“What’s in a name? A rose by any other name would smell as sweet….”
That’s true — but not as likely that a particular business would be easily identified and remembered by its customers, without a well-chosen identity campaign and branding strategy — including the appropriate legal protection.
Many businesses and entrepreneurs do not realize that their business name is actually a trademark and functions within the trademark law system. Because a business name functions as a trademark, there are many issues to consider in adopting a company or organizational name or “DBA”. (If you are not familiar with trademark law and trademark registration, read the article “Basic US Trademark Facts” on Arborlaw.
Business name adoption and protection (also called “trade name” protection) actually involves five legal areas of concern:
- common-law trademarks and service marks
- “assumed name” registration
- state trademark registrations
- corporate and LLC entity name certification
- federal trademark registrations
The common law of trademarks automatically protects business names from confusing use by multiple users — and against infringement by intentional use — in almost all US states. Common-law mark ownership is obtained by simply adopting and being the first to use a protectable name “in the manner of a mark.”
In order to be able to enforce common-law rights in a company’s name, the business owner must provide notice of its use as a trademark by affixing a notice symbol (“TM”) — and — the business owner must diligently “police” the mark — the company must enforce these rights legally, against others who use the mark on similar goods or services. If the business does not enforce its common-law trademark rights, it will ultimately lose the legal right to stop other users from using the name.
Common-law protection is usually enforced by going to state court, but may also be enforced in federal courts. While the cost of common-law protection is minimal, the protection it gives is also minimal. The business owner relying on common-law trademark protection typically has to “prove more” to win a common-law case than where a registered mark is at stake. And, common-law protection is limited to the geographical area within which the business can prove that it is actually using the mark.
The biggest pitfall to protection by common law is that a business owner seeking to stop another user will have to prove in court that the other user actually had notice of the trademark claim. In contrast, where a business name is registered as a trademark, the trademark registration serves as “constructive” notice and others are assumed to know about the protected use, whether they actually do or not.
But this is putting the “cart before the horse” — how does a startup or group know whether a name is even available for common law trademark protection? See “Investigating Business Name Availability Before Filing,” below.
“Assumed name” registration
This is also called “fictitious name” or “DBA” registration. Many states require registration of a name used by a group, a sole proprietor, or a company, before money can be collected, held or transferred under a business name. It is also required in many circumstances before submitting a bid or signing a contract under the business name.
The business owner registers an assumed name at the county level in most states. What happens to duplicate DBA’s and business names? Although most counties will not register two similar trade names, others will — so an assumed-name registration cannot be relied upon as proof that no one else in the county or the state is doing business under the name. The date of filing the certificate is usually kept on file, and registrations must be periodically renewed.
“Assumed name” registration does not give ANY legal protection against use by others, or ANY guarantee that the use of a name does not infringe others’ legal rights (particularly rights in existing trademarks). The business name owner should always check existing registrations in their county, and any other counties in which he or she will be doing business, before settling on a company name, to determine if there are already other users. Here’s a bonus to a fictitious name certificate: if the business name owner must sue to protect rights in a name, an assumed name registration provides an independent source of evidence, providing the name’s earliest date of use.
All states — including Michigan — have a state-level trademark registration system (similar to the national US federal system). State registration gives priority of use within a particular state and provides the advantage of giving “constructive notice” to others who may begin using a similar trademark or service mark after the owner. Protection extends to the state borders. An added advantage: state registrations are picked up by the computerized databases, so others searching for conflicts will know of the business owner’s trademark use. Also, states usually allow the registration of business and trade names, while the federal system has additional requirements before these may be registered as trademarks on the US system.
Although a business owner’s state trademark registration doesn’t “beat out” a prior user of the same name under the common law, many state laws provide that a name which is registered and not opposed for a period of time becomes “incontestable” — as a general rule, even prior common-law users cannot challenge a mark once it becomes incontestable under state law. And, state fees are typically low.
There is one case where a state trademark registration is particularly appropriate: where a business owner is making an appropriate trademark type use of the business name, and where use is geographically limited to an area within one state. If business is limited to goods or services which are truly local (such as a restaurant, dance studio, auto repair or hair salon), a federal trademark registration for a trade name will usually not be possible.
Corporate and LLC Entity Name Certification
Each state certifies the names of corporations, LLCs, and partnerships filed with the state. If a sole proprietor or group is not incorporated but the owner or owners feel the business name is a vital and strategic resource which could not be easily changed, the business owner should consider incorporation or LLC formation, to get the benefit of both liability protection, and business name certification.
Generally, a business owner can keep other corporations from using the same name in a particular state by being the first to incorporate there or to qualify to do business as a foreign corporation (if your company’s corporate home is in another state).
Corporate name certification exists side-by-side with the state’s trademark registration system — neither system legally affects the other. States generally have policies against allowing more than one company to do corporate business under the same name, but there are no guarantees that the corporations agency will actually catch a conflict.
Most importantly — filing corporate or LLC paperwork does not release a company from liability for trademark or trade name infringement of another company’s name. If a state registers a particular corporate name and there is already a company which has been using that name, or a highly similar name, and has trademark rights, the latecomer will have no right to sue the state for putting it into the position of an infringer.
Federal registration provides a business owner with the ultimate in business name protection — protection from others using the same branding or identity on similar products, across the entire country. The company must be doing business or advertising across state lines to qualify.
However, the federal system does not automatically protect all business names. Business names will not be suitable for federal registration unless they are used on goods or services with a true branding strategy — ie, “in the manner of a mark.” Determining whether a trade name is being used “in the manner of a mark” is legally complex. If it seems likely that a business is using the name as a trademark — rather than to merely provide location information in conjunction with the company’s other trademarks — then federal registration is possible — is uniquely valuable — and worth pursuing. Otherwise, it is generally not available for business name protection.
Investigating Business Name Availability Before Filing
Sadly, the majority of service providers advertising low-cost incorporation or LLC services DO NOT investigate availability and liability of the chosen name under trademark laws. (Not surprisingly, courts have held that this is a form of negligence and in some cases have awarded damages against the professionals who neglected this responsibility.)
A party which is already using a certain business name has superior rights — and a company choosing to adopting a name which is already in use may be subject to an expensive claim for infringement, a request for an injunction against use, and possibly a request to pay any profits over to the original user.
Branding professionals, incorporators, and business attorneys should always investigate whether a name is available before recommending it for adoption. The most comprehensive type of investigation is available through a professional trademark searching service like Thomson & Thomson, which searches the federal and state trademark registries, corporate and LLC filings in the 50 states, the Yellow Pages, Internet domain names, and press releases and article copy from trade and industry journals.
An availability and clearance search is absolutely essential for name adoption and protection, where substantial assets are involved or where it would be completely disruptive to change the name in the case of an actual conflict.
Where a less comprehensive investigation is needed, online database searching may be a less costly (but less accurate) alternative.
AND BUSINESS NAME OWNERS
Startups should not delay investigating and protecting business names. Many business owners put off the decision to investigate business name protection until the company is “farther down the road” — only to find that others are doing business under the name they have invested in — or worse, they receive a “cease and desist” trademark letter to immediately stop using the name — causing thousands of dollars in unplanned legal expenses and possibly, a business disruption.
Here are some tips for use, after a name has been searched and cleared:
- Business owners should use the appropriate common-law symbol “TM” in all their advertising and marketing materials. This gives “notice” to others that the company means to protect the name.
- At a minimum, the company should invest in state-level trademark protection, for all its products and services, in the states in which it primarily transacts its business.
- Sole proprietors should consider incorporation or forming an LLC, if they are not already using an entity. Further, existing entities should consider filing as a foreign corporation in states in which they experience meaningful sales volume, to block use by others.
- All companies should pursue federal trademark registration for their business name, if possible. Business owners should also pursue separate service mark registration for the service aspects of their business.
Copyright 1999 – 2007 Carol Ruth Shepherd.
If you have issues concerning business names and/or DBAs (or questions about how these are affected by trademarks) and you need to consult a business attorney who is experienced with business name protection and liability, you can reach Carol at (734) 668-4646.