Choosing and Clearing a Name for Your Client’s New LLC

Sparkle Klean Kar Wash, LLC
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Your client wants you to form a new entity called, Sparkle Klean Kar Wash, LLC. You check the Ohio Secretary of State website and the name is available. Six months later, your client gets a demand letter alleging trademark infringement and demanding your client change his name. How did this happen?

Due diligence in selecting a company’s name means different things to different professionals. A marketing professional may focus on whether the name can create a strong brand. A corporate lawyer may focus merely on whether the name can be registered with the Ohio Secretary of State as a corporate name. While both marketing professionals and corporate lawyers seek a sound foundation for their client’s new company, they often overlook an intellectual property lawyer’s perspective: will the proposed company name infringe another’s trademark rights?

There are basically two types of trademarks rights, common law and federal. Neither is generally found by searching for the availability of a corporate name on a secretary of state website, so confusion is common.

Common Law Trademark Rights. The first type of trademark right is common law. Common law trademark rights are created when one uses a distinctive logo or word or series of words in association with a good or service in commerce. Using the aforementioned example, if the client opened his car wash and had a sign stating, Sparkle Klean Kar Wash, he would begin generating common law trademark rights in the mark, Sparkle Klean Kar Wash from the first day the sign was up and he was in business. Those rights would extend geographically only to all areas where consumers identified that mark with his business. In those areas where consumers would not identify that mark with his business, a competitor would be free to begin another business under the exact same name, offering the exact same services. The corporate names could even be identical, if, for example, one entity was incorporated in Indiana and one in Ohio. The common law rights could be identified by the TM superscript, e.g., Sparkle Klean Kar Wash.

Federal Trademark Rights. The second type of trademark right is federal trademark or registered trademark. Federal trademark rights are created when one files a trademark application in the United States Patent and Trademark Of fice (USPTO). The application will be examined by a trademark lawyer employed by the USTPO. The application will be approved if it (1) comports with the procedural rules of the USPTO (applicant, mark and goods are properly identified, etc.); (2) does not merely describe the goods (one cannot own an exclusive right to words that describe the goods); and (3) is not likely to cause confusion with a previously registered mark. If approved, the applicant will have nationwide rights to the mark, retroactive to the date the application was filed. The federal trademark rights are identified by the circled R superscript which stands for registered, e.g., Sparkle Klean Kar Wash.

Common law and federal trademark rights are infringed when the subsequent, unauthorized use of another’s trademark confuses a consumer as to the identity of the source or origin of the goods or services.

Ohio State Trademarks. To the surprise of many, the owner of an Ohio state trademark registration does not have the exclusive right to use that mark throughout the state. “The rights in trademarks, trade names and service marks are acquired by actual user and not by registration. Such rights belong to the one who first actually adopts and uses the name or mark in connection with his business … The qualified property rights in such names and marks and the right to protection thereof arise as a matter of common law, not as a matter of statute. The registration statutes merely implement the common-law rights and create certain procedural advantages.” Younker v. Nationwide Mut. Ins. Co., 175 Ohio St. 1, 6 (1963). In essence, an Ohio state trademark creates no trademark rights for the owner, but can provide procedural and evidentiary advantages.

Recommended Procedure for Clearing a Corporate Name. Once a proposed name has been identified and confirmed as an available corporate name in Ohio, search for any federal or common law trademark rights that would be infringed by the adoption of the proposed name. The website (www.uspto.gov) of the USPTO offers a fairly user-friendly search tool and advice how to perform the search. A quick search of Google will yield other free and for-fee search tools you can use.

Roger Emerson

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