The Role of Brand Names in Business

March 23, 2022

Understanding the legal rules around names is important because they’re the single most valuable intellectual property asset a successful business builds. ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

One person who clearly didn’t understand this was Mr Gu who set up a Chinese takeaway in Barrow-in-Furness in 2009 using the name China Tang.

For 12 years he used this name. So, he was in disbelief when he received a cease and desist letter from lawyers acting for the high end China Tang at the Dorchester Hotel in Mayfair whose rights to use the name stemmed from a figurative trademark in class 43 (restaurant services, catering services, cafes, cafeterias, and self-service restaurants) registered in 2005.

Mr Gu initially thought it was a scam and ignored the Claimant’s communications. Even when he realised the legal action was legitimate, he was so convinced of his right to use the name, that he apparently declined to settle the case and get his rebranding costs paid by the Claimant.

 

Rebranding Costs are Not Negligible

Rebranding costs are not negligible. What’s often involved is to find a new name, get a new logo and website, pay for new signage, new menu designs, and flyers. Additionally, it is often necessary to do a promotional campaign to raise awareness of the new name.

But he refused to believe that he was in the wrong arguing that as there had been no confusion amongst consumers over the 12 years he had been in business, this meant he should be permitted to continue using the name China Tang. The Judge disagreed and rejected Mr Gu’s defence of honest concurrent use, holding that Mr Gu had infringed the Claimant’s trademark and should rebrand.

 

Lessons in Business

There are various lessons businesses can learn from this case which is why I wanted to highlight it here.

We often receive enquiries from prospective clients who are caught up in disputes around names. It’s quite common for business owners to believe they are in the right in wanting to use a name, quite regardless of the legal niceties.

One reason people tend to be confused into believing it is acceptable to use their chosen name is that they managed to secure their desired company name or domain name registration. However, registration of a company or domain name does not come with a right to use a name. They are subject to other people’s trademark rights.

The key takeaway from the China Tang case is the importance of doing thorough due diligence before deciding on a name.

 

The Need For Clearance Searches

Many people wrongly assume that applying to register a trademark will give them the protection they need, but registering a trademark will only protect you if you have first done thorough clearance searches to establish that a name is available to adopt. That involves doing internet searches as well as checking the trademark registers for similar or identical names.

What gives someone rights in a name is being first to use a name. However, the fact that you can get unregistered trademark rights in a name simply from using a name, often gives people a false sense of security so they don’t register their desired name as a trademark.

Registered trademarks give you much stronger rights in a name than simply using a name. Just as you would first do legal searches and buy physical property so your name is on the title deeds, so it’s important to secure ownership over the name you intend to use by registering it as a trademark. You wouldn’t just occupy physical property and rely on your rights as a squatter, would you? So, don’t just use a name relying on unregistered trademark rights.

Always get a professional clearance search to establish whether a name is available and can function as a trademark and then register it as a trademark before building your business around a name. A registered trademark puts others on notice of your rights so that when they’re choosing names they should avoid using one that’s similar to yours. Trademark registration should be regarded as a cost of being in business, rather than as optional.

 

The Expense Of Unregistered Trademarks.

What is not well appreciated is how expensive it is to rely on unregistered trademark rights.

If someone else starts using a name after you adopted it, the £1,000-£2,000 you saved in professional fees by not registering a trademark soon looks trivial when you consider that it might cost you £10,000-£50,000, if not more, to defend your right in your name.

And there is never any certainty in litigation, meaning you could lose a dispute even if you were the first to use a name. It by no means follows that you will win because there is luck involved, as well as the skill of the lawyers, and the attitude of the judge. So, if you lose, you would then have the costs of rebranding on top of legal fees to factor in – all just because you didn’t want to spend the money to register a trademark.

It makes sense to secure the rights to your chosen name. Once you’ve done so, stay vigilant and challenge third parties who begin using the same name. Your name is your most valuable IP asset, so don’t take it for granted.

 

Shireen Smith , advises SMEs on how to turn ideas for new business concepts, products or services into protectable IP. Building a business on strong legal and IP foundations is how you increase the value of a business. For help to create, identify, protect, and defend your business assets.

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