Legal Briefing

Preventing trade name infringement in Vietnam

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Technology, Media and Telecoms | 01 October 2010

One of the most important steps in setting up a new business is finding a name for the company. When choosing a name, the two main concerns are usually the meaning of the name and its availability for use. Given that there are countless businesses already established, it is a challenge for a new firm to select a name that benefits its public image without infringing other companies’ intellectual property (IP) rights.

In Vietnam, awareness of IP rights – even within the business community – remains relatively low. When choosing a name for a new company, businesses have traditionally focused purely on the meaning and wording of the name, ignoring the need to ensure that it can be used legitimately. This has led to many infringements of trade names, made either deliberately or unknowingly.

In an attempt to counter this problem, on 15 April 2010 the Vietnamese government passed a 2010 decree clarifying the law on business registration and prohibiting the registration of company names that infringe a third party’s rights. Decree 43/2010 on Enterprise Registration (the 2010 Decree) came into effect on 1 June 2010 and, among other things, regulates the company registration procedure, providing that a company must not use a trade name, trade mark and/or geographic indication belonging to another entity as its company name. The 2010 Decree helps to bring Vietnam further into line with more developed jurisdictions.

With the introduction of the 2010 Decree, naming a business will be subject to tighter assessment during registration proceedings and there will be new provisions to deal with infringements of trade names.

This article discusses the 2010 Decree as it applies to IP, and highlights its effects on international IP rights holders and local businesses.

2010 Decree

Laws and authorities governing trade names

The laws governing the use of trade names in Vietnam are:

  • the Enterprise Law, which deals with the registration of company names;
  • the 2010 Decree, which clarifies and adds guidelines to the Enterprise Law; and
  • the Intellectual Property Law (the IP Law), which deals with the protection and enforcement of IP rights (including the protection of trade names, regardless of whether those names are registered as trade marks).

The authorities responsible for the regulation of trade names are the relevant Business Licensing Authority (BLA) and the Enforcement Authority (EA).

Geographical scope

Prior to the enactment of the 2010 Decree, companies were prohibited from using a name identical or confusingly similar to another within the same city or province. The 2010 Decree has sensibly extended this to cover the whole country. The 2010 Decree therefore makes it unacceptable to register a trade name in Hanoi that is already in use in Ho Chi Minh City.

National Company Registration Database

Prior to the 2010 Decree, business registration offices within each city or province had separate company registration databases, with online databases only in the three main commercial centres of Hanoi, Ho Chi Minh City and Da Nang. Under the 2010 Decree, a national company registration database is to be set up, allowing for comprehensive national company name searches. National databases are already the norm in more developed jurisdictions, where online searches of such databases are simple and available to the general public.

To create the new database, business registration offices will be responsible for uploading information on companies to whom they have granted business licences. While such an approach sounds workable, not only is the database likely to take a substantial time to complete, it must be continually updated to ensure that there is no time lag between a business registration and a subsequent search. The problems in compiling a thorough database are made more complex by the need to include registrations from small and/or remote provinces that may only have paper filing systems in place.

Trade name infringement

An equally important aspect of the 2010 Decree is its introduction of provisions for dealing with cases in which a company name breaches the IP Law.

Where a company is found to have used a third party’s trade name, trade mark or geographical indication to form its name, the 2010 Decree provides that the infringing party will bear full responsibility under the law (which may include a monetary fine) and be required to change its name. The grounds for determining such a breach will be in accordance with the IP Law.

Despite the 2010 Decree, the practical resolution of disputes is likely to remain a challenge. As the regulation of trade names is dealt with by both the relevant BLA and the relevant EA, IP rights holders will have to deal initially with the BLA and then with the EA when dealing with infringements. While it is likely that most infringers will respond positively to an initial request from the BLA, the possible need to work with both authorities is likely to cause delay and increase the rights holder’s burden.

Household businesses

In Vietnam, it is not unusual to see the signs of small family-owned shops using the names and branding of well-known consumer products, such as Google, Apple, adidas, to confuse consumers into believing that there is a real relationship between the business and the brand.

The 2010 Decree fails to fully deal with the ubiquitous and thorny issue of trade name infringements by household businesses. A household business is a small business (with less than ten employees) that is owned by an individual, or group of individuals, and registered in one location. This type of business continues to play an important part in Vietnam’s economy, contributing 13% of Vietnam’s GDP in 2007 (according to Vietnam’s Chamber of Commerce and Industry).

Under the 2010 Decree, household business registration proceedings are subject to a different licensing authority from company registration proceedings and are more relaxed. In particular, they limit the applicable geographical area so that the proper name of a household business cannot be identical to that of another household business within the same district, as opposed to the whole country. This seems to allow household businesses to use the trade name of another entity as long as that entity takes another business form (for example a company) or is located in a different district. The 2010 Decree fails to address cases in which household businesses have confusingly similar names (as opposed to identical names). It is unclear how breaches of this kind will be dealt with.

Given that there are many household businesses illicitly using the names of well-known multinational and local companies, these deficiencies in the 2010 Decree are likely to be an ongoing problem.

Common trade name issues

To choose the most appropriate option and enforcement authority, it is vital that IP rights holders fully appreciate the different types of trade name infringements.

Differentiating ‘identical’ and ‘confusingly similar’ trade names

Under the IP Law, the confusion between names such as ‘ABC Co Ltd’ and ‘ABC Trading Co Ltd’, which are almost identical, is obvious.

However, this is not the case under the provisions of the 2010 Decree, which stipulates that the name of a company must include two components. These components are the type of company (eg limited liability company) and its proper name (eg ABC). The proper name may include the area of business for which the company is registered (such as trading or service) or the form of investment it is implementing.

Under the 2010 Decree, an identical name is one that is exactly the same (in written and spoken Vietnamese) as that of a registered company. A confusingly similar name is one:

  • whose Vietnamese name reads the same as the name of a registered company;
  • whose Vietnamese name is the same as the name of a registered company with the addition of ‘&’ or ‘and’;
  • whose abbreviation is identical to the abbreviated name of a registered company;
  • whose foreign name is identical to the foreign name of a registered company;
  • whose proper name is different from the proper name of a registered company by the addition of one or more numbers or letters of the Vietnamese alphabet immediately following the proper name;
  • whose proper name is different from the proper name of a registered company only in that it has the word ‘new’ immediately preceding or following that name;
  • whose proper name is different from the proper name of a registered company only in that it includes the words ‘northern’, ‘southern’ or similar words; or
  • whose proper name is identical to the proper name of a registered company.

To determine whether company names are identical or confusingly similar to each other, the whole name, including the form of company, proper name, and business line and/or investment form must be taken into account.

It is clear that although the names ‘ABC Co Ltd’ and ‘ABC Trading Co Ltd’ appear to be confusingly similar to the lay person, they will not be considered so by the BLAs. In contrast, preventing the use of the trade name ‘ABC’, which is obviously an infringement of the trade mark ‘ABC’, will be much easier under the 2010 Decree.

Enforcing Trade Names in Vietnam Before June 2010

Although both the Enterprise Law and the IP Law make provisions for trade name infringement, the resolution of trade name disputes has not always been easy. In practice, the infringer tended to rely on the fact that the relevant BLA had approved the infringing trade name as a defence to an infringement claim. In such cases, the BLA could refuse to solve the matter by arguing that the licence had been granted in accordance with the Enterprise Law. There was no specific regulation granting the licensing authority power to intervene.

Enforcing Trade Names in Vietnam Since June 2010

The 2010 Decree makes provisions for IP rights holders to request that the BLA instructs the infringer to compulsorily change its name and requires that the BLA intervenes when these requests are made.

The successful resolution of trade name disputes requires a thorough understanding of the different legal mechanisms open to IP owners, combined with the correct choice of enforcement authority. Depending on the nature of the infringement and the IP rights holders’ objective (which may be obtaining a speedy result or drawing attention to the issue to deter future infringement), IP rights holders can choose various actions. Such actions include any combination of sending a cease and desist letter to initiating administrative or civil action.

Cease and desist letters

Sufficient warning, in the form of a cease and desist letter, and regular follow-up is normally the first step. The licensing authorities should be sent a copy of the letter and all subsequent correspondence. (This is particularly important if the IP rights holder intends to take stronger action to solve the dispute further down the line.) Cease and desist letters are often very effective, with most infringers, in particular household businesses, taking heed and stopping the infringing acts within a short period of time. However, many businesses are nervous of signing the requisite undertakings.

Administrative action

Despite its deficiencies, the 2010 Decree sets out a mechanism for co-operation between the EA and the BLA in dealing with trade name infringement. This option is suitable for borderline cases, where it is unclear whether an infringement has taken place or where the infringer has refused to stop the infringement, despite having received sufficient warning.

Taking this route, an IP rights holder can request the BLA to compel a company using an infringing name to change its name. The request must be supported by evidence of the holder’s rights (such as the trade mark registration certificate), as well as an expert opinion from an authorised body, such as the Vietnam Intellectual Property Research Institute, confirming that the company name is infringing.

The BLA must then give notice to the infringer, requesting a change of company name within two months. If the infringer fails to comply within this period, the BLA will notify the relevant EA.

Remedies for trade name infringement under the IP Law include:

  • an order prohibiting use of the infringing name;
  • a warning;
  • a fine;
  • the seizure of infringing evidence and means; and
  • a temporary suspension of the infringer’s business licence.
Civil action

An IP rights holder can initiate court proceedings against an infringer. Civil action is a relatively rare route in Vietnam due to a lack of IP knowledge on the part of the courts and the judiciary, together with delays and a lack of certainty as to the outcome.

However, if civil action is chosen, the court will consider both the Enterprise Law and the IP Law in assessing an infringement, which will hopefully ensure a more complete conclusion. If an infringement is found, the court will order the infringer to change the name and the infringer must submit the dossier for changing the name and a certified copy of the court order to the licensing authorities. Damages for trade name infringement are rare.

Before initiating court proceedings, it is essential to check when the infringement took place as the limitation period for commencing a court action is two years from the date on which the infringement took place.

Conclusion

The guidelines set out by the 2010 Decree represent encouraging progress and are to be welcomed by both international and local IP rights holders in Vietnam.

The 2010 Decree sends a clear message that when choosing a company name, a business must take proactive steps to ensure that it does not infringe another entity’s IP rights. IP rights holders should protect themselves by obtaining all necessary protection, including registering their trade name as a trade mark. They should also carry out periodical company name searches to detect any infringement at an early stage, so that it will be easier and quicker to solve disputes.

However, there are still areas of concern:

  1. 1) Given the large number of business registrations, the effectiveness of the database will depend on the ability of the business registration offices to regularly update and maintain the register.
  2. 2) Inconsistencies relating to household business infringements mean that such businesses may be able to continue to infringe the rights of IP holders with very little recourse to the holder.
  3. 3) The two-month period for complying with the BLA’s notice appears to be overly generous. Arguably, a one-month period would be more appropriate.
  4. 4) The involvement of two authorities in the enforcement procedure is likely to cause delay and increase the burden on rights holders.

Despite these concerns, the 2010 Decree constitutes a significant boost for IP rights holders, and is further evidence of the Vietnamese government’s commitment to making the country more attractive to overseas investors.