Editor’s Note: José Cortina is a member of the Research Triangle Park law firm of Daniels Daniels & Verdonik, P.A. TechLaw is a regular feature in LTW.
_______________________________________________________________________________________Selecting a corporate name is usually a simple endeavor. In most states, one only has to search the Secretary of State’s records to determine if a name is available and if it is available, the registrant only has to register to acquire approval for use. What is often confusing, however, is what protection or exclusivity is afforded by such registration.

Registrants of corporate names need to understand that the protection afforded by the registration with the Secretary of State is very narrow. More specifically, the Secretary of State in most states throughout the country will allow concurrent registration of names which, while not identical to each other, appear very similar in pronunciation, sound, look, etc. Thus, registration of a corporate name only results in a prohibition against another company using that identical name as a corporate name in the state(s) where the registration has occurred. This may result in complications when attempts are made to use of the selected name in providing products or services.

Tradenames

A tradename is the name under which a business or company does business. This may be its corporate name or may be an assumed name. If it is an assumed name then a filing must be done so that person searching for the owner of the business using that name can be found. Such registration is normally done locally and in and of itself rarely provides any protection from others using the name since the registration is not for the purpose of “clearing” the name but rather only allowing identification of the owner.

Trademarks

A trademark is any word, symbol, design or slogan used to identify or distinguish goods. The terms “trademark” and “service mark” are used are basically interchange, with the main difference being that trademarks identify and are used on goods while service marks are used to identify services. Technically, a company’s goodwill is associated with the trademark so that if anyone does something that were to harm that goodwill (such as infringement), courts can step in to stop the actions causing the harm.

Selection of Trademarks

In order to acquire the right to use its business name, whether its corporate name or an assumed tradename, as a trademark, that name cannot be one that is likely to be confused with a trademark that has been previously used on similar types goods or services by another person. Thus, a prior user with trademark rights can prevent a corporate name registrant from using its corporate name in connection with goods or services the corporation provides if it is likely to be confused with the earlier user’s trademark. Consequently, in selecting a corporate name, if the intent is to also use it as a trademark, careful searching of common law trademark, state trademark registrations and federal registrations should be conducted. Otherwise, the corporate name registrant may find itself in the position of having to change all of its branding and marketing materials or using something other than the tradename as the trademark.

Types of Trademark Protection

Trademark protection comes in three forms. The first and most comprehensive form of protection is registration at the federal level with the U.S. Trademark Office. Such registrations secure rights nationwide provided that the trademark is used across state lines or in international business. Registration is granted to the first person to apply to register the mark in interstate/international commerce (commerce governed by Congress), and therefore is generally only subject to challenge if it can be shown that there was prior use of the mark on similar products or services that are in commerce governed by Congress. In cases where a prior user is using a mark in commerce not governed by Congress, i.e., locally in a narrow market, the owner of the Federally registered trademark may be prevented from using that trademark in the prior user’s local market.

The second form of registration is with a state agency for use of the mark within that state. As a general rule, such registration affords protection throughout the state, regardless of how localized the use of the mark is within the state. The state agency accepting such registrations varies from state to state. In North Carolina it is the Secretary of State.

Finally, there is protection provided by “common law.” If a user begins using a trademark and there are no prior existing rights, then the user acquires rights in the territory in which the trademark is used. So, if the mark is used in only a small area then the rights would be in, for example, a specific municipality. On the other hand, if the mark’s use is pervasive throughout the country, rights can be acquired nationwide, although the scope may vary from state to state as the laws of the respective states differ from each other as to common law protection.

The Lesson

When starting a business, corporate name selection and registration is not enough to allow business owners to freely use the selected business name as the identifier of its products or services. While a corporate name may be available, if it conflicts with another owner’s trademark, the later registrant may find itself blocked from using the corporate name as anything other than a corporate name.

Prudent business conduct dictates that in addition to following standard corporate name registration procedures, if the name is to be used as providing goods or services a comprehensive trademark clearance should be conducted to minimize the possibility of later costly rebranding.
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Daniels Daniels & Verdonik, P.A. has been serving the legal needs of entrepreneurial and high technology clients for more than 20 years. A. José Cortina is a registered patent attorney who focuses his practice on the intellectual property needs of small to large technology companies, including providing patent, trademark, copyright, counseling, licensing, conflict resolution and transactional services. He is experienced in a broad range of technologies, including electronics, communications, computer hardware and software, biomedical, materials, and selected chemical and chemical engineering technologies. Questions or Comments can be sent to jcortina@d2vlaw.com