Considerations when choosing a company name in order to avoid infringing the rights of established businesses and to ensure legal compliance
One of the main considerations for entrepreneurs establishing a new business is the name. The main restriction in this regard is that the chosen name or one very similar may already be in use by another established business. This restriction applies no matter what format the business takes. Those establishing a new business often mistakenly believe that if they don’t register the name anywhere or actually manage to register the name at Companies House, they are immune from any action being taken against them by anyone else using the name.
So what action can be taken by the aggrieved third party who believes that the new business is trading with a name which is the same or too similar to their name?
The main action normally instigated is under the UK common law right of “passing off”. This law is based on the common sense basis that it should be an offence for one trader to misrepresent his goods or services as those of another and so deceive customers into purchasing his goods and services when they thought they were purchasing those of another. In order for the aggrieved party to succeed it must show (1) that its goods or services have acquired a goodwill or reputation in the market and are known by some distinguishing feature (2) that there is misrepresentation by the other party leading to the public believing that they are buying goods or services from the aggrieved party; and (3) that the business of the aggrieved party is likely to be damaged. Unless the business taking the action is very well known (and even this didn’t work for Harrods), to be successful in an action, the businesses need to be in broadly similar lines of trade and in overlapping geographical areas.
In a recent High Court case in England the proprietors of a successful and trendy bar, restaurant and gallery in Bristol known as “Bocabar”, otherwise known as “Boca Bar” or simply “Boca”, sued the proprietors of another restaurant and bar in Bristol who were trading under the name “Boca Bistro Café”. The owners of “Boca Bistro Café” had even registered the name as a trade mark. The Judge found in favour of “Bocabar” in that they established the three grounds mentioned above. There was substantial goodwill and reputation attached to the claimant’s restaurant, bar, café, gallery and music venue services in the minds of the public under the name in the Bristol and surrounding areas, there was a very real likelihood that the public were being confused into believing that there was a connection between the two businesses and there was damage. Because the action of passing off was successful, the UK trade mark “Boca Bistro Café” was held to be invalid. It is interesting to note that the claimants restricted their complaints to the geographical area of Bristol. They did not seek and were not therefore granted a monopoly on the use of the name Boca. It was noted by the Judge that there are other restaurants in the UK using the name, including one in Belfast.
Whilst the passing off tests mentioned above can be difficult to establish, this case does show the importance of making all necessary checks prior to choosing a business name and taking the matter seriously if another business alleges that your business is infringing its rights.
Celia Worthington, Senior Partner of the commercial department of Worthingtons Solicitors, Belfast office can be contacted on email@example.com