademarks

By: Claire Little *

In the world of fund firms, picking a distinctive fund name may be a topic of little consideration. However, distinctiveness opens the door to trademark protection for the fund name and potentially gives the firm “an invaluable asset” and the benefit of competitive advantage, assuming the name carries a positive connotation in clients’ minds.

Two firms recently clashed over trademark rights to the phrase “absolute strategies.” The competitors Loomis, Sayles & Co. and Absolute Investment Advisors, LCC, went head-to-head over whether “absolute strategies” was a generic industry term. Absolute Investment Advisors trademarked the phrase and sued Loomis, Sayles & Co. after the firm “rolled out Loomis Sayles Absolute Strategies.” The two firms settled out of court. (Loomis renamed its fund Loomis Sayles Strategic Alpha.) As similar disputes play out, use of descriptive investing terms will leave firms walking a fine line between what can and cannot be protected by trademark.

According to the Lanham Act, “no trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless . . . when used on or in connection with the goods of the applicant [the mark] is merely descriptive” of the goods. After trying to register descriptive terms with the Patent and Trademark Office (PTO), Goldman Sachs, Capital Group Cos., and Absolute Investment Advisers all received rejections. One strategy to avoid the setback of a rejection is to add a “unique term” to the descriptive word—a tactic that worked for Putnam Investments and ProFund Advisors, LLC.

Another path to successful registration requires waiting until the mark acquires secondary meaning. Even descriptive marks can be registered if the mark acquires secondary meaning. A mark acquires secondary meaning when the mark becomes “distinctive of applicant’s goods in commerce;” i.e. the public recognizes the mark as a source identifier. But, if a new firm wants to trademark it’s fund name, then waiting to gain distinctiveness could cost it the game. Before the mark is protected, anyone has a right to use the mark which could lead to competitors creating confusion in the public as the source of the fund. In such a situation, timing is key, and success [in registering a mark] hinges on the nuances of the moniker a firm picks.

With the ability to trademark its fund names, a firm gains the ability to control its public identity and client reputation: “High-level investment business is commonly conducted based on trust and personal relationships among individuals. If any investor reads about a [Firm A] investment … and mistakes that transaction for a [Firm B] investment of which it was not aware, it may well feel ‘cut out’ of a potential lucrative deal.” In the fund name game, distinctiveness is the key to winning with clients and competitors.

* Claire Little is a second year law student at Wake Forest University School of Law. She holds a Bachelor of Arts in English and Philosophy from Virginia Tech. Upon graduation, Ms. Little plans to pursue intellectual property law.