Business Law Checklists Legal Topics

What’s in a (Business) Name?

trademark_144318179As with any newborn, one of the first decisions an entrepreneur makes is the business name. But attorneys also have an important role in the naming process.

As a practical matter, the entrepreneur’s choice of a business name is driven by the marketing and goals for the particular business. But the attorney has a different perspective: he or she has to consider the likely business size, form of doing business, its geographic location or where it may be conducted, and the method of engaging in the business. All these factors have a direct impact on how to advise a client on the use of a proposed trade or commercial name.

As an attorney, keep in mind the two-fold goal of every legal review of a prospective business name: to procure rights for the client’s business and to avoid infringing on someone else’s name rights.

Here are some steps to get you started on your next name review:

  • Consider the form of doing business. At the simplest level, a sole proprietor engaging in a geographically localized business may only be concerned with obtaining fictitious name protection. At the other extreme, a start-up business may be planning on doing business worldwide and involving sophisticated forms of capitalization. In the latter situation, the decisions on name use may require exhaustive multi-jurisdictional analysis of applicable laws as well as databases and lists of pre-existing business names, symbols, and designations to obtain legal protection in a particular jurisdiction.
  • Learn the applicable laws. Because several different bodies of law govern the choice of a business name, be familiar with federal, state, and common law trade name and trademark laws, as well as with name requirements and restrictions governing the particular form of entity and scope of business. The proliferation of product promotion in the mass media has created a minefield of prior existing rights in various names and trademarks.
  • Don’t confuse trade names and trademarks. A trade name is the name by which a business is known to the public (e.g., “3M” is the trade name for “Minnesota Mining and Manufacturing Co.”). By contrast, a trademark is associated with a vendible good or service as a guaranty of quality, i.e., the brand name applied to a particular product or service (e.g., “Tide” detergent).
  • Watch for possible confusion. A name or mark cannot be adopted or used if it is so similar to a prior name or mark that the public would be confused about the source, origin, sponsorship, or affiliation of the goods or services involved. This means that any new business should avoid any name that could give rise to the likelihood of confusion.
  • Be cautious. Always err on the side of caution in advising a client whether its intended use of a particular name is permissible; it can be costly to “undo” trade name use that is later found to be infringing.

For everything you need to know about selecting a business name and how to best advise your clients in doing so, turn to CEB’s Selecting and Forming Business Entities, chapter 3.

Other CEB blog posts your may find interesting:

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7 replies on “What’s in a (Business) Name?”

Sound advice. From my perspective as a domain name consultant, I would add 2 topics for lawyers and business owners to consider.

1. Apart from preexisting trademark rights, business owners and their legal team should be aware that their name of choice may correspond to one or more domain names already owned by other people. These people are legitimate stakeholders in the name, whose ownership predates the claim of subsequent entrepreneurs. It is advisable to negotiate a fair solution rather than apply strong-arm tactics, which frequently backfire.

There is widespread confusion about the difference between legitimate domain investment and cybersquatting. The latter involves registering domains in bad faith that infringe on a trademark or business name. Basically it’s a distinction based on precedence and intent. Legitimate domain investment does not uniquely target any company or mark. For example, I own, which is too broad to infringe on anybody’s rights.

UDRPs are the prescribed legal recourse for obtaining ownership of domains used by cybersquatters. For instance, Google has won UDRPs in order to confiscate domains that contain the word “Google”. Sometimes, a business owner is advised by lawyers to file a UDRP against a domain owner who is not engaged in cybersquatting in order to circumvent the normal process — which is negotiating a purchase of someone else’s property. Ethically speaking, this approach is little more than theft. It often fails, and UDRP panels label the business a “reverse domain hijacker”. That stigma can follow a business for years and years online, hurting its reputation. Please, advise your clients to consider this risk. My recommendation is to hire a broker (I’m one) to negotiate domain acquisitions or else hire a professional namer to devise an equally strong but less problematic name.

2. Cybersquatting is a real concern that should be anticipated and preempted at the moment of initial naming. Doing so will save time, headaches, and legal expenses down the road. Generally this is as simple as registering multiple domain variants for the sake of brand protection. How many and which domain variants should be registered depends on the projected size of the business and its geographical footprint, as well as the name itself. Generally, the more traffic a website draws, the more tempting cybersquatting will be for unscrupulous individuals.

Brand protection is not simply a concern because of cybersquatters. Let’s put it this way: Leaving variant domains available and not controlled by your client leaves the door open to future competition with other legitimate businesses that may choose a similar name for their website. It’s amazing how many people independently imagine the same name for their business. And having to compete in search results with multiple businesses that use similar domains dilutes your client’s brand and adds to your client’s ongoing marketing expenses.

Hopefully, this will be useful information to somebody out there.

Joseph Peterson

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