Buoyed by the popularity of their trendy hair salon in the Chicago suburb of Hinsdale, Raymond Koubek and Salvatore Segretto created a line of shampoos, conditioners and gels under the Zazu salon brand.

They registered "Zazu" with the Illinois trademark office in 1980 and began selling the products to clients on a limited basis in 1985. In 1986, Koubek and Segretto were astonished to see national magazine ads for a line of temporary hair color products called Zazu, placed by L'Oreal, a major Paris-based cosmetics company.

"We were as careful as a small business owner could be and went through the trouble of protecting ourselves," said Koubek, who immediately contacted L'Oreal and told them to stop using his trademark.

L'Oreal officials told him it was too late to stop distribution of what turned out to be a short-lived product.

The angry entrepreneurs sued L'Oreal and in September 1988 a federal judge in Chicago awarded Zazu's founders $2.1 million in damages. They are still waiting for the money, but feel vindicated because the judge agreed that L'Oreal flagrantly violated Zazu's trademark registration.

John D. Sullivan, corporate counsel for Cosmair Inc., which licenses the L'Oreal line, said the ruling was "extraordinarily unusual" and said he is still awaiting the judge's final ruling in the case.

Many small business owners who think filing for a trademark is too expensive or time consuming will be surprised to learn it usually costs less than $1,000 and can save you endless grief.

"The money you spend in the beginning to protect your name is going to pay itself back 100 times," said James Warren, head of the intellectual property group at the San Francisco law firm of Pillsbury, Madison & Sutro.

Warren, who has been hired to protect the "New Kids on the Block" rock group name, among other big and small company trademarks, said even the tiniest company can benefit from trademark protection.

Your company may be small now, but if your products or services take off, you don't want imitators to threaten your success. On the other hand, if you use a name that belongs to someone else, you can be put out of business immediately if they find out.

It is possible to conduct a trademark search on your own, but hiring a competent trademark attorney is not as expensive as you might think.

Once you've chosen a name you like, the first step is to see if anyone else is using it or anything that sounds or looks like it. This kind of first-level search is usually done by paralegals and costs $50 to $100. If nothing turns up at that level, the next step is to complete a national search of databases, telephone books, trade magazines and other published sources. The second phase can cost $250 or more, depending on how complex and comprehensive the search is.

Names are not the only thing you can register as a trademark. Logos and other graphic designs can also be protected, Warren said.

If the name you choose is available, the next step is to file an application with the U.S. Patent and Trademark Office. The government charges a $175 application fee for each class of goods or service for your product. To qualify for a federal trademark registration, your products have to be sold in more than one state.

After your application arrives at the patent office, it is given to an attorney who determines whether there is anything "confusingly similar" between your trademark and others. If your trademark application clears this hurdle, notice of your intent to register the mark is published four times in a weekly publication called the Official Gazette so others can be alerted.

While big corporations have entire legal departments devoted to protecting trademarks, small business owners usually have to rely on vendors and customers to tell them if another firm is infringing on their product name.

Finn said there are about 650,000 active, federally registered trademarks, plus thousands of others registered with states. In our computerized society, he said, anyone who tries to get away with using someone else's name will eventually get caught.

He said his trade association, which has about 2,200 members, offers several publications to help business owners deal with trademark issues.

"A Trademark Is Not a Patent or Copyright," "Protecting Your Trademarks Abroad," "Trademark Checklist," "The Guide to Proper Trademark Use" and "Trademarks ... A Winning Combination" are among the publications available for a modest fee from the association. To obtain a publication and price list, send a self-addressed stamped envelope to: U.S. Trademark Association, 6 East 45th St., New York, N.Y. 10017.

Jane Applegate is a columnist for the Los Angeles Times.