What’s in a name? Business names and trademarks
One of the first things that must be done when starting a business is to give it a name. Business entities are treated as if they are “persons,” and they can own property, hold bank accounts, send invoices, pay taxes and are legally liable for their actions. Without a name to identify the business, it would be impossible for it to perform these functions.
Often during the business formation process, a business name search is conducted at the Secretary of State’s Office of the particular state of incorporation to determine if a desired business name is available. The Secretary of State maintains a database of all business names to track each individual business. If that particular name is available, then the name is assigned to the business upon the completion of the incorporation process. Now your business has a name, which is referred to as its “business name,” to identify the business on property ownership records, business transactions, such as contracts, bank accounts, invoices and tax returns.
However, a costly mistake that businesses often make is falsely assuming that because their business name was available at the Secretary of State level that this business name can be used to promote and advertise the services and goods the business offers for sale to the public. When a word, phrase, symbol or design is used in association in the promotion of goods and services, that word, phrase, symbol or design is being used as a “trademark.” Trademarks identify the source of those goods and services that are offered for sale and should be distinct from other trademarks used by competitors for similar goods and services to prevent consumer confusion in the marketplace. And while a business name can be used as a trademark, the search that is conducted at the Secretary of State level does not reveal whether someone in that state or another part of the country is already using that same business name or one that is confusingly similar to yours as a trademark.
For example, you may have embarked on a new business venture and quickly registered your business name as Infinite Potential, LLC with the Secretary of State’s Office, with the desire to use “Infinite Potential” as a trademark to promote the business’s brand of business consulting services to the public. However, a competitor, ABC, LLC, in the same field of business as Infinite Potential, LLC, has been using the phrase “Infinite Potential” as a trademark to identify their brand of business consulting services for the last 10 years. The fact that you were able to name your business “Infinite Potential, LLC” does not provide you with trademark rights in that name. Here, ABC, LLC clearly has the exclusive right to use the trademark “Infinite Potential” to market their services due to their prior trademark use, while Infinite Potential, LLC does not have the right to do so. In this case Infinite Potential, LLC would be limited in the use of its business name in the capacity of conducting its internal business, such as sending invoices to clients, filing tax returns, entering into contracts, for example. It cannot promote or advertise that “Infinite Potential” is their brand of business consulting services, as originally intended.
Thus, it is important to understand that when your business uses the same trademark, or one that is confusingly similar to one that has already been adopted by a competitor, your business runs the high risk of being accused of trademark infringement. This can result in having to stop the use of the trademark, thereby requiring that your business undergo a complete re-brand with a new trademark moving forward, the possibility of the loss of domain name rights if it incorporates the trademark, as well as liability for monetary damages. This is costly, time consuming and causes confusion in your customer base as they now have to re-acquaint themselves with a new unfamiliar brand; and in some cases can result in end of the business if it holds a large investment in branded inventory that it cannot sell because it infringes another’s mark.
To avoid this potentially disastrous result, proper brand planning should be conducted before the business is formed, and before any internet domain name is purchased, to identify whether the business name will be used as a trademark, and if not, what trademarks will be used to identify the business’s goods and services. Once a brand strategy has been developed, then a formal trademark search should be conducted by a trademark attorney to determine if the mark is available for adoption. If the search reveals the trademark is available for use, then Federal Registration of the trademark is a powerful option to pursue to increase the strength of the rights in your mark.
If you are in the process of forming a new business, developing a brand or expanding your business’s existing product or service offerings under new brand names, contact me and I can assist you in the trademark selection process to ensure your trademark rights are maximized, while minimizing the potential for infringement.