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Company names versus trade marks: Effect of the
Companies Bill
You have successfully registered your
new company name. The logo, domain name, website,
letterhead and office signage followed. Then, just when
you think your marketing efforts should start paying
off, you receive a letter from the owner of a trade mark
similar to your company name, demanding that you cease
trading under that name. This article is about how to
avoid such a situation.
Introduction:
The ongoing process of replacing the outdated Companies
Act of 1973 with a new Companies Act was taken a step
further when the Companies Bill was approved by the
South African Cabinet on 7 February 2007.
One of the objectives of the new Act is the phasing out
of Close Corporations over a 10 year period. In this
regard, the Bill inter alia provides for the
incorporation of two types of companies, namely "for
profit" and "not for profit" companies. The company name
of a not for profit company (current section 21
companies) will end with the letters "NPC". For profit
companies could either be "widely held companies"
(company names ending with "Limited" or "Ltd.") or
"closely held companies" (company names ending with "CHC
Limited" or "CHC Ltd".) By virtue of a company's size,
the nature of its activities and consequent greater
responsibility to a wider public, a company in any of
the above these categories could also constitute and be
regarded as a "public interest company", which will be
subject to more severe disclosure and transparency
provisions.
Company names versus trade marks:
According to Section 41 of the Companies Act of 1973,
which currently applies, a company name shall not be
registered if the Registrar of Companies is of the view
that the name is undesirable.
In 1973 and again in 1995 the Registrar published
Directives with regard to names of companies, close
corporations and defensive names. The Directives (which
are still in force) set out certain guidelines on how
the Registrar will determine when a mark is undesirable.
According to the Directive, the meaning of "undesirable"
inter alia includes the following:
"…In particular, a [company or close corporation] name
will be considered to be undesirable if …words
pertaining to a trade mark are contained in a name which
will be used in regard to a business which relates to
the class of goods or services in which the trade mark
is registered while the applicant has no proprietary
rights in respect of such trade mark, nor the consent of
the said proprietor to use such words in a name."
The Trade Marks Register is divided into 45 different
classes, each class covering a specific category of
goods and/or services. Trade marks are therefore applied
for and registered in different classes, depending on
the goods and services it covers. For instance,
according to the trade mark classification, "cold
drinks" would fall in class 32, while class 25 covers
"clothing, footwear and headgear". Based on the above
guideline, it follows that a hypothetical company named
Jacaranda Cold Drinks (Pty) Ltd could therefore possibly
co-exist with a JACARANDA trade mark registered in the
name of an unrelated entity which covers "clothing", as
"clothing" and "cool drinks" are generally not related
goods.
The Companies Bill potentially changes this position. In
this regard, Section 19(1)(c) of the Bill provides that
a company name "must not be the same as, or confusingly
similar to – (iii) a registered trade mark belonging to
another person, or a mark in respect of which an
application has been filed in the Republic for
registration as a trade mark." It is not clear from the
Bill itself whether it is the intention of the
legislator that a company name may not be the same as,
or confusingly similar to, a third party's registered or
pending trade mark in a relevant trade mark class or any
class.
Conclusion & Recommendations:
As there is currently no cross-referencing between the
South African Trade Marks Register and the Companies and
Close Corporation Registers, a successful company or
close corporation name reservation is no guarantee that
the reserved name does not offend/conflict against a
trade mark, registered or applied for, on the Trade
Marks Register. In this regard, it should be borne in
that the current Companies Act provides that a company
and close corporation name may be attacked by third
parties on this basis within two years after its
incorporation.
To obtain certainty and to avoid possible litigation
relating to a company or close corporation name, we
suggest that you instruct us to conduct a trade mark
search for your proposed business name, before using or
registering the company or close corporation name. In
light of the developments mentioned above, it appears
that trade marks may be gaining even stronger protection
over company names. We recommend that clients, who
consider forming legal entities under distinctive names,
also consider obtaining trade mark registrations for
their business names.
You are welcome to contact us, if you have any comments
relating to this article or if you require formal advice
or further information on costs and procedures.
Dr Sunelle Geyer
12 March 2007
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