In the business world, there are generally two contexts in which a company name is used: (1) as a formal “trade name” for purposes of banking, taxation, licensing, and related matters; and (2) as a “trademark” for purposes of marketing goods and/or services. There is a common misconception that the successful filing of a fictitious business name statement and/or organizational document with the California Secretary of State authorizes a business to safely use its “trade name” for all purposes. Critically, these filings only address “trade name” issues – not “trademark” concerns.
For example, one could conceivably file “Jiffy Lube Automotive, Inc.” as a trade name with the Secretary of State (if available) and then open a bank account and file taxes under this name. Yet, if “Jiffy Lube Automotive, Inc.” were used to market goods or services via print advertising or displays (i.e., used as a “trademark”) there is a reasonable likelihood it would infringe the rights of “Jiffy Lube” a well branded automotive service provider. This would subject “Jiffy Lube Automotive, Inc.” to substantial liability exposure and potentially force it to change its name and destroy all marketing materials despite the fact the Secretary of State allowed the name to be registered as a “trade name”.
This scenario is not uncommon. In fact, infringement lawsuits can be devastating given they are not only expensive, but also frequently destroy goodwill created by prior marketing efforts. Thus, it is imperative that business owners proceed with caution when choosing their name. At the very least, a name likely to be used as a trademark should be subjected to thorough internet, phonebook, Secretary of State and United States Patent and Trademark Office (USPTO) searches for similar marks already in use. There are a number of trademark search companies that provide comprehensive services of this nature.
In addition, a business owner should consult with an insurer regarding “advertising injury” and related coverage and may want to consider seeking state and/or federal trademark registration. While not always necessary or recommended, trademark registration generally decreases the likelihood of valid infringement claims – which can be critical if the business operates in several markets or intends to expand. Further, registration usually has other advantages such as: (1) constructive notice to the public of the registrant’s claim of ownership; (2) a legal presumption of ownership; (3) the right to sue in federal court on matters involving the mark; and (4) a basis to obtain registration in foreign countries, if necessary.
Ultimately, every business seeking to adopt a name should consider whether the name can be used as a “trade name” as well as a “trademark” and should also consider the level of risk associated with the name. If the business owner has questions or concerns regarding these issues, an attorney should be consulted.