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What Do You Mean I Can't Use My Corporate Name?

October 30, 2016

You have been asked to set up a subsidiary for a new line of products and to determine whether a particular corporate name is available.  You have checked the public records in the state of incorporation and have determined that (1) the name is available for incorporation, (2) no other corporation is using the name as an alternate or fictitious name, and (3) no other entity, such as a partnership or sole proprietorship, is doing business under that name.  You give the "all clear" sign to the client.  The new company begins its operations but then reality strikes.  The company is served with a trademark infringement complaint seeking to enjoin the subsidiary from using its corporate name.

Many learn this lesson in exactly the way described above -- through actual or threatened trademark, service mark or trade name infringement and/or unfair competition litigation -- and often after the business has made substantial investment in the promotion and use of its corporate name.  The good news is that a thorough search of certain public and commercially available information can do much to minimize the risk associated with adopting and using a particular corporate name.  Such searches are useful not only in the process of selecting a name for a new corporation or business venture, but also in performing due diligence in the course of the acquisition of a business.

Putting the Problem into Perspective

As a preliminary matter, it is important to identify and distinguish among the types of names which may present a potential conflict in the use of a corporate name -- specifically, trademarks, service marks and trade names.  A trademark is a word, symbol, or a combination of words and/or symbols, used to identify products and to distinguish those products from those sold by others.  A trademark also serves to indicate the source of goods, even if the source is unknown.  15 U.S.C. § 1127.  For example, Skippy® is a trademark used by CPC International, Inc. to identify its brand of peanut butter; Clorox® is a trademark used by The Clorox Company to identify its brand of household bleach.  A service mark is a word, symbol, or a combination of words and/or symbols, used to identify services and to distinguish those services from those offered by others.  For example, McDonald's® is a service mark used by McDonald's Corporation for restaurant services; LEXIS® is a service mark used by Reed Elsevier Properties, Inc. in connection with its computerized legal research service.  A trade name identifies the manufacturer or seller of goods and/or services, and, in the case of a corporation, is often the corporate name.  However, other types of business entities, such as sole proprietorships and partnerships may also conduct their businesses under a trade name.  By virtue of the above-mentioned illustrations, you can see that businesses sometimes use their trade names as trademarks or service marks.

Confusion can result among consumers in the relevant marketplace when different entities use similar trademarks, service marks or trade names in connection with similar goods, services or businesses.  In cases where it is determined that confusion is likely, the law seeks to eliminate or minimize confusion by enjoining or modifying the rights of an entity to use the trademark, service mark or trade name at issue.

In the United States, the right to use a name -- whether it be a trademark, service mark or trade name -- derives from actual use of that name.  This right is firmly grounded in both federal and state common law and/or statutes.  As a general rule, in the event of a conflict, the first to use the name wins.  Because the right to use a corporate name may conflict with another's rights in an existing trademark or service mark, as well as with another's right in a trade name, a thorough search of a corporate name involves an examination of materials which identify, to the extent possible, all relevant trademarks, service marks and trade names.

Searching Trademarks and Service Marks in the U.S.

Both federal and state statutes in the United States provide mechanisms for the registration of trademarks and service marks ("marks").  Although registration of a mark is not required in order for it to be legally protected, most companies which are serious about protecting and enforcing rights in their marks tend to register them.  Therefore, the federal and state registers of marks are an excellent place to start your search.  In order for your search to be complete, however, unregistered marks also must be searched.

The Lanham Act, codified at 15 U.S.C. 1051 et seq., is the federal statute which establishes a centralized system of registering marks used in interstate commerce or international commerce (i.e., between the United States and a foreign country).  The owner of a mark which is registered on the federal Principal Register generally has the exclusive right to use that mark in connection with the goods or services recited in the registration anywhere in the United States, effective as of the filing date of the application to register the mark.  The Lanham Act also permits the registration of marks on an intent-to-use basis.  That is, if an applicant has a bona fide intent to use a mark in interstate or international commerce, an application may be filed to register that mark.  In order for a registration based upon an intent-to-use application to issue, the applicant ultimately must provide evidence that the mark is being used in interstate or international commerce.

Marks which are used in connection with goods or services sold solely within a state's borders generally are not registrable at the federal level.  Nevertheless, they still may be eligible for registration pursuant to the state's trademark law.  As you may have guessed, state registration only provides the owner of the mark with protection within the borders of the state of registration.  Unlike the Lanham Act, which does not permit the registration of a trade name unless its also functions as trademark or service mark to identify the goods and/or services of a company, some states do permit registration of trade names under their trademark statutes.

Many companies simply adopt and use marks for their products and services without seeking formal registration of the mark.  Such unregistered marks may be protected under the common law.  Generally, such protection is limited to the geographic area in which the mark is being used.  However, for products and services marketed and sold nationwide under an unregistered mark, the relevant geographic area can be the entire United States.

The Search

Federally registered marks are classified according to a international system of classification based upon the goods and/or services recited in the registration.  State-registered marks also are classified, but in many states a different system of classification (the "United States classes") is used.  You will want to search for marks that are identical to all or part of your corporate name in all classes and those which are very similar to your corporate name in classes which cover not only the goods or services provided by your company, but also those which cover related goods and services.  You will also want to search for marks that are similar in the classes which cover the goods and services sold by your company.

The federal search also should include "intent-to-use" applications, applications which are pending or have been abandoned or suspended, and registrations which have been canceled or expired.  Even though such marks are not considered registered, it does not mean that the marks are not in use.  In particular, many registrations are canceled or expire simply because someone forgot to timely make a required post-registration filing.  Owners of such marks that continue to be used subsequent to cancellation or expiration may still assert common law rights in those marks.

Federal registrations, including canceled and expired registrations, and applications to register a mark are publicly available and can be searched manually through the United States Patent and Trademark Office and commercial publications.  Because manual searches are very time-intensive,  they generally are not cost-effective from an attorney's standpoint.  The same information is available on certain commercial on-line databases, such as TRADEMARKSCAN® (a service of Thomson & Thomson), and can be searched by formulating the appropriate inquiries.

Searches of state registrations should be done in the state of incorporation and in all of the states in which the company plans to do business, or in all 50 states if the company plans to do business nationwide.  Although state registers can be searched manually, due to the differing methods of classification and the availability and power of computerized databases, it is much more efficient and cost-effective to use a computerized database to conduct your search.  You can conduct your own on-line search of registered marks using a database such as State TRADEMARKSCAN®, which contains the trademark registration records of all 50 states, Puerto Rico, Guam and American Samoa.

Unregistered marks can be found literally anywhere, but some of the more common sources for researching such marks include yellow pages advertising, compilations of information about the products and services of companies, such as the Thomas Register, and trade journals and publications in the industry in which your company does business.  Many of these sources are available on-line, but multiple searches may be required of many databases.  Generally, searches will encompass marks which are identical and similar to your corporate name in the absence of other criteria (such as class) for formulating the search.  There will nearly always be unregistered marks missed in a common law search, simply because they are not published anywhere or are published in sources not considered by the searcher.  Therefore, as a rule, the search will serve to minimize the risk associated with using a corporate name, but does not completely eliminate it.

It is generally more time and cost-effective to retain a professional search firm to perform searches.  These firms make use of the same databases which can be directly accessed through on-line services, as well as additional proprietary databases.  A professional search firm will provide assistance in determining which marks and classes should be searched, and will include all relevant federal registrations/applications, state registrations, as well as unregistered marks in its search report.  You should be aware, however, that the search is only as good as the searcher assigned to the task.  Therefore, it is helpful to retain a search firm which also provides you with the search criteria used as part of its report in order to assess the thoroughness of the search.

By following an early, comprehensive strategy to identify potential conflicting marks and trade names, corporate counsel should help to ensure that the new company can concentrate on selling products and rendering services rather than defending its corporate name in court.

Our Team

Robert J. Schoenberg

Robert J. Schoenberg
Of Counsel

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