For many entrepreneurs, the starting point in setting up a new
business is to choose a name for the new business and to register a
company with that name. The first step of the registration process
of a company is to select, in order of preference, a list of names
for consideration and approval by the Commissioner of Companies who
oversees the registration of companies in South Africa.
Arising from the name reservation process, there often is a
misperception that the approval of a particular name as a
company's registered name means that the new company has the
exclusive right to use its chosen name and to prevent others from
using the same or confusingly similar names in the trade. It is
also often assumed that the fact that a name is approved for
registration as a company means that the use of that name is lawful
and will not infringe the rights of others.
Although the Commissioner of Companies, when approving a
company's name, considers other company names on the register
of companies, the Commissioner ordinarily does not cross-check the
register of trade marks or conduct a check of names in use in the
trade to establish if there is a conflict between a proposed
company name and the trade mark rights or common law rights that
another business may have in a trade mark or trading name.
A result of misperceptions about the name approval process of a
company's name is that an entrepreneur may invest a significant
portion of its start-up capital on branding only to be faced with
claims of trade mark infringement in the event that it starts
trading, or claims of passing-off if there already is an
established business in the same field of trade with a reputation
in a confusingly similar name. There is also a procedure in terms
of the Companies Act, 2008, in terms of which a person with an
interest in a name may lodge an objection to a new company's
name. An objection may be lodged on various grounds, including that
a company's name is confusingly similar to a registered trade
mark of the objector or that the new company's name is likely
to cause confusion with the name of another business that has
common law rights in a name.
To avoid possible liabilities and to reduce the risk of having
to engage in time-consuming and expensive rebranding exercises, it
is advisable when choosing a name for a new company for
(1) research names that are already in use in the
trade in the same field of business by cross-checking business
directories and search engines on the internet; and
(2) arrange for a search of the register of trade
marks to establish the risk of the proposed name interfering with
the rights of an owner of a registered trade mark.
In addition, to secure the rights in a new company's name,
it is advisable to consider filing the company's name as a
trade mark in terms of the Trade Marks Act. There are a number of
benefits to obtaining registration of a name as a trade mark. For
example, in terms of the infringement provisions of the Trade Marks
Act, the owner of a registered trade mark has the right to prevent
others from making unauthorised use, in the course of trade, of
marks that are identical or confusingly similar to the registered
trade mark in relation to goods or services that are the same as,
or similar to those goods or services for which registration is
obtained. As a business grows, it becomes the focus of attention to
competitors who may decide to use confusingly similar names in the
trade to ride on the back of another business' success.
In addition, a trade mark can acquire a significant value as a
financial asset to a new company as it starts to grow. The
reputation in a trade mark that is used in the course of trade
subsists in its registered proprietor. As a business expands,
issues such as possible licensing and franchising may become
important and the value of a name can be a significant source of
royalties and franchise fees.
In summary, an intellectual property strategy, including a
branding strategy, should commence at the very beginning of the
start-up phase of a business, namely the choice of a company's
name. Prudent steps early on could avoid hiccups such as having to
re-brand or change a name and obtaining early protection could
deter copycats and create brand value for a business.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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