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The name of the game

Securing the rights to a trading name can be tough, so how can retailers avoid the hidden pitfalls?

For any retailer, a trading name is a crucial asset. So when a rival attempts to use it, legal sparks fly.

The most recent such dispute involved footwear giant Stylo and an independent Lancashire retailer tussling over the right to use the name Shutopia. It is understood the 18-month battle was settled when Stylo paid the indie £37,500 for sole rights to use the name.

Gary Assim, partner at legal firm Shoosmiths, believes most retail trademark cases arise over product that either bears the same name or one that is confusingly similar.

Many retailers use the National Business Register to record a trading name. But Lee Curtis, trademark attorney at law firm Pinsent Masons, warns that this register, which was also used by the Shutopia indie, has no legal significance, a fact that some retailers may find confusing.

The owner of another independent currently caught up in a similar dispute to Shutopia says she believed the rights to use the name had been secured by putting it on the National Business Register. She says: "When we got a certificate from the NBR we thought we were covered, but it didn't help us at all."

A spokeswoman for the NBR admits that the register has no statutory basis, although she adds that the company will pay for legal fees if a business has to defend its right to use a trading name.

Simply having traded under a name for a certain length of time does not provide full protection either. Stephen Sidkin, partner at law firm Fox Williams, says: "You can rely on common law if you came up with the name and had been trading with it for a long time, but it's better to get it registered. If you fail to do this, you are left exposed.

"Common law enables you to object to someone registering your name and to claim that the other side has passed itself off - which is when one company uses another's name to attract business."

But retailers must be prepared for the cost. "A passing off claim is one of the most expensive to pursue in English law," he says. Not only this, but if a retailer has only been operating in a small geographical area, their common law rights are likely to be limited to that locality.

Small retailers can also fall into the trademark trap if they register a name at Companies House, having checked the register there, says Assim. "This is not a guarantee against passing off actions. The first time a business may be aware of a problem is when somebody threatens legal action," he explains.

Another aspect that can be overlooked is the difference between trademark symbols. A business can only use the 'R' symbol on its trademark if it is registered, while if it has only applied for registration it must use 'TM'. Using the 'R' without securing registration is illegal.

Sidkin says that since the 1980s there has been no requirement to register a business name, and only two bodies currently hold statutory status: the UK Intellectual Property Office (formerly the Patent Office), and the Community Trademark Office for Europe-wide registration.

But registering may only be the start of your problems. Although it may only take a year, some cases can last more than a decade before use of a name is secured.

The decision about whether or not to argue the case for use of a name is complex, according to Sidkin. "The company would have to ask itself how much it would cost to argue its case in front of an independent adjudicator, as well as its chances of success, how much it would cost in management time to pursue it, and how much the name was worth."

One of the most common problems that arises for multiple retailers in the field of trademarks is when they move across borders. Topshop's US launch was only possible after a court ruled in August 2006 that Arcadia Group had the rights to use the name in the US market. There was an existing womenswear manufacturer that had registered Topshop as a brand name. Similarly, New Look's Republic of Ireland debut was delayed because of a trademark dispute. Trademark problems can hinder the largest multiple retailers, but can be fatal for independents. One independent involved in legal action says: "We were advised that it would cost £100,000 to £150,000 to go to trial to prove we had the legal right to the name. Even if we won, we would only get about 70% of that back. It means that small businesses just can't afford to defend themselves."

TRADEMARK ESSENTIALS

- The National Business Register (www.anewbusiness.co.uk) does not give legal protection, but will help to defend on disputes

- UK Intellectual Property Office (formerly the Patent Office) and the Community Trademark Office for Europe-wide registration have statutory status

- The 'R' symbol is for fully registered names. 'TM' is for applications for trademarks

- Trademarks generally need country by country registration.

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