GENERALLY SPEAKING trademarks serve to protect the exclusive use of your company name, slogan or logo. A significant number of business owners think that because they have registered a company and reserved a company name with the CIPC, their exclusive right to the name is ensured. The short answer is that this assumption is incorrect. Reserving a company name with the CIPC does not necessarily mean that you have the exclusive right to use that name.
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This article seeks to provide you hard-working entrepreneurs and business owners with a better understanding of what a trademark is, why it is needed for your business, and some of the incredible, but not particularly well known, benefits of having a registered trademark.
Reviewing a contract is a tricky business, not entirely different from asking a builder to finish building a half built house. However, there are some useful techniques to ensure you get the most out of the exchange with your lawyer.
RESERVING A COMPANY NAME VERSUS REGISTERING A TRADEMARK
Following on from the company name example above, the register of company/business names and the register of trademarks are two completely separate registers.
For example, Darryl, an enterprising serial entrepreneur, decides to reserve his company name ‘Darryl’s Delightful Doughnuts’, and thinks that because he has reserved his company name, nobody else is entitled to use that name or anything similar. Darryl is wrong.
Darryl doesn’t realise that another Darrel from another province, who has decided never to incorporate his company, but rather to remain a sole proprietor, has registered a trademark for the name ‘Darrel’s Delightful Doughnuts’, and has been trading for five years longer than our Darryl.
After a number of years of trading, with both businesses growing, Darryl and Darrel eventually learn of each other, and both try to prevent the other from using their respective business names. Although there are certain exceptions in terms of the law of trademarks, such as honest concurrent users, generally speaking, Darrel, with the registered trademark, and who had been trading for a longer period of time, is principally entitled to use of the name, and could forcibly prevent Darryl from using his version of the name.
What becomes apparent is that when reserving your company name, also do a search of the trademarks’ register, and file for a trademark to avoid suffering the fate of poor Darryl.
PREVENT OTHERS FROM CYBERSQUATTING BY USING YOUR BRAND NAME
By submitting a registered trademark to the international Trademark Clearinghouse, when a new domain is registered that incorporates your registered trademark, the Trademark Clearinghouse will warn the person attempting to register your domain that it is the subject of a registered trademark, and will also send you a notification informing you that somebody is trying to register a domain containing your trademark, allowing you to take action, and prevent the registration.
LICENSING OF A TRADEMARK
Let’s assume that our Darryl did not have an issue with Darrel, and had a registered trademark. Darryl’s Delightful Doughnuts has been growing substantially, to a point where he now wants to franchise the business, and to use distributors and agents to distribute his delightful doughnuts.
One of the primary enabling mechanisms that will allow Darryl to franchise his business effectively, and to allow agents and distributors to utilise his branding, is through the licensing of his trademark, with or without a fee, to his franchisees, distributors and agents.
SECURITY FOR A LOAN
In building out his franchised business, Darryl also needs to purchase fancy new head offices, for which he does not have the cash flow as yet to purchase himself. Guess what? Darryl’s registered trademark comes to the rescue once again, and can be used as security when applying to a bank for a loan to fund his office expansion. His trademark has effectively become a standalone asset with intrinsic value, and is not merely regarded as goodwill as would be the case with an unregistered trademark.