The difference between business names and trade marks.
What Is A Business Name?
Business names have been around for years. There is a big difference between a business name and a trade mark. Many business people don’t know the difference.
Business Names are not property: section 17 Business Names Registration Act 2011 (Cth). The purpose of registering a business name is to:
Identify the legal entity that carries on business under a name that is not their legal name.
For example, Sharon Smith is a landscaper. She carries on business under the business name: All Seasons Landscaping. All Seasons Landscaping is not her legal name.
Registration allows people to identify who they can sue by consulting the register.
Having a registered business name gives you no right of action against others.
The purpose of company name registration is to award a unique name to a corporation. Registration of use of trade description that is not your legal name is compulsory.
What Is A Trade Mark?
A trade mark can arise from use, or by registration.
The establishment of a trade description as a trade mark by use is an expensive process and requires a court case. The essential rule is to prove the user has a reputation associated with the trade mark. The court case usually arises when a competitor is attempting to pass off their mark – a mark that is deceptively like yours. Similar trade marks confuse customers. They don’t know if it is your goods or services or a competitors, resulting in you losing business.
A common-law trade mark can only be in a visual form.
Through registration, a trade mark can be:
- a name
- a trade description, that is visual
- a sound
- a shape or
- a smell.
This is more expansive than just something visual. The main rule for registration is that the trade mark is distinctive.
A trade mark is a badge of recognition. When a person sees Coke, Pepsi or Lift they immediately know what is being offered to them.
Section 20 of the Trade Marks Act, 1995 (Cth) (TMA) gives the registered owner of a trade mark the exclusive rights to use that mark.
Section 21(1) of the TMA provides that a registered trade mark is personal property. As registered trade marks are property, all the rights of ownership attach to them.
The reputation of owning a registered trade mark is a valuable benefit. Proof of reputation is not required in infringement cases but it is for a common law trade mark. Your case in infringement proceedings will be stronger and less expensive.
Registration of a trade mark is not compulsory.
The Difference Between Business Names And Trade Marks
You own personal property but you cannot own something that is not property.
By law a business name is not property; it cannot ever become property. Not being property means no goodwill or legal rights to sell a business name will arise.
It is possible that use of a business or company name constitutes a common-law trade mark. Creating a registered trade mark is easy. It doesn’t make sense to take this business risk. You do not want to be in the same position as one example given by IP Australia: www.ipaustralia.gov.au/about-us/ public-consultations/archive-ip-reviews/ip-reviews/review-of-the-relationship-between-tm-names/issues-paper
A Brisbane woman was about to start up a new business and she learned that it could cost more than $1000 to register her trade mark. Her accountant advised her that it was cheaper to register a business name. He advised her that this could achieve ‘protection’ for her trading name for less than $100.
She took the advice and started using the registered business name. She did not search the trade mark register. Several months later the woman received a letter threatening her with legal action. The letter alleged she was infringing a trade mark made up of the same words. Clearly, the other business had prior rights to the name. She then had to make the difficult decision whether to resist the claims or to adopt a new trading name. She decided to adopt a new name even though the cost of doing so was considerable.
The purpose of registration of business names is to maintain a register. The register identifies those who operate a business under a name other than their own.
People wrongly believe that a business or company name:
- Confers a proprietary right in that name (like the protection of a registered trade mark)
- Registration offers immunity from infringement of another person’s registered trade mark
This misconception results in many people either:
- Not searching, or
- Undertaking insufficient searches of the trade mark register
These searches are to identify potential conflicting trade marks and they should be done before registering a business or company name.
The failure to search or undertaking insufficient searches can have drastic implications. The main one is they start a business unaware their registered business or company name infringes a registered trade mark. If the name infringes a registered trade mark, they may have to stop using their name. This can cause loss of reputation associated with the name. The business will have considerable expenses:
- To rebrand
- In paying their legal costs to sought out the mess; and
- The possibility of paying compensation to the registered trade mark owner and their legal costs