As a business owner, you should consider at least three things when naming your business:
- The difference between a corporate name, a trade name, and a trademark;
- Whether to register a registered trade name or a trademark; and
- Whether you might get into trouble using your preferred name.
Know the difference: a business, a sole proprietorship, and a corporation
It is important to distinguish between what we mean by a business, a sole proprietorship, and a corporation. They are often conflated. A business is the activity of making, buying, or selling goods or providing services. A business is carried on by either a sole proprietor (which is an unincorporated individual person) or a corporation formally incorporated (usually with the assistance of a lawyer).
Know the difference: a corporate name, a trade name, and a trademark
The name you use as your business identity is one of the most basic and important marks of branding. As a sole proprietor, you may simply use your own personal name (e.g. “Luke Ratzlaff”) since it’s you who is personally offering your service or product for sale. In fact, I ran a technology consulting business as a sole proprietorship for many years this way.
Similarly, a corporation can use its registered corporate name (eg its numbered company number or the name assisted to it when it was incorporated). Think of a corporate name as equivalent to an individual’s birth name. Just as I can change my name from “Luke Ratzlaff” to “John Doe” (here are the instructions; it costs only $120), a corporation can also change its name (which involves amending your corporation’s Articles).
Whether a sole proprietorship or a corporation, you can operate your business under a name of your choosing. The name you choose need not have anything to do with your own personal name or your corporation’s name. For example, the name I use for my law firm—my legal services business—is “Ratzlaff Law” even though my corporation’s legal name is “Luke Ratzlaff Professional Law Corporation”.
The name you use is called a trade name.
To assist in keeping track of trade names, Alberta has a registry allowing you to register a trade name. Counterintuitively, this does not reserve the name for your use only; anyone can register a name already in use or already registered. It does help with making it easier for others to confirm that you are using a particular trade name for your business.
The registration of a trade name is relatively easy; many of our clients are comfortable doing it themselves, however, we do provide this service for a nominal fee.
Trade names and trademarks are different but related concepts. A trademark is an exclusive right to a group of words, a logo, sounds, or designs (or a combination of these things) to help the public distinguish your goods or services from the goods or services of others. For example, the Nike swoosh logo.
A trade name can be a trademark if the name is used as an identifier of the goods or services provided by your business, which is often the case. For example, “Sunlife” may be both a trade name and a trademark.
Trademarks protect your business’s image because over time trademarks come to stand for not only the actual goods or services that your business offers for sale, but also the reputation of your business. This is why trademarks are so valuable: a business’s reputation is extremely valuable.
There are two types of trademarks:
- an unregistered trademark, created by using a mark as a trademark.
- a registered trademark, created by meeting the trademark requirements of the Canadian Trade-marks Act (the “Act”).
With unregistered trademarks, to enforce your mark (e.g. to legally challenge someone else’s attempt to use the mark), you must prove prior use of your mark in connection with your business. The burden of proof is on you.
Registered trademarks are often easier to protect years down the line, though they also require more upfront administrative work. However, registered trademarks also have other advantages over unregistered trademarks (such as trade names) including the following:
- registration provides protection of your trademark across Canada, rather than only the in the geographical area where your mark is known to your customers;
- registration puts others on notice about your mark and helps prevent others from registering a similar mark, those possibly preventing future litigation;
- registration provides additional protection even before you use begin using your mark;
- Registration provides additional statutory remedies against trademark infringement; and
- After 5 years of being registered, a trademark becomes incontestable.
Should you register a registered trade name or a trademark
The decision to register a trademark is a business decision, but often worth the effort considering the relatively low cost of applying for registration.
The following are factors that you should consider when making your decision:
- Are you presently using or will soon be using a mark?
- Do you anticipate using your mark nationally or internationally?
- Do you have time and/or funds to proceed with an application now?
- Are you sure are you that your mark does not infringe on another business’s mark?
- What if a competitor or another business started using a mark similar to yours? Will this be a significant problem?
- Do you anticipate the future reputation that your mark represents to be valuable in the future and possibly worth selling?
Potential liability: Whether you might get into trouble using your preferred name
First, operating a business under a trade name or trademark does not limit liability. Liability remains with the entity operating the business, whether it is you individually as a sole proprietor or a corporation. One of the reasons why many business owners run their corporation through a corporation is to limit certain types of liability (for example certain types of debt or negligence).
Second, prior to branding your business, you should ensure you are not infringing on someone else’s registered or unregistered trade name or trademark. If you are, the other business owner may demand that you cease using the brand or may take legal action against you (e.g. through the common law tort of passing off or one of the several statutory remedies provided by Act).
Ratzlaff Law is, of course, pleased to help you decide whether to apply for a trademark or to apply for a trademark.