What's in a name?
Strategic considerations and other legal issues in the selection of your company's business name5 min read
2. Legal Issues
Trademark and other legal issues in the selection of your company's business name
Why is strategically choosing a business name so important? A company's name has the power to influence decision-making and spending. A business name is often the first impression your business makes on a customer. A business name helps communicate business strategy. A business name is also the foundation of brand and trademark strategy and design, which can be of significant value to your customers and potentially increase your company's value. The greater the brand equity your business has built, the more appealing your company is to investors.
What's more, some companies develop such strong and positive brand awareness that they can franchise their business. Potential customers tend to decide whether or not they like or even trust your brand by how they identify and connect with your business name. A name is a significant factor in attracting customers. For example, a brand name like "Apple" has excellent brand marketing, top-notch product development, and even better service delivery to ensure that customers positively recognize and interact with Apple's brand, products, and services. Therefore, choosing a name that resonates with your company's target audience will put your company on the right path toward success.
Companies should not choose a legal name or "doing business as" (a DBA) arbitrarily from both a branding perspective as well as a legal perspective. Both state and federal laws are applicable when choosing a name and logo to trademark.
A trademark represents one of several types of intellectual property protected at the federal and state level. A trademark identifies a single source of origin for goods and services, distinguishes the owner's goods and services from those of others, and provides the mark's owner with the right to prevent others from adopting similar marks likely to cause confusion to customers in the marketplace. Trademarks are registered at the federal level by the U.S. Patent and Trademark Office (USPTO). The owner of a trademark has exclusive rights to the trademark and can prevent anyone else from using it. Trademarks form the basis for the image of the company. A company's reputation, services, and products are determined by its presence on the market. For example, in the fashion industry, a trademark of a brand name becomes an incentive for people to choose that brand over the others. Now, the question is, who should be the trademark owner? The party controls the nature and quality of the goods and services used in connection with the brand.
Moreover, it is important to keep in mind that only a legal owner of a trademark has the standing to enforce the intellectual property rights of that mark. A common mistake made by business entities is to have an executive of the company file for a trademark in their own personal name. This can restrain the company from enforcing its trademark rights against competitors, and it can risk invalidating the trademark registration; and once the business entity is formed, typically, it will become the registered trademark owner through the assignment of the mark(s).
There are five (5) key advantages for a company to trademark its business name:
(1) the business entity will be able to license or assign the mark
(2) since trademarks are quantifiable assets, the mark can add great value to the business
(3) trademarks can be used as security interests in financial transactions
(4) successfully registered marks can be exploited (to generate revenue) in business negotiations with third parties looking to license your mark
(5) the company will have the standing to enforce its trademark rights against third-party infringers.
In Copyrights, federal law can also provide another layer of restriction on corporate name selection in the form of copyright protection. Copyright law protects the expression of an idea. New companies cannot use copyrighted expressions in the name of the business. For instance, if an existing company develops and copyrights a marketing slogan, a new company cannot use that slogan in the new company's name.
State Registration is one of the important steps in the process of naming a company. There are different forms of entities you can choose before deciding on which one to form or incorporate, but picking a state of registration may be a gamechanger for the company. In other words, there are some states which are considered as more "business-friendly" or "international-friendly," such as U.S. states are more "business-friendly" or "international-friendly," especially the States of Delaware, Nevada, and Wyoming. For example, if someone wants to form a company for the purpose of obtaining U.S. investment or venture capital, you may consider a Delaware corporation as this is the entity that is required by the vast majority of institutional investors and venture capitalists. For that, you will need a registered agent, who is a person or company that must have a physical address in the state of formation, be available during business hours, and will accept and sign for official legal and state documents for the company..
The main goal of a trademark is to avoid confusion of a customer over the trademarks that businesses use related to their goods and services. Your brand name is like an energy source for your company. To protect your business and name from any legal issues, you should have a proper business registration. When you are registering your entity with the secretary of state, the office performs searches to make sure that your proposed business name isn't already in use by another company in that state. So, every state has its own laws about just how different a name from other business names. Once the entity is formed, the person's name is protected in the state. No other business will be able to form an entity with the same name in that state. However, there's nothing to stop a business that operates as a sole proprietorship or partnership from using your name in the state. It just won't be able to register as an LLC or corporation with that name.
While every business in different industries is subject to different rules and regulations, just as important, you want someone that is competent, responsive, and experienced with the types of legal issues with which you will need help. Hiring a lawyer who is familiar with the industry you operate your business in can help get your startup off the ground. Startup lawyers are able to handle all complexities that arise during the process of launching, financing, and running a brand-new business. Unfortunately, there is simply no foolproof way to guarantee that your company will never get sued, but your lawyer's best course of action is to mitigate your risk and make sure you have the right protections in place.
Moreover, if your business has important intellectual property, such as patents, copyright, trademarks, or product or industrial designs, your lawyer can help you protect those valuable assets.