Imagine any famous corporation's logo: that of Apple, Starbucks, or McDonald's, for example. These are all registered trademarks, meaning that their corporate owners have registered the marks with a government agency. However, a mark does not always need to be registered in order to qualify as a trademark.
An unregistered trademark is a mark that has not been registered at the U.S. Patent and Trademark Office (or at any of the state trademark offices). Owners of unregistered trademarks nevertheless have legal rights within the geographic areas in which they operate. These are sometimes referred to as "common law" trademarks, as they are protected by state-based laws concerning unfair competition.
An unregistered mark can sometimes stop a subsequent federal user in the same geographic area. Or alternatively, a larger company moving into an area may not be able to prevent a smaller competitor (whose use preceded the big company) from using a similar name. (Hence, Norman McDonald was able to continue to use his name on his hamburger stand in Philpot, Kentucky, although he had to remove his copycat arches.)
Laws concerning unregistered marks are derived from a common law English business principle: If someone attracts customers (known as "consumer goodwill"), then it is unfair for someone else to falsely pass off products or services with a similar name. Not only would such action harm the first business, but it would confuse consumers about the origin of the goods.
For example, imagine that there was a jewelry store in a small town called "Precious" that made earrings and bracelets. The store attracted customers from the town itself, and also from tourists and others from around the state. The store never bothered to register "Precious," but it operated with that name for decades.
Now, imagine that a new store opens down the street, also calling itself "Precious." Surely, the first Precious would lose customers who mistakenly assumed that the second store was the original, or related thereto. Moreover, the customers themselves would be harmed, particularly if they purchased jewelry that was inferior in quality to the goods they assumed they would get based on the original store's excellent reputation. Everyone would lose, except the new store, which would benefit from the good will created by the original.
Fortunately, even though the first store does not have a registered trademark, state common law as well as state statutes would likely still offer some degree of protection. Sometimes these state laws are referred to as unfair competition laws, or unfair business practices. Famous unregistered trademarks can be protected under dilution laws. (Note, some functioning regional trademarks may not qualify for registration because they are not used in commerce regulated by the federal government, typically, interstate commerce.) These protections exist even in the absence of trademark registration.
As noted, an unregistered first user of a trademark can often claim trademark rights within the relevant geographic area. This means that even though the first "Precious" store might be able to stop a second "Precious" from opening in its town, it cannot stop another "Precious" from opening in Hawaii or New York or Florida. It also cannot stop a second Precious from registering an Internet domain or selling goods online using the "Precious" name.
So, while unregistered trademarks enjoy certain limited rights, the best approach for most businesses is to register your trademark if possible. This advice is particularly true if there is any possibility that you might expand, opening additional locations or doing business outside of your specific town or municipality.
This advice also important given the rise of the Internet, which has created situations where many previously local or regional companies are competing against national businesses. In addition, registration is now a common practice by startups, whose equity investors perceive it as adding value. Registration allows for stricter brand enforcement both domestically and internationally.
Clearly, there are advantages to registering with the U.S. Patent and Trademark Office. Importantly, though, before you register, you will need to establish that the trademark is actually in use. Once your examiner is satisfied that you have a working trademark being used in the marketplace, registration is granted and enhances your already-existing trademark rights. Registration gives the owner a presumption of ownership, provides constructive notice to other companies in the U.S., and offers the hope of incontestability (after a few years). Registration may also increase your payment in case of a willful infringement.
Learn more about the trademark registration process in Nolo's guide to Registering Trademarks.