The link between purpose-led businesses, ‘B Corp’ certification and the Better Business Act
Out-Law Guide | 19 Apr 2005 | 5:20 pm | 17 min. read
This guide is based on UK law. It was last updated in July 2011.
In particular, most businesses invest a lot of time and money in creating a brand which will appeal to consumers and set its products or services apart from competitors. For this reason, a business will not want anyone else pretending to be associated with it and piggy-backing on its reputation.
The brand of a business is an example of intellectual property, and can be one of the most valuable assets of the on-line business. As an example, when the infamous boo.com went into liquidation, the most sought after assets of the business were the domain name and trade marks; in other words, the boo.com brand. It is therefore important to a business to secure the rights in its brand.
Before settling on a brand, you should carry out some research to ensure that no one else is already using the proposed brand. Searching through an internet search engine and on the Companies House web site will be a good starting point to determine whether another business is trading under the name or using the brand.
Protecting your own rights is important, but it is equally important to ensure that you do not infringe the rights of other people. You should therefore check that someone has not already registered your chosen brand name as a trade mark. A basic search can be carried out on the Intellectual Property Office (IPO) web site, or Trade Mark Agents can carry out a more detailed trade mark clearance search for you.
A combination of the above searches will be the most useful approach: the trade mark clearance search will identify whether the same or a similar brand has already been registered, whilst the internet searches may identify unregistered trade marks which are being used by other companies.
The strongest form of protection for a brand is a registered trade mark. Basically, trade marks identify the products or services of traders, to enable consumers to distinguish between the products and services of different traders. You will often see a brand with the letters 'TM' after it; this is to identify a trade mark of the business. There is nothing to stop you putting 'TM' after your business name or brand, to show that you are asserting rights in it as a trade mark. However, the symbol ® denotes a registered trade mark and it is an offence to use this symbol with a trade mark which has not been registered.
If a trade mark is registered, special rules apply which simplify the way in which it can be protected. Unregistered trade marks can also be protected, however, it is much cheaper and easier for a business to enforce its rights in a registered trade mark than in an unregistered trade mark. For this reason, businesses should consider obtaining registered trade marks to protect their brands. Most countries have their own systems for trade mark protection and registration. There are also European and international systems of protection (see below).
To obtain a registered trade mark in the UK, an application must be made to the UK Trade Marks Registry at the IPO. In order to qualify for trade mark protection, the mark must meet certain criteria and must not conflict with prior rights, e.g. pending or registered trade marks.
Many companies look to register their company name or their domain name as their trade mark. For example, both amazon.com and lastminute.com have been registered as trade marks. Having the company name or domain name does not mean that the name will automatically qualify for registration nor that you have an automatic right to register the name as a trade mark, as another company may already have a registered trade mark for that name.
For registration, a trade mark must be capable of:
To pass the first requirement is fairly simple. A brand containing words, designs, letters, numerals, even jingles or sounds will satisfy this test. To pass the second requirement is more difficult. This is particularly true for on-line businesses, as many brands on the internet are chosen by their owners for descriptive reasons. A brand which is not descriptive of your goods and services will be easier to register, as it is more likely to distinguish your goods and services from the goods and services of other businesses.
When registering a trade mark, you must select one or more classes within which you want protection. There are 45 different classes to choose from: 34 for goods and 11 for services. For example, most software products fall within Class 9, whilst paper and printed materials form Class 16. If you operate a web site, you would choose your class or classes according to the goods or services it offers. Class 42 is a general services class in which many web site operators register. You can find a full list of trade mark classes in the Trade Mark Rules 2000 (as amended).
Following submission of the application, the Examiner looks at whether there are any prior conflicting pending or registered marks. If none are found, the application is advertised in the Trade Marks Journal. Publication in the Trade Marks Journal marks the start of a two-month period during which third parties may make observations on its acceptance or oppose the registration if they have good reason to do so. This period can be extended to three months by anyone who is considering opposing the application. For example, another company may be concerned that your application is for a trade mark which is very similar to its registered trade mark, and that the public would confuse the two. If no oppositions are filed, the trade mark will automatically proceed to an electronic queue to become registered.
It usually takes about 6 months to obtain a UK trade mark if the Examiner raises no objections and third parties do not oppose the application. Applications that are opposed can take an additional six months to complete, depending on the nature of the opposition. Once a registered trade mark is granted, the owner has a statutory monopoly to prevent unauthorised use of the same or a similar mark in respect of the goods and services for which the mark has been registered. Trade mark registrations are valid for ten years and are renewable for further ten-year periods thereafter.
Your trade mark may be infringed if another business uses the same or a similar mark in the course of trade in relation to goods and services identical or similar to those for which your mark is registered. If either the mark or the goods or services in question are only similar, the owner of the mark must satisfy an additional criterion: that the public are likely to confuse the goods and services of the alleged infringer with the goods and services of the owner of the trade mark. This requirement can be difficult to satisfy. The class system is important because it allows concurrent use of a mark. A good example is the brand Apple: the computer manufacturer and the record label of the same name can exist independently because they each focus on different markets.
If you think that someone is infringing your registered trade mark, you need to be very careful about how you approach the other party, to ensure that you are not seen to be making an unjustified or groundless threat. Ideally, legal advice should be sought before you take any action, as making an allegation of trade mark infringement could result in the other party having a right of action against you for unjustified threats.
One form of trade mark misuse which has taken place on the internet is through the abuse of meta tags. A meta tag is basically HTML coding that contains information about the content that the user sees, as opposed to the actual content which the user sees on screen. The most common use of the meta tag is to provide information about the site for the benefit of some search engines, by including keywords to be used by these search engines. In this way, meta tags can be used to attract traffic to a web site.
On the other hand, some web site owners have used meta tags to divert traffic away from other sites (usually competitor sites) by unlawfully using other parties' trade marks or brand names in the meta tags for their own web sites. Such abuse has resulted in court actions for trade mark infringement. The owners of the Playboy brand took action against other businesses which included the word 'Playboy' in their meta tags. Playboy was successful in its argument that these businesses were hoping that a search for 'Playboy' would lead a user to their site instead and that this amounted to trade mark infringement, despite the meta tag being hidden. A case in the UK, which concerned the trade mark "REED", found that the unauthorised use of trade marks in meta tags will not automatically amount to trade mark infringement. This is due to the fact that there is "invisible" use of the trade marks (invisible as far as internet users are concerned) and there is still a need to show that the use of the trade mark creates confusion between the brands in the mind of the public.
Many businesses trading on the internet will be keen to protect their brands on a European level. The Community Trade Mark (CTM) gives brand protection throughout the countries of the European Union. A CTM will only be granted if there is no third party opposition based upon pre-existing national rights in any member state. Where the application is successful, the CTM application can be converted into a series of conventional national trade marks in the countries in which there are no objections. The CTM provides a cost-effective way of providing protection in a number of European countries, but anyone considering applying for a CTM should be aware that it takes a long time to obtain, usually between and 18 months.
For registering a CTM, see the IPO guide How to Apply for a Community Trade Mark.
The Madrid Protocol system may also be of interest to businesses trading on the internet, as it provides an international system of protection. The Madrid system applies amongst those countries which are signatories to the Madrid Protocol, and an application under this system is only available to those who are nationals of or are domiciled in one of the countries covered by the Protocol. It has been embraced by over 70 countries, including China, Japan, Russia and the US. The European Community as whole only became a member on 1st October 2004, although most of the countries had been individual members prior to that. The Madrid system allows an applicant who has filed a home application to make a further application covering one or more of the Protocol countries based on the home application. The national trade mark Registries of the countries of interest have a period of 12 or 18 months (depending on the country) in which to raise objections to the granting of the international registration covering their territory. Applications under this system tend to be cheaper than making individual applications in each country of interest.
The Paris Convention and the WTO Agreement provide further benefits. Under these international Conventions, you can file a trade mark application in the UK and then have six-months within which to apply for the same trade mark abroad and rely on the UK filing date. This means that the foreign application is effectively back-dated to your UK application, giving you priority over anyone who has applied to register the mark during that time. It also allows a business to spread out the costs of trade mark registration.
If you have foreign registrations, watch out for bogus letters from organisations inviting you to register in "official" registers or publications in return for payment of an annual subscription. A number of warnings have been issued by the UK Intellectual Property Office and World Intellectual Property Organization (WIPO) about such companies.
If a business does not have a registered trade mark or is unable to obtain a registered trade mark (e.g. if the name is too descriptive to qualify for trade mark registration) the law of passing off may protect a brand. It is a law which aims to protect both consumers and other businesses from the effect of confusion on their goodwill in trade.
Passing off will only protect a brand if the owner of the brand can demonstrate that:
It is generally not very easy to prove passing off, particularly because anyone bringing a passing off action usually has to gather together survey evidence to demonstrate the possibility of confusion or actual confusion. It can be very difficult to obtain survey evidence and it is usually very expensive to do so.
A further way to protect your brand is through registered design rights. Registering your product design gives you a monopoly in it and allows you to stop others from making, selling or using a product which incorporates your design or to which your design has been applied.
As with trade mark rights, registered design rights can be used to protect a 2D image. However, registering the image as a design will give you a monopoly in the application of the image to products, whereas a registered trade mark will only give you a monopoly in respect of the same or a similar mark in respect of the same or similar goods and services. For this reason, some businesses have chosen to register their logo for both trade mark and design right protection, as a further layer of brand protection. As an example, easyGroup has registered "easy.com" as a trade mark and has also registered its orange and white "easy.com" logo as a registered design for use with clothing and travel goods amongst other things.
In order to qualify for registration, the design must:
One advantage of trade mark registration is that the registration can last indefinitely, whereas registered design rights can only last for a maximum of 25 years.
Domain names are unique names that identify internet sites. They usually consist of two parts. The first part generally comprises the name of the enterprise or organisation or the brand associated with the enterprise or organisation (e.g. out-law). The second part of the name usually identifies the name and sometimes a country (e.g. .co.uk or .com). A domain name is not an intellectual property right known to UK law. There is no cause of action in UK courts for "domain name infringement."
However, as can be seen from cases decided on cybersquatting (see below) UK courts have been willing to use the laws of passing off and trade marks to tackle domain name infringement. It is therefore always advisable to include all brands and any variations of such brands in domain name registrations.
Recently directors at the Internet Corporation for Assigned Names and Numbers (ICANN), which oversees the identification of websites, voted to increase the number of generic 'top-level' domain name endings from the current 22. Top-level domains refer to how the suffixes of addresses are rooted and include familiar address endings such as .com, .org and .net. They do not include country-level domain suffixes such as .uk. ICANN have agreed to no longer operate such a closed list. As of 12 January 2012, all barriers will be removed and business will be able to purchase any suffix they choose in any language. For example Google would be able to purchase the ".google" address. This presents an avenue by which to get around cybersquatters who may have commandeered domain names at an earlier stage and generally will be extremely useful to businesses who were slow to involve themselves with the internet and therefore lost out on their domain name of choice.
The application process for new domain names will only be open for 60 days. Thereafter, it will be closed for three years. Businesses must act quickly if they wish to take advantage of this branding opportunity. Moreover application will cost £114 000 and applicant businesses will have to show they have robust intellectual property protection systems in place. Full guidance was issued by ICANN shortly before the vote.
There are various web sites which offer domain name registration services. However, the allocation of all top level domain names (such as .com, .org and .net) is the responsibility of ICANN,. To check availability or register domain names, see a domain name registrar such as easily.co.uk.
If a dispute arises in relation to a domain name, it is possible to refer such a dispute to a dispute resolution procedure. ICANN has given powers to the WIPO and other bodies to operate a dispute resolution system for transferring domain names, one of the aims being to curb cybersquatting.
Cybersquatting is the practice of registering a domain name in bad faith, knowing that someone else will want the name and often with the intention of holding another company to ransom. Whilst disputes over domain names are usually taken to a dispute resolution panel such as the World Intellectual Property Organization, some companies have opted to take the cybersquatters to court and have been successful in actions for both passing off and trade mark infringement.
A well known example of this was a case in England where companies including Marks and Spencer, BT, Sainsburys, Virgin and Ladbrokes all found their domain names had been previously registered by One In A Million Limited, a cybersquatting business. One In A Million was attempting to withhold domain names that were similar to the registered trade marks of these companies. The trade mark owners succeeded in persuading the court to order One In A Million to hand over the domain names on grounds of passing off and trade mark infringement. Similar circumstances arose in a Scottish case, where Scottish Widows was successful in a court action against a cybersquatter for registering the names "scottish-widows.com", "scottish-widows.co.uk" and "scottish-widows.tm." More recently, FIFA won its case in the US against a company which had registered "CopaMundial.com" and "CopaDoMundo.com" in breach of FIFA's rights in its "World Cup" trade marks.
Following these cases, if your brand is part of your domain name, your domain name may be protected by the laws of trade marks or passing off in the UK. This has dealt with the most flagrant incidences of cybersquatting, however, the practice still exists with cybersquatters simply disguising their practices better or even deliberately setting the ransom demanded slightly below the cost of bringing a passing off action. In the US, legislation has been passed to deal with this issue, namely the Anticybersquatting Consumer Protection Act and the Trademark Cyberpiracy Prevention Act.
Typosquatters register domain names that are nearly identical to the actual domain names used by other businesses. The slight differences between the domain names are intended to catch internet users who make typographical or punctuation errors when entering a domain name. A case in the US in 1999 saw an example of this when a securities firm with the domain name painewebber.com took action against a site with the domain name wwwpainewebber.com, a name only distinguishable by the exclusion of a dot. The typosquatter's name linked the user to a site displaying pornography. There have also been successful actions in the US against one of the most prolific typosquatters in recent times, John Zuccarini, who at one point had registered over 5000 "misspelled" domain names (which included the names of famous people) in order to divert traffic from legitimate sites.
It is a very different situation where another company has simply beaten you to registration of the domain name and does have a right to legitimately use the domain name because of their own company name or trade mark. The way in which the company registration and trade mark registration systems operate means that a number of companies may have the same name.
Prince plc, an IT consultancy in the UK, was threatened by Prince Sporting Group Inc. in the US for having registered the domain name 'prince.com'. The sports company had a registered trade mark in the UK for the name, but the IT company had been in business for some 14 years. Complex actions were brought in both the US and UK in the fight for the name. After much expense, the parties agreed to direct visitors to each other's site if the visitor arrived at the wrong site. That said, the UK company still uses the 'prince.com' domain name and the actions did not resolve whether infringement of a trade mark actually took place.
As a rule of thumb, if your name does not infringe a trade mark in the off-line world, it is unlikely to infringe a trade mark in the on-line world.
Creating and registering a brand is not the end of the story when it comes to brand protection, and you will have to continue to protect your rights in both your registered and unregistered brands. If you are an organisation, someone should be given responsibility for renewing all trade name and domain name registrations, so that these are not allowed to lapse and are potentially lost. You should also ensure that your brands are used consistently, in order to enforce them in the mind of consumers and to build up your rights in unregistered trade marks. This may involve raising internal awareness and producing brand guidelines to let people know how the brands should be used, e.g. should a trade mark be a particular size, font and colour, and should the ® or ™ symbol be used?
It should also be remembered that rights can be acquired and lost under contract. If you are intending to allow other companies to use your name or trade marks, your rights should be properly protected in a licensing agreement. If you are commissioning an external agency to create any branding for you, you must ensure that all of the rights are transferred to you in writing, to allow you to fully exploit the brand.
As well as protecting existing rights, a business needs to ensure that intellectual property rights are being identified at an early stage, to allow a decision to be taken on whether these can and should be protected by registration.
As there is still little international harmonisation of the laws that protect brands, the rights and remedies available will largely depend on the particular country or countries involved. Businesses should consider which markets are important to them and make sure that the rights in their brands are effectively protected in those markets. It may seem expensive at the time, but it is worth doing in the long run. The internet is a powerful advertising medium and often the brand is the single most important piece of intellectual property owned by a business – and one which is well worth protecting.
The link between purpose-led businesses, ‘B Corp’ certification and the Better Business Act