Executive Summaries Jun 4, 2020

The Registration of a Trade Name with the Business Registry: A False Sense of Security

A business’ tradename is at the heart of its identity and defines, in great part, the relationship between the business and its clientele. At the dawn of the post-COVID era, it may be necessary for some business organisations to re-evaluate their trademark protection strategies.

By registering their business names (either used or proposed to be used in the future) with the provincial business registry, many businesses believe that they thereby acquire a form of protection in the name, which it can enforce against third parties or competitors who use identical or similar names. Those businesses will likely be surprised to learn that the Act respecting the legal publicity of enterprises (the “ARLPE”) clearly states the contrary at section 19: “No right to a name is conferred on a registrant solely by the recording of the name in the register or the deposit of a document containing the name in the register.”

One must understand that the purpose of the ARLPE in not as much as providing some form of protection to businesses than to allow the public to identify the persons and companies behind the businesses with whom they are dealing.

If we wish to obtain rights in a tradename in order to assert such rights against a third party who uses a name that is likely to be confusing, there are only two options:

  • Using the tradename such as to create, in the mind of the relevant consuming public, an association between the tradename on the one hand and the business or the goods and services it offers on the other; or
  • Registering the tradename as a trademark on the register of trademarks held by the Canadian Intellectual Property Office.

These options are not alternative and are ideally cumulate. However, this first option, taken in isolation, comprises certain limitations, some of which will be addressed below.

The Limitations of Relying solely on the Use of a Tradename

On a preliminary note, actual commercial use of a name is an indispensable condition to acquiring any form of protection. As such, if someone, for example, develops a new line of goods or services that will be offered under a new name, that person risks “getting the rug pulled from under him/her” by a third party between the moment where the decision to adopt the new name was taken and that when the goods or services at issue have been actually sold or offered on the market. Typically, this occurs in two circumstances.

First, on some unfortunate occasions, an unrelated person who has heard of the impeding business plans will, for whatever reason, choose to file a trademark application for the name in question before it has been used. Second, by pure coincidence, a third party will begin using that same name, or a confusingly similar one, elsewhere in Canada or file a trademark application therefor.

In both situations the problems can indeed be serious: the right to use the name or to protect it as a trademark can be entirely lost. In such situation, it is required, quite often, to go back to the proverbial drawing board, find a new name and thereby lose all the efforts and expenses invested in the development and launch of the name that is now only good for the wastebasket.

In addition, we must consider that the scope of the rights that ensue from the use of a name are essentially limited to the goodwill developed in association thereto, which necessarily entails geographical limitations to the area where the name was effectively used. Acquiring such limited rights appears sufficient if our ambitions are initially limited to a very local market.

However, following commercial success or in light of new business opportunities, the initial ambition can easily morph into expansionist horizons, either when we start opening new stores or offices or by expanding the client-base beyond the original endeavour. The limited protection afforded by use can therefore have negative consequences. For example, another business operating in the same field in another city could coincidentally adopt the same or a similar name, which actually happens more often that people can tend to imagine. Five, ten, or twenty years later, both businesses can have expanded, one in the western part of the country and the other in the eastern part: one or both businesses may need to stop their respective expansions and cease entry in new territory.

The only way to obtain national rights to a tradename, even if its use is strictly local, is by obtaining a trademark registration. When an application is filed before use has begun, the rights to the name are retroactive to the date of filing of the application once registration is secured. Therefore, as soon as the use of a new name is being considered, the recommended actions are the following:

  • ensuring that the name or trademark is actually available in that its use will not infringe any third party rights in an identical or similar name; and then
  • proceed to filing a trademark application in order to actually reserve the right to use the trademark a mari usque ad mare

Even if the initial business plan is prospectively modest or has a local flavour, the above remains the best recommended course of action because it adds true value to the business, notably in the eyes of an eventual new owner or business partner who may want to develop the business farther.

Finally, in addition to granting rights that can more easily exercised before the court than those granted by sole use, a trademark registration is often a necessary prerequisite to filing a complaint with the Amazons and eBays of the world in order to cease the offering of counterfeit goods on the Internet.

The importance of a name for a business can not be underestimated. Properly protecting the name, in order to ensure being entitled to use it, to preserve the possibilities of expansion and growth of its market share, and to have the right tools to act against unfair competition, should be on the first priorities of a business.

Do not hesitate to contact our team of trademark specialists, which accompanies goods and services companies in all sectors of activity. Our professionals will be pleased to guide you in terms of employment availability verification and name protection strategies in Canada and abroad.

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