When you’re faced with setting up a company, there are a lot of things to think about:
– Do you have the funding you need?
– How are you going to market your services?
– Is your product going to sell?
What you probably won’t consider is the legal side of things…
Is there something in your plans, however innocuous, that could land you in legal hot-water?
One of the first things people tend to do when setting up a new venture, is to spend long hours (or even days) agonising over the choice of a company name. And rightly so, for two primary reasons.
First, this is the name your business will be stuck with for some time, and once a reputation has been built, the association between company name and product is hard to switch. But the second reason is probably of far greater importance, without being given anywhere near the same consideration – that of Intellectual Property infringement.
When choosing a name, whatever process is preferred (everyone discussing names, putting forward proposals, seeing how it might work as a logo or on a business card), the final stage for many is checking on Companies House to see if the name is already in use. If it isn’t, great – registration ensues and everyone is ready to go, right?
Wrong. There are more steps that need to be taken when choosing and registering a name… trademark infringement is a serious breach of intellectual property law, and one that spans the globe, not just the country in which you operate.
A recent case highlighted this, and can also be viewed as a warning to companies as to how far reaching judgements can be – and how much they can cost, both personally and professionally. The case was between two companies who sold energy and sports drinks, Grenade (UK) Ltd and Grenade Energy Ltd.
Despite the fact that one party sold its drinks as ‘Grenade’ and the other as ‘Epic’, the judge ruled that a registered company name, even if not used to promote the drinks, was enough to cause trade mark infringement and to establish legal liability in passing off – that is the defendant was in effect passing off its own product as the claimants, damaging its reputation and presumably hurting sales in the process.
This in itself is a potentially massive decision – not only do damages have to be paid, but the defendant would be required to rebrand and in effect start afresh with a new company name and rebuild the reputation and relationship with their customers. But in this case, the judge went one step further.
The final ruling was that the defending company’s sole director was jointly liable for the infringement. The company registrar is not required to check trade mark rights when registering a company name, so the burden falls to the directors of the company, and this case shows that by registering a company name and then allowing that name to be used could make the directors personally liable for any infringement – including the costs of fighting the claim.
But it’s not all doom and gloom… the process of checking that a trade mark can be safely used and ensuring that no intellectual property infringements will arise is something that we handle on a regular basis. It is an important step, and one that could prove costly if ignored or not completed correctly. The cost of fighting an infringement claim for a newly established business could potentially be devastating, so is it really worth the risk?
My advice? Seek professional assistance on trade mark registration and the protection of your intellectual property, then sleep soundly, safe in the knowledge that a lawyer isn’t going to be knocking on the door in the morning.
Iain Garfield is a Partner in the Commercial team at BPE Solicitors in Cheltenham, specialising in commercial contracts, intellectual property and e-commerce.
BPE is the headline sponsor for Innovation Rocks the Cotswolds
Innovation Rocks is a brand new event organised by Rock The Cotswolds (www.rockthecotswolds.com) to help inventors and entrepreneurs secure vital venture capital or angel investment for their business. The day will also offer entertaining and innovative speakers as well as showcasing exciting companies with an innovative edge.
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