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13 • 2008

Understanding the Differences between Corporate Names and Trademarks (Guest Author, Don Thornburgh)

Formation of a business entity, such as a corporation or limited liability company, entitles the owner to conduct business under that name in the jurisdiction in which the entity was formed. It is important to recognize, however, that the act of creating the company itself does not confer upon the owner any intellectual property rights in the name.

As such, the right to use the name may be subordinate to the rights of others in an identical or even a similar name. As in most jurisdictions, the California Secretary of State’s office does not perform a trademark search when approving company names. Quite to the contrary, when submitting a proposed entity name, the entity’s owner thereby represents and warrants to the Secretary of State that he or she is not aware of any conflicting uses of the name. Third party rights in a name could derive from various sources, including the Federal Trademark Act (Title 15, United States Code, Section 1051), the California Trademark Act (Business and Professions Code Section 14200), the Fictitious Business Name Act (Business and Professions Code Section 17900) and common law rights, including rights to a trade name.

Because of this possibility, before selecting a company name or brand names under which to promote the company’s goods and services, it is prudent to investigate whether there are any identical or confusingly similar names or marks already in use. A simple online search should reveal any obvious conflicts, and trademark counsel can perform a more detailed search. If there are no direct conflicts or if the results are ambiguous, a comprehensive search report can be obtained from a specialized trademark search company. The search will include an extensive analysis of the computer database, using a more sophisticated search strategy to locate names that may be similar even if spelled differently. The resulting report also will contain information from other databases, which include common law references such as trade journals. For a variety of reasons, such as the time delay in the processing of information, no search can uncover all potential conflicts. Trademark counsel can review the report and provide analysis of the level of risk based upon the information disclosed in the report.

Business owners should understand how common law trademark rights accrue. If a corporate name is registered, but is not used to promote the company’s goods or services, trademark rights do not accrue. To obtain common law trademark rights (regardless of whether the trademarks are registered), the owner must use the name as a brand to promote its goods or services. For goods, this means such acts as placing the name on the goods themselves, packaging, or displays used to sell the products. For services, the owner must use the mark in the sale or advertising of the services, such as on signs, brochures, advertisements, business cards or stationary, in a manner that makes clear the type of services which are associated with name.

Finally, to create a favorable presumption of exclusive rights to a particular name, business owners should consider state or federal trademark registration. The registration of trademarks can be a valuable addition to the assets of your company. Consider discussing your options with legal counsel experienced with trademark matters.

Don Thornburgh is an intellectual property attorney and principal at Don Thornburgh Law Corporation (www.donthornburgh.com). Don has been a member of California State Bar since 1996. He has published more than 80 articles on topics within his areas of expertise in such publications as Internet Management Strategies, Computer Economics Report, and the Los Angeles Daily Journal.