Which statement is true regarding fanciful trademarks?

Fanciful trademarks are defined as terms that have no prior dictionary meaning or significance before they are used as a trademark. This characteristic makes them inherently distinctive as they are specifically created for the purpose of identifying a particular product or service. For example, a coined term like "Kodak" has no prior meaning and is not associated with photographic products until it became a trademark for such goods.

The other options do not capture the essence of what makes a trademark fanciful. While commonly used words that describe goods are known as descriptive marks, geographical representations pertain to geographical trademarks, which also do not fit the definition of fanciful. Moreover, arbitrary marks, while sometimes confused with fanciful marks, are typically known words used in an unexpected context (like "Apple" for computers), thus differing from the completely invented nature of fanciful trademarks. Therefore, the statement that fanciful trademarks have no prior dictionary meaning clearly identifies their unique and distinctive nature in trademark law.