Navigating Around the Bermuda Triangle

(IPRinfo 2/2011)

Joose Kilpimaa
LLM, IP Lawyer, European Trademark Attorney, Kolster Oy Ab

IP -related issues concerning the change of a corporate name. How to avoid typical pitfalls?

In these rapidly evolving times, a company may find itself in a situation, where it needs to change its name. The need may occur because of organizational changes in the company, in case of a merger or company acquisition, streamlining a brand or brand portfolio or due to a court order or ongoing litigation.

The change of a company name is a huge undertaking, which carries many risks. Giving up a company name that has been in use for a long period of time, and has gained reputation and value through extensive use and marketing, is something that should not be done without careful commercial and legal review. A name change requires comprehensive strategic planning. It is vital that all the rights relating to the new name are cleared with preliminary trademark and domain name searches and audits. Despite the clearance efforts, certainty is seldom achieved, as is the case with companies conducting business internationally. Thus, the best thing is to focus on risk-management and investments therein.

Company names and brand names to be dealt with separately
For many companies, the company name and the main brand are one and the same. Having the same company and brand name do, of course, bring synergy benefits to the company, especially in IPR portfolio management.

It is, however, crucial that when a change is going to take place, they are separated from each other and dealt with equally diligently. The change of a company name constitutes such a vulnerable moment that all imaginable risks have to be taken into account.

Questions regarding the company name arise especially in cases in which a completely new company is founded. The company may feel the need for renewing its image among consumers or for separating a particular field of business into a separate entity. It may be desirable that the new company name communicates to the public a new way of thinking and a new approach to the company’s business.

Availability of the new name must be checked
Registering the new company name is a rather simple procedure, but the availability of the desired new name has to be checked in advance. The preliminary check also has to cover the compatibility of the desired trademarks that will be used in connection with the goods and services the company will market under the new name.

Generally, having an identical company name and trademark also provides synergy benefits in marketing, but it is unwise to rely only on a registered company name or a trademark. It is the combination of the two that provides the tightest IPR safety net in such a vulnerable moment. Early registration is also advisable since it can be used to establish priority when registering other rights and domain names later on. There are examples of numerous cases in which priority is the decisive factor when two similar rights collide.

If the intent to change the name becomes known to outside parties before the first registration applications are filed, the risk of mala fide registrations of similar or identical names or brands may increase. This may cause long and costly litigations, delays in the kick-off of business and, in the worst case, may even prevent the whole process.

Advance planning is vital
It is strongly recommended that when changing a name, the relevant older trademark registrations are kept in force for a fixed period of time, preferably at least five to ten years. The costs of maintaining these older registrations are considerably lower than trying to require them in a case where the trademark has been allowed to expire and is later registered by an outside party.

Establishing a new company requires careful advance planning, preferably in cooperation with professional trademark counsel. After creating or choosing the new trademark, the next steps are identifying the goods and services for which the trademark will be registered, and forming a strategy regarding the desired geographical coverage of the trademark.

Both steps require sufficient resources from the company’s personnel responsible for IP protection, as well as the company’s outside trademark counsel. The allocation of resources at this early stage is not always clear to the company.

Some companies find that the investments for the work done in advance are too costly, and in worst cases, unnecessary. Unfortunately, however, many companies have learnt the hard way that failure to conduct the required work relating to building a trademark strategy can cost many times the sum it would have taken to conduct the pre-registration work properly.

Trademark due diligence
Coordinating trademarks with the new company name should be considered as a form of due diligence. Once the relevant goods and services are identified and the relevant countries or areas chosen, an availability search in all countries is advisable.

The purpose of such a search is to find out whether there are earlier registrations or other rights that may prevent the registration of the new trademark in a particular country.

There are many public official databases that can easily be used. It is also wise to check the local legislation in any particular country by using the services of a local trademark counsel. The local counsel is able to advise the company of any specific rules in local legislation on the registration process or the use of the trademark.

Domain names v. trademarks
Domain names are not considered as intellectual property of a company as such. However, they are widely considered to be very closely linked to a company’s trademark rights. It is difficult to think of brand related business without corresponding domain names.

Anyone who has ever dealt with domain name management is very aware of the risks relating specifically to domain names. Terms such as ”cyber squatting”, ”phishing” and ”slamming” are in the everyday vocabulary of many IP professionals. Also the challenges relating to domain name management differ considerably from trademark portfolio management.

No unified rules for domain names
First of all, there are hundreds of domain name extensions. There are no unified rules and regulations governing domain names. They are governed by various sets of rules, from the rules regarding the common generic top-level domain names, such as .com, .net, and .org, to national legislation governing the country code top-level domain names, for example .fi and .de.

What makes domain name issues particularly susceptible to risk, is the ease and low cost of registering many domain names. There are domain names which may be registered by anyone without any prior rights relating to the name in question.Registration of certain domain names can also be very inexpensive. Therefore the registering of domain names similar to registered company names and trademarks has become a lucrative business for companies or individuals seeking to profit from the company name or a trademark of another company.

Because there are no unified rules regarding the registration process of domain names, the applicant must be prepared in advance to deal with peculiarities relating to the registration of various domain names. The requirements for obtaining a domain name in a certain country may, for instance, be that the applicant has a prior right to an identical registered trademark in that country or that the applicant has a registered branch office or subsidiary in that country.

In some countries this requirement can be met by using a local partner as so called local presence, as is the case in Finland. Also the maximum amount of registered domain names in a country may be restricted, as is the case in Norway. Therefore, the company has to be prepared to use the assistance of partners in the relevant countries.

Complex management
In general, the buildup and maintenance of an extensive domain name portfolio is more costly, time consuming and complex than imagined. The need for local contacts to establish a local presence may bind the company to a new contractual relationship with attendant obligations and responsibilities.

In some cases a new trademark application has to be filed in order to have the desired domain name registered. It is thus extremely important that the domain names are handled in connection with the registration of trademarks. Centralized and professional domain name management from the start also makes the maintenance of the domain name portfolio more cost-efficient in the future.

Internationalization and alphabetic systems
An increasingly important issue in launching new trademarks or setting up new business entities in the global market is the concept of internationalization. The term has generally been defined as means of adapting to different languages and regional differences in the target market. The Latin alphabet is at present the most used alphabetic language system in international trade, and it is still often taken for granted.

In order to make maximum use of an IPR portfolio, questions about internationalization should be on the agenda from the start, if the aim is to set up a new business or introduce a new brand in an area where other alphabetic systems are used. When, for example, entering the Chinese market, transliterations of the company name and the relevant trademarks should be included in the local trademark portfolio without hesitation. Basically, transliterating the company names and brand names secures that the targeted group of consumers will be able to both write and pronounce them.

Failure to secure rights in transliterated names may expose a company to risks of losing relevant rights to outside parties. Furthermore, if the transliteration has not been done carefully by a skilled professional, a company may find itself in a position where the registered rights don’t provide them with the desired protection.

A triangle of rights
The company name, corresponding trademarks, and domain names together form a triangle of rights, which provides companies a sturdy basis for doing business with a low level of risk. However, failure to secure rights to any one of the three can cause substantial damage to emerging businesses, and even prevent the launch of new enterprises entirely.

All the different rights carry a weight of their own, but a well-balanced combination of the three provides a sufficient balance for the company to focus on the main business instead of having to fight long and expensive battles for rights that should have been secured from the beginning.