Out-Law / Your Daily Need-To-Know

Brands gain new protection from opportunism from October

Out-Law News | 25 Sep 2008 | 10:27 am | 2 min. read

Businesses will be able to stop others from registering their brands as company names in the UK for the first time under new laws that comes into force at the end of the month. A new tribunal aims to resolve disputes faster and more cheaply than courts.

Advert: free OUT-LAW Breakfast Seminars - 1. Making your contract work: pitfalls and best practices; 2. Transferring data: the information security issuesUntil now a trade mark owner has had limited powers to prevent the registration of a company name similar to its own. Current laws only prevent the incorporation of a company whose name is identical to the name of a company already incorporated under the Act.

There is currently a right to object to a name as being 'too like' the name of a company already incorporated but that right is a limited one. It can only be exercised by those with an existing company registration and any decision to force a change of name is subject to the discretion of the Secretary of State. These rules will change on 1st October.

As part of the staggered introduction of the Companies Act 2006 an adjudicator will be introduced who can decide whether a company name is too similar to someone else's trading name.

Any business that has goodwill in a trading name can file an objection with the adjudicator when someone registers a company with a very similar name. Unlike the current rules, that can be done whether or not the person complaining has a matching registered company name or not.

The adjudicators will be based at the Company Names Tribunal at the UK Intellectual Property Office (UK-IPO) and they will decide whether or not a new company registration misleadingly suggests a connection with an existing firm, activity or product.

A UK-IPO statement said that the rules were designed to prevent opportunistic abuse.

"An example of an opportunistic company name registration is when someone registers one or more variations of the name of a well-known company in order to get the latter company to buy the registration(s)," it said. "Another example might be where someone knows that a merger is about to take place between two companies and so registers one or more variations of the name that the newly formed commercial entity is likely to require. The registration(s) would be opportunistic in that the registration holder’s purpose in obtaining the registration was to cash in on the other entity’s fame."

In 1996, an individual incorporated a company with the name GlaxoWellcome after news leaked that pharmaceutical giants Glaxo plc and Wellcome plc would merge. Glaxo plc had to go to court and argue that that incorporation was an 'instrument of fraud'. Under the new rules, adjudicators will be able to deal with such opportunists faster and more cheaply.

The rules are different to the old regime in offering protection to names that are not already actual registered company names. Previously, a complainant would have to have a trade mark in the name and go through the courts to allege trade mark infringement or 'passing off' or use Glaxo's 'instrument of fraud' argument.

Someone attempting to register a new name who finds themselves facing such a complaint has a number of defences available to them under the Act.

That company can claim:

"a) that the name was registered before the commencement of the activities on which the applicant relies to show goodwill; or
(b) that the company—
(i) is operating under the name, or
(ii) is proposing to do so and has incurred substantial start-up costs in preparation, or
(iii) was formerly operating under the name and is now dormant; or
(c) that the name was registered in the ordinary course of a company formation business and the company is available for sale to the applicant on the standard terms of that business; or
(d) that the name was adopted in good faith; or
(e) that the interests of the applicant are not adversely affected to any significant extent."

It will be for the early adjudicators to outline through their decision what is meant by 'good faith', to what degree investment in an operation is grounds for being permitted to use the name and how the 'interests of the applicant' are to be judged to be adversely affected or not.

The initial application fee will be £400, though costs will be likely to be awarded to the winning side.

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