Imagine the following scenario: you start a new business.
You work hard and your business becomes successful.
Then one day you find that someone else is selling similar products or providing similar services operating under a business name that is very similar to yours.
Customers comment to you that they think this new business is yours or associated with yours, and you start receiving calls from potential customers looking for the other business but accidentally getting you instead.
The issue this short article addresses is unfair competition through infringement of a person’s property interest in the goodwill of his or her business, and steps that can be taken to avoid this from happening and to deal with it if it does.
First off, upon starting business, you should register your operating name as a trade name.
This should be done whether you are operating as a sole proprietor, a partnership (in which case you are required to) or through a corporation.
Registration of a trade name provides strong evidence of when you began using the name, and it provides notice to the world that you are using it and claiming a proprietary interest in it.
Note that if you are operating through a corporation, registering the name of your business as your corporate name largely provides the same advantages.
Furthermore, as part of the registration process, a name search should be done to see if there are any other similar names registered. If so, then some research should be done to find out what sort of business is using the name, so as to avoid infringing someone else’s goodwill and being potentially subject to legal proceedings.
No one wants to put their time, energy and money into a new business only to find that the name they have been using needs to change, failing which they will be sued.
Trademarking a business name and logo is a very good idea. It is a fairly lengthy process, which can be very complicated in some situations, but once registered, a trademark provides the right to exclusive use of the trademarked name and/or logo throughout Canada. Trademarks are quite common in business, especially in franchises, for this exact reason.
But registration of a name or trademark does not provide any assurance that someone will not unfairly compete.
If this happens, the remedy is to demand that the infringer cease and desist, and then to sue if they do not comply. Legal proceedings can be brought pursuant to the Trademark Act if you have a trademark, or by what is referred to as the common-law action of passing off.
Put very simply and generally, the primary elements that need to be established include the existence of goodwill in association with the name to be protected and misrepresentation by the defendant that does (or is likely to) confuse the average person as to whether the businesses are one and the same or affiliated.
The misrepresentation element is generally met by use of a misleading similar name in association with the same or similar wares or services.
If these elements are established, the next question is the appropriate remedy. Damages to a business, such as lost revenues, are often difficult to quantify and prove. Further, the point of the action is not primarily to recoup damages caused, but to stop the infringement. Accordingly, courts will often order an injunction, which is a court order that the person or entity passing off the name must stop doing so.
In conclusion, while there is no way to avoid infringement of your name and goodwill from occurring, registration of your business name and trademarking bolsters your position if it does, and legal remedies exist to stop it.
Legally Speaking appears every second week in LIFE. It is intended for information purposes only. Readers with a specific legal problem should consult a lawyer. This week’s column was written by James Cawey, of Red Deer law firm Duhamel Manning Feehan Warrender Glass. Cawsey can be reached at 343-0812 or at www.reddeeraltalaw.com