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Companies Act offers hope for defending company names

29 September 2008

New legislation from 1 October 2008 will give the owners of goodwill in a mark a new weapon against those seeking to take advantage of the reputation of their brand.

The current position

Until now, the only way to force a change to a company name based on earlier trade mark rights has been to issue proceedings for trade mark infringement and/or passing off, which can be costly and time consuming.

A recent European judgment (subsequently applied by UK courts) has now limited the scope of protection afforded by a registered trade mark in company name cases. The Court in that case held that the use by a third party of a registered mark in a company name will not amount to trade mark infringement where the use of that mark does not interfere with or affect the ability of the mark to designate the origin of the relevant goods or services.

In particular, the Court stated that the registration of a company name or use of a trading or shop name was not in itself done to distinguish goods or services, but to identify the business being carried on. For infringement to occur, there has to be some form of use of the name to connect the goods or services to the mark, such as using the name of the company on labels for the goods.

Companies Act changes

Section 69 of the Companies Act 2006 comes into force on 1 October 2008, giving the owners of goodwill in a mark a new weapon against those seeking to take advantage of the reputation of their brand.

Under the new provision, the owner of the goodwill in the mark – the ‘applicant’ – may object to the name of a registered company on the grounds that it is the same as the name associated with the applicant, or that it is sufficiently similar that its use in the United Kingdom would be likely to mislead by suggesting a connection between the company and the applicant. In this context, goodwill includes a reputation of any description.

Defences

Where an application is made to avoid it succeeding the company against which the complaint is made – the ‘respondent’ – must defend itself by showing:

·         That the name was registered before the applicant started the activities on which it is relying to show goodwill, ie it has prior right to the name

·         That the company:  is operating under the name;  is proposing to do so and has incurred substantial start-up costs in preparation;  was formerly operating under the name and is now dormant

·         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

·         That the name was adopted in good faith

·         That the interests of the applicant are not adversely affected to any significant extent

However, even where the respondent can show one of the defences in one of the first three points above, the complaint will still succeed if the applicant can show that the main purpose of the respondent in registering the company name was to obtain money from or prevent the applicant from registering the name themselves.

The complaint process

Complaints will be handled by a specially formed Company Names Tribunal based at the UK Intellectual Property Office, in Newport.

The application fee is £400, but this does not take into consideration any hearing costs nor the cost of legal advice. Despite this, in the right circumstances it is still likely to be a far quicker and cheaper way to deal with the bad faith use of brand names in company names.

In a successful application the Company Names Tribunal will order that the respondent change the name of the company and will stipulate a period within which this is to be done.  If the respondent does not comply, the Tribunal may choose a new name for the company without their consent and order that this be changed and recorded by the Registrar to Companies.

Decisions of the company names adjudicators can be appealed to the High Court.

Limitations

The Tribunal has been established specifically for dealing with applications under Section 69, and is unable to deal with cases where someone feels that another person has registered a company name which is too similar to their own or where they are using it as a trading name, but with no evidence of bad faith and opportunism. In these cases the brand owner will still have to rely on existing procedures and remedies.

Neither does the Tribunal have the power to grant injunctions or damages/account of profits. Where these are needed, parallel court proceedings may be have to be issued.

Impact of the new law

Section 69 may well prove popular amongst brand owners wishing to protect their rights against unscrupulous registrants in a quick and relatively cheap way. However, the protection offered is limited to the extent that, unless a respondent has acted in an opportunistic way, they may be able to establish a defence, in which case the company will be entitled, as far as the Companies Act 2006 is concerned, to keep its registered name.

The complaint also relies on an applicant having goodwill in the name, which, in the case of new companies formed through mergers, may not yet be present. For example, there may well be companies being registered anticipating the likely name for the newly merged Lloyds TSB and HBOS (passing off was used successfully when Glaxo and Wellcome announced their merger against the registrant of the company GlaxoWellcome Limited, which suggests this would be the appropriate route to protect in these circumstances).

The goodwill requirement will also mean that new businesses or subsidiaries will not be able to take advantage of the legislation even if they have been careful to protect their new brand through pre-launch trade mark registration.

However, Section 69 may afford greater protection to the owners of registered trade marks who also own goodwill where it is difficult to show third party use of the mark in relation to goods or services as required by the European Court. In these cases it is probable that there has been no use (or there is no use anticipated) which may render the respondent without a defence under a Companies Act complaint.

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Tracey Huxley

Associate
T: 08700 86 8226
I: +44 (0)118 965 8226
E: tracey.huxley@shoosmiths.co.uk