According to Professor Ann Bartow at the University of South Carolina, "Writers can make noncommercial use of trademarks without violating trademarks. However, companies can (and do) send threatening letters and even bring suit over such uses. Few writers or publishers have the time and money to defend such suits, so there is a widening gap between what the law allows as a technical matter, and what is allowed by trademark owners as a practical matter."
To avoid disgruntled trademark owners from taking exception to your use of their product names, certain guidelines have developed that should avoid most threatening letters:
1. Trademark names should be capitalized and spelled correctly. Don't try creating your own product that sounds like the trademarked product but is spelled differently like Orios or Crispy Crèmes. You actually increase your chances of a threatening letter because you increase (slightly) the chance that the consuming public will be confused about the name of the real product.
2. Trademark names can be used as nouns but not as verbs. If you ask the product owners what they would like most, they will tell you they would like their product name to be made up of a capitalized modifier and a generic noun: Band-Aid adhesive bandage would make them happier than Band-Aid. However, they will accept a story where the mom puts a Band-Aid and a kiss on a small child's boo boo. However, since using a trademark name as a verb always loses touch with the actual product, doing so will always result in a letter if the trademark holder catches you. So, no rollerblading in the park!
3. Trademark names should be an incidental part of your story (unless you are writing an article reporting on the product) so that you do not appear to be trading on the fame of the trademark. If your young character shares his M&Ms with his best friend, the candy company will not be upset -- but if you create a world where all food is M&Ms, you'll have to seek (and probably pay for) permission from the company. And keep the trademarked products out of the titles of your work.
4. Trademarked products should not be used in a manner suggesting they are shoddy or dangerous. If you write a story about a kid who eats at McDonalds every day for lunch and subsequently gets some terrible stomach disease, you're likely to be in for some trouble. Don't link a product with a problem.
These guidelines are not legal rules, only ways to avoid conflict with trademark holders. In fact, according to Professor Bartow, the first amendment would protect writers from losing suits in most cases. For example, suppose I wrote a murder mystery in which the victims are always conked on the head by Coke bottles. Or suppose I create a character who refers to her poor relations disdainfully as the "Wal-Mart cousins." Would the trademark holder win a lawsuit against me?
"If the characters in the mystery started referring to the killings as the Coca-Cola murders as part of the story, I think that would definitely be within the law," Professor Bartow says. "However, it is very likely that Coca-Cola would object, send threatening letter, and generally test a writer's intestinal fortitude, bank account, and commitment to the First Amendment. And Wal-Mart could try to bring an action for tarnishment or they could claim defamation and probably come up with a whole host of claims, as they can afford a team of top notch lawyers." So even if trademark law allows use of these terms in pretty much any way a writer might choose to, the companies can make what is arguably a free speech right very difficult to exercise.
Of course, a writer can simply writer and ask for permission before using the trademark. However, if permission is refused, the chances of winning a lawsuit become harder. That is why so many writers choose to take the chance. The word lawyers often choose when describing writers and the law is "risk." Writing can be a risky business. But, at least with a working knowledge of the law, we can weigh our risk intelligently.
taken from: "The Write Words to Read"
The Institute of Children's Literature
June 3, 2010