 For many businesses, protecting the company brand is a key function of the in-house legal team. Not only does a strong brand make business easier, it adds tangible value to the company. Often, the strength of the brand is a key attraction to companies seeking a merger partner or buying a business. In this case they need to ensure that the business has a valid company name or domain name. The management time required to resolve any dispute and rectify acquisition contracts can be at best a major headache and at worst, a deal-breaker.
Protecting a brand
‘Brand squatters’ are companies set up with the purpose of registering a name that might later be sold on for a financial gain. The remedies against such brand squatters used to be either ineffective or expensive, so many companies neglected to deal with the issue.
The good news for brand owners is that they now have a new weapon to fight against opportunistic registration of company names that are the same or substantially similar to their brand name. Objections to such registrations may be made to a new statutory body called the Company Names Tribunal. If a registrant cannot establish a legitimate reason for the adoption of an opposed name, then the company names adjudicator may rule that the name be changed.
The recent success of Coca-Cola Company Ltd (Coca-Cola), which used this procedure to force a company to change its name, serves as a useful indicator of its potential benefit to brand owners. This article looks at how brand owners can take advantage of this procedure in the battle against opportunistic company registrations and brand squatters.
A company name is, however, just one of a number of branding issues for consideration before setting up or buying a company. This article therefore goes on to consider further recommendations for businesses when launching a new brand.
Background
The provisions on company names contained in the Companies Act 1985 prevent a company from registering the same name or one ‘too like’ that of a company already incorporated. Unfortunately for brand owners, this has had little impact in practice. The restriction has been applied narrowly so that even minor variations in a company name can be successfully registered. In addition, the provisions do not deal with company name squatters who pre-empt the registration of desired names in the hope of selling them on at an inflated rate.
In Glaxo plc v Glaxowellcome Ltd [1996] the defendant, upon realising that there was to be a merger of Glaxo plc and Wellcome plc, registered the combined company name. The defendant then ‘sought to bargain with those plcs for the release of the name’. Glaxowellcome plc succeeded in getting its name back under a passing-off action by arguing that the earlier registration was an ‘instrument of fraud’. However, bringing an action for passing-off can be difficult, time-intensive and costly to pursue through the courts.
Even a trade mark registration for the company name in question does not guarantee stopping company name squatters. In Céline SARL v Céline SA [2007] the defendant adopted a company name that had been registered as a trade mark. The European Court of Justice held that the mere adoption of a company or trade name was not ‘trade mark use’ for the purposes of trade mark infringement.
Company Names Adjudication?
The Company Names Adjudication process is intended to provide a cheap and easy alternative to the above options. This procedure was introduced on 1 October 2008 by s69 of the Companies Act 2006.
The global drinks brand Coca-Cola has already taken advantage of this new procedure by successfully objecting to the registration of Coke Cola Ltd. Having failed to file a defence to the objection made in October 2008, Coke Cola was ordered in December 2008 to change its name to one that did not contravene s69. Coke Cola was also ordered to pay Coca-Cola’s costs, totalling £700. Coca-Cola’s dispute was resolved within three months, demonstrating the potential speed and effectiveness of this procedure.
Making an Objection
Any person, whether a company or an individual, may make an application objecting to a company’s registered name on the grounds that it is either:
- the same as a name associated with the applicant in which the applicant has goodwill; or
- it is sufficiently similar to a name associated with the applicant that its use in the UK would be likely to mislead by suggesting a connection between the two companies.
Legitimate Exceptions?
An objection will be upheld unless the registrant company can show a legitimate reason for the name. The main exceptions are as follows:
- the registrant company is actually operating under that name;
- the registrant company intends to operate under the name and has incurred substantial start-up costs in preparation;
- the name was adopted in good faith; or
- the interests of the applicant are not adversely affected by use of the name by the registrant company.
Despite these exceptions, the objection will be upheld if there is clear bad faith on the part of the registrant. This is likely where the registrant’s principal purpose is to, directly or indirectly, financially benefit from the applicant or to prevent it from registering the name.
Practicalities in bringing or defending a claim?
The Company Names Adjudicator Rules 2008 explain the process for objections to company names. Objections should be submitted to the Company Names Tribunal with a brief statement of the basis for the objection. The registrant company is then invited to submit a written response.
The adjudicator will set out timescales for evidence and submissions to be provided. Failure to make a submission or submit evidence can result in the adjudicator finding against that party without any further consideration. This occurred in the Coke Cola dispute. The adjudicator also has the power to strike out any objection or response that is vexatious, has no chance of success or is otherwise misconceived.
If an objection is upheld, then the respondent will be required to change its name to a non-offending name within a time frame set by the adjudicator. Any decision may be appealed to the courts.
Although not required by the 2008 Rules, an initial approach to the registrant company is recommended. This should flush out the respondent’s intention to rely on one of the exemptions or to extort money in return for the name.
Costs?
The initial fee for raising an objection is £400. If a response is made, then the fee is £150 and a fee of £150 is also required for any evidence submitted. The adjudicator may make an award of costs to either party at any stage of proceedings, and shall set down how the costs are to be paid.
Recommendations for brand owners?
The new Company Names Adjudication procedure may prove to be a useful tool for brand protection where an identical or similar company name is registered. Brand owners should consider putting a watching service in place, alerting them to any new company names to which they may wish to object.
The following further steps are recommended for businesses launching new brands or acquiring an existing company:
- Carry out company name and trade mark searches to be aware of any similar names. These conflict checks should include a review of any potentially unregistered marks.
- Review the legitimate exceptions where there is a potential overlap of a brand with a company name or mark.
- Devise a trade mark and domain name strategy to ensure that all registrations are obtained before brand launch.
- Ask for a warranty that any acquired company name and domain names have been registered in good faith.
Comparison to domain name disputes?
The Company Names Adjudication process provides similar protection to the domain name (DN) recovery proceedings to prevent cybersquatting. The DN dispute procedure is provided by the Internet Corporation for Assigned Names and Numbers (ICANN) and is adjudicated by the World Intellectual Property Organization (WIPO). Similarities include the necessity for brand owners to establish bad faith and the broad scope of legitimate exceptions. However, WIPO has frequently criticised brand owners for being heavy handed or for failing to establish a sufficient case.
It remains to be seen whether the company names adjudicator will apply similar guidelines to those applied by WIPO. WIPO has, however, received criticism in the past for inconsistent decisions and it is hoped that company name disputes will be decided on a more consistent basis.
From our experience, ensuring that a DN can be transferred in practice takes more than just an agreement to do so. Further recommended steps for launching or acquiring an e-business include:
- Adopting a brand that is distinctive. This will make it easier to obtain top-level DNs such as .com, .co.uk and .net.
- Limit opportunistic cyber-squatting by registering appropriate DNs, including any likely misspellings of those names and any likely derogatory DNs.
- Put in place a DN watching service to monitor use of DNs incorporating the brand.
- Ensure that, in practice, all technical information (such as passwords and usernames) is provided with the DN to effect the transfer.
- Search ‘Whois’ (www.whois.net) to confirm that the DN is registered to the correct entity (and not to an individual employee or IT service provider, as is often the case).
Reference point?
Further information is available from the Company Names Tribunal website: http://www.ipo.gov.uk/cna.htm
The tribunal's latest decisions are available at www.ipo.gov.uk/cna/cna-notifications.htm
By Hermione Hague, senior associate, and Helen Krushave, solicitor, McGrigors LLP.
