20
Apr/06

Why Did I Get A Demand Letter If I Was Allowed To Incorporate Under That Name?


I hear this every so often, usually in the context that the corporate lawyer who created a legal entity told the client that the name of the business was available, which meant that it was available as a corporate name in that state, but which the client understood to mean, simply, available.
The problem is that a corporate name is the name that the Secretary of State (which oversees incorporation in a state), allocates to a legal entity, after conducting an idential or near-identical search of the name, in that state. The availability of a corporate name means only that there is no other legal entity by that name in that state, and there is no trademark significance to this fact (a Secretary of State will apply some other restrictions to naming, usually relating to words associated with regulated entities such as banks or insurance, but thats besides this particular point).
Sometimes the Secretary of State will prohibit you from incorporating under an obviously problematic name, such as Coca Cola LLC, but the state will not conduct a likelihood of confusion analysis for corporate names. And they search the registry in their state, not all states. They are only concerned that tax bills and process gets served on the right corporation. Note: I am not referring to state trademark registries – I am talking about state corporation registries.
So you may be the only Acme Widgets, Inc. in California, but if there is a Rhode Island entity (incorporated or unincorporated) that started selling ACME brand widgets before you did in interstate commerce, you may have problems (and that you incorporated as Acme Widgets, Inc. two years ago will be no defense).
The good ‘how to start your business’ literature does address the corporate name/trademark distinction. I have only anecdotal evidence about how widespread is the misperception (and, to steal a saying I heard recently, the plural of anecdote is not data). I would imagine that lawyers who do a fair amount of incorporation work know to advise that unless a trademark search is performed, they are not clearing a name for trademark use (a disclaimer that a client may forget three years later when they get the demand letter). BLATANT PITCH TO CORPORATE LAWYERS – CONTACT US FOR YOUR TRADEMARK CLEARANCE AND FILING NEEDS.
I’m in favor of more education on this point, directed to the clients and the corporate law bar and the Secretaries of State, because it will lead to fewer nasty surprises and of course because it will lead to more clearance work for trademark lawyers.
The Australian Government has started addressing this issue. It has issued a report on the conflict between business names and trademarks here. Its proposals are discussed by Warwick Rothnie here.
Update: As I said, the good ‘how to start a business’ literature discusses this: ‘What Do You Mean I Can’t Use My Corporate Name‘ from Riker Danzig.

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