Wednesday, 25 April 2012

Watch your name and protect your brand

Research conducted in 2010 showed that American technology giants were responsible for a quarter of all applications to The Company Names Tribunal. A couple of years on, the Intel Corporation in particular has had a run of orders in its favour. However, a recent decision that went against it gave very useful guidance on the matters that might sway a CNT adjudicator. Consideration of the emerging body of decisions highlights the importance to brand protection of a combination of a company name watch service and a readiness to deal with any abusive registration by a speedy, and appropriate, application for an order.

The British Brands Group defines a brand as a “reputational asset…developed over time so as to embrace a set of values and attributes…resulting in…a powerfully held set of beliefs by the consumer... and a variety of other stakeholders”. A BBG study suggests that, in Britain, £16bn (6% of total investment in the economy) is invested annually in brand creation. The same study estimated that one million people (4% of the entire workforce) were directly employed in the creation and management of brands. Now, marketeers and lawyers alike understand that a “brand” is more than just a name. No-one would dispute, however, that a company’s name is a key part of its brand identity and that name recognition is key to brand value.

Until 2008, there was little that a business could easily do if a competitor registered a limited company under a name so similar to its own as to threaten damage to the value of its brand. The Companies Acts contained provisions (now reflected in the Companies Act 2006 s66 to s68) directing that a company could not be registered under a name “the same as” an existing registered company and providing that the Secretary of State could (but only within twelve months of its registration) direct a company to change its name if it was the same as, or “too like”, that of an existing registered company. In practice, these provisions were interpreted very narrowly. It was very unusual for an application to be refused on the grounds of similarity unless the conflicting name was more or less identical with that of an existing UK registered company. As a matter of policy, it was felt that there should be a broader right to object to a name by a cheaper alternative to court action. The 2006 Act introduced this:

"69 Objection to company's registered name
(1) A person (“the applicant”) may object to a company's registered name on the ground—
(a) that it is the same as a name associated with the applicant in which he has goodwill, or
(b) that it is sufficiently similar to such a name that its use in the United Kingdom would be likely to mislead by suggesting a connection between the company and the applicant"

The Act provided that “company names adjudicators” would be appointed to hear objections under s69 and, in October 2008, The Company Names Adjudicator Rules 2008 came into force. The system is administered by the Company Names Tribunal which itself is overseen by the Intellectual Property Office and the adjudicators are all hearing officers with experience in trade mark tribunal work. The Act provides that if the applicant shows it has goodwill (which is very broadly defined to include “reputation of any description”) in a name (not necessarily the name of an existing limited company) and that the proposed company name is likely to be misleadingly similar, then the burden of proof shifts and:

"(4) If the ground specified in subsection (1)(a) or (b) is established,it is for the respondents to show—
(a) that the name was registered before the commencement of the activities on which the applicant relies to show goodwill; or
(b) that the company—
(i) is operating under the name, or
(ii) is proposing to do so and has incurred substantial start-up costs in preparation, or
(iii) was formerly operating under the name and is now dormant; or
(c) that the name was registered in the ordinary course of a company formation business and the company is available for sale to the applicant on the standard terms of that business; or
(d) that the name was adopted in good faith; or
(e) that the interests of the applicant are not adversely affected to any significant extent. 
If none of those is shown, the objection shall be upheld."

However, even if the respondent company does establish any of these things, the objection will still be upheld if the applicant shows that “the main purpose of the respondents…in registering the name was to obtain money (or other consideration) from the applicant or prevent him from registering the name.”

If the objection is upheld, the adjudicator must order the company to change its name to a non-offending one and, if that is not done by the date specified in the order, pick a new name himself.

The 2008 Rules provided the framework for the management of proceedings brought before the CNT but they left the adjudicators with a wide discretion as to how precisely to deal with applications coming before them: Rule 6 provides that “[t]he adjudicator may give such directions as to the management of the proceedings as he thinks fit” and gives a long and non-exhaustive list of what he might do. For the sake of clarity and consistency, the CNT has issued a practice direction which, whilst it does not fetter this broad discretion of any adjudicator, sets out a standard practice. The applicant will be expected to provide, as part of the evidence establishing goodwill in its name, details as to the nature, history and longevity of its business activities, with specific reference to the contested company name. In terms of Rule 3(2), the adjudicator will send a copy of the application to the respondent. A respondent will normally be allowed two months to file a defence, which must address the matters stipulated in Rule 3(5). Rule 4 requires that the adjudicator will then determine what “evidence rounds” there shall be. The Practice Direction provides that the periods will each be of two months and that normally there shall be three: the applicant, the respondent in reply and the applicant in reply. There are specific provisions governing how an adjudicator is likely to deal with material sent on a “without prejudice” basis and the key criterion seems likely to be whether it was sent as part of a genuine attempt to negotiate an agreement. Requests by parties for extensions of time will be considered but are expected to be the exception rather than the rule. The adjudicator can decide to determine an application with or without a hearing. He may award expenses for work including the preparation or consideration of statements, the preparation of evidence, preparation of submissions and attendance at hearings. There is a range of possible awards (with a cap which applies provided the loser has not acted unreasonably) but anything between  £3,000 and £5,000 seems likely for those with lawyers instructed. Those who represent themselves will get half what they would otherwise have been awarded. If the action is undefended, expenses may still be awarded but it will be important to show that there was adequate notice given to the respondent before the objection was lodged. The explicit expectation is  that "a prospective applicant will have sent the respondent a letter before action and properly considered any response prior to filing an application to the tribunal” and a successful respondent may get an enhanced award of expenses in its favour if this cannot be shown to have been done. Expense awards will not take account of any conditional fee arrangement.

The system has been operating for a few years now and a few things have become clear. It is not enough to make a general complaint about use of a name: the adjudicators will be quite willing to strike out an application that does not address the issues of goodwill and confusion (see the decision in the application made by Jewson Limited). Applications will be entertained, and orders made, where the names are much less similar than would be needed for an application under s67. The adjudicators are willing to take a fairly broad-brush approach to what expenses should be awarded: Albourne Property plc not only withdrew their application but sent a letter to the respondents, apologising for making it, yet the adjudicator refused the respondent’s application for costs because it had not responded to the initial letter of complaint. As explicitly stated in the decision in in the application by Barloworld Handling Limited, “Applications to the Company Names Adjudicator are neither an alternative nor an equivalent to an action for passing-off”, and so confusion harming goodwill was not enough: the application there complained that the respondents were already operating under the name (which is itself a defence) and so, in the absence of any assertion that the purpose of the registration was to obtain money or prevent use, the application was struck out.

The Intel Corporation has made various objections over the last few years. The CNT regularly states that it takes judicial notice of the fact that Intel has goodwill in its name for computer related goods and services. Intel had a run of awards in its favour in 25 undefended applications. In September last year, it faced its first defended application and, again, the adjudicators found in its favour in respect of the name “Intellogic Ltd”. However, on 23 March this year, it had its first reversal. The name complained of was “Intel Marketing Ltd”. The adjudicator's decision held that the name “gives the impression that the undertaking is Intel or a subsidiary company of Intel which has the task of marketing its goods”. It held that the respondents must have known of Intel’s reputation at the time of incorporation. It noted that “Intel” is a made up word, used exclusively by the applicants. It held as not conclusive the fact that there had been a separate predecessor company, established in 1984 but dissolved in 2009, which had previously operated the respondents’ business under the same name.  It similarly placed no real weight on the fact that “Intel is an American semiconductor chip manufacturer, whereas [the respondent] is engaged in the sale of car parts and agricultural equipment in East Africa”. It noted that the respondents had, against all this background, given no explanation as to why they had adopted their name, beyond referring to the desire for continuity with the predecessor company’s name. Perhaps counter-intuitively, this seems to be what led to the finding in their favour. The decision went against Intel on the rather nebulous ground of “good faith” adoption of the name. The adjudicator referred to earlier CNT decisions but also, by way of analogy, to trade mark decisions too. He found that “there is no reason to believe that the initial incorporation [of the predecessor company] … was not made in good faith”. He did not “see anything sinister into the absence of a fuller explanation” for the adoption of the name by the respondents and appears to have placed some reliance (despite the onus being on the respondents) on Intel’s failure to adduce any evidence of bad faith. He noted that the respondents had not made any apparent gain as a result of the choice of name. He dismissed the application.

The decision contains an interesting review of the concept of “good faith” in analogous circumstances. Although the great majority of applications (over 90%) have been successful, the decision demonstrates that CNT decisions are likely to be very fact-specific and that, perhaps, more care will be needed in assessing the prospects of success with any application than this statistic would suggest. The adjudicators have not been shy of pointing out that it is not enough for applicants to establish confusion or that a name is “too like” theirs. There must, in short, have been an opportunism in the respondent’s choice of name.

Perhaps the key lesson from the entirety of the decisions is that any business must recognise the value that adheres in its reputation and take steps to protect that against opportunistic attack by abusive registration. About 1,500 new companies are registered in the UK every working day. Any delay in objecting to a name may be critical. Once a company starts trading, it is likely to have a defence that it has been operating under the name and the applicant will have to rely on establishing that the intention behind registration was to obtain money from it or prevent it from registering the name itself. That may not be easy, to say the least. So, a flow of up to date information and speed of reaction are critical. The good news is that it is relatively easy and relatively cheap to use a company name registration watch service to give warning of offending registrations, allowing a speedy application to be made to the CNT to limit the damage done. No less an authority than the Oxford Journal of Intellectual Property Law & Practice recommends:

"[T]he CNAs should be considered by rights owners as a new arrow to the quiver of IP protection in the United Kingdom and a company names watch service is now recommended."

If you would like details of how we can help you protect yourself, just let us know. We’ll be happy to talk through what we can offer.

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