Doing business in California generally involves forming an entity. (Why? To limit the business’ liabilities to the business’ assets.) One of the required steps in forming an entity is selecting a name for it. And whether one does business in an entity or not, one will probably find it advantageous to have a business name.
Business entities such as corporations, limited liability companies, limited liability partnerships, and limited partnerships are formed by filing a document with California’s Secretary of State. The Secretary of State cannot accept an entity’s charter document for filing with a name that is the same as, or which closely resembles, the name registered (or reserved for use) by another entity of the same sort. Nor may it be a name likely to mislead the public, nor a name that contains the words “bank”,”insurance”, “trust” nor corporation, if that is not the case.
Since there have been many corporations formed in California, and a fair number of limited liability companies and limited partnerships, it gets hard to find a name distinct enough to pass muster with California’s Secretary of State, which generally relies on a computer algorithm for this purpose. Clients are sometimes dismayed to learn that their first several choices for their entity’s name are unavailable. Finally, out of desperation, they may form an entity with some strange name which may utilize their business address, a combination of their founders’ names, or some other strange combination of letters merely to secure corporate (or other entity) existence.
This is okay, I assure them because the entity may conduct its business under a fictitious business name, sometimes colloquially referred to as a “dba.” And it is true that anybody and any entity may do business under a fictitious business name without any pre-screening or advance approval being necessary. You merely have to publish a notice that you are doing so in the proper form, in a proper newspaper, and file an affidavit of such publication with the clerk in the county in which you are doing business.
Now Do I Own the Name?
Not exactly. You formed your entity, you published your fictitious business name, what more do you need to do?
Names are kind of a tricky thing. It is tricky enough forming an entity and securing the name you wish. But that is just a technical matter of filing certain documents with California’s Secretary of State. It is important to the State of California to make sure that all the corporations and other entities it authorizes are distinguishable, but that is just the beginning of matters. Frankly, the State’s objectives might be accomplished by assigning numbers to entities, like license plates on a car.
But ownership of a name in the context of commerce is governed by a fairly complex set of rules which rarely provides the type of clarity and predictability businesses wish. For this reason, there is a fair amount of litigation in this field.
As a general rule, you acquire common law trademark rights in a name used commercially to the extent you are the first to use it, both geographically and with respect to the product (or service) areas in which it is used. For example, if you are the first to operate an Italian restaurant in Westwood California called Guido’s, you might own that name for Italian restaurants in Westwood. Do you own the name Guido’s for any kind of restaurant anywhere in Los Angeles? California?
Maybe. The standard for opposing registration or asserting infringement of a junior user’s similar or identical trademark is whether a “likelihood of confusion” would result in the minds of the relevant consumers if both trademarks were allowed to be used. This “likelihood of confusion” analysis is primarily based upon (1) the similarity of sight, sound and meaning of the respective trademarks, in conjunction with (2) the relatedness of the respective goods/services offered under the trademarks such that an unknowing consumer would be confused. One purpose for these rules is to avoid confusing the public regarding the source of services and products. Thus, it will depend upon who else is doing what else in the business and geographic vicinity. A search of these other uses is crucial, because these other uses will determine the extent of your ownership of your name, or whether you can use it for your contemplated business at all
At this point, I must offer a caveat. I am not a specialist in intellectual property law, nor in any of the subareas such as copyright law, trademark and patent law, and the law of trade and service names and service marks. (A trademark or a service mark is a word, name, symbol or device used by a business to identify its goods or services and distinguish them from the goods and services of others. Coca-Cola, Kleenex, are familiar examples. A trade name identifies an enterprise, such as GE or Microsoft. The dividing line between a trade name and a trademark or service mark can be unclear, since occasionally the same word is used for all those functions.) This is the province of specialized counsel.
Accordingly, when a client contemplates a substantial investment in a trademark or service mark or a trade name I usually refer that client to an intellectual property attorney. Intellectual property counsel will identify the appropriate elements of the mark or name, conduct a search to identify possibly conflicting uses, and register the name or mark as appropriate. The search is particularly crucial.
If you have formed the entity, published your notice of fictitious business name, and registered your trade name and service or trademark, then do you own the name? Perhaps. Doing all those things does not confer rights against prior users. Hopefully, your search, which will include a search of phone books, state and federal filings and the internet, will disclose such prior users, but it may not. Trade name and trademark rights are based on use, and the first to use a name or a mark generally has superior rights at least in the geographic and business area where the mark is used or known.
A comprehensive search is likely to generate an exhaustive list of similar names and identify their uses, and perhaps give some clues as to territory of use. It is very unlikely to come up with nothing. Rather, you are likely to be in a position of scrutinizing this list and making a business decision regarding risks and rewards. How much are you about to invest in the new name? How difficult will it be to change names if that becomes necessary? How much does the name benefit you? How close are you coming to the predecessor uses, as to geographical location and business scope? Certainly some risks will be encountered; it seems almost impossible to do business without running some risks. Intellectual property counsel can help assess these risks.
Is there anything that can be said definitively? I would recommend against using famous names such as “McDonalds” or “Apple” for any business, even if it’s not related to hamburgers or computers. Of course, I do not believe Apple poses any problem for those actually selling fruit of the similar name. Do you see how things get tricky?