WHY INCORPORATION, SOLE PROPRIETORSHIP, PARTNERSHIP, or BUSINESS NAME REGISTRATION DOES NOT PROTECT YOUR NAME
Most business people who have not received legal advice from an intellectual property lawyer or trade-mark agent are shocked to learn that Provincial registration of their sole proprietorship, partnership, or business name, or even Provincial, territorial or Federal incorporation under their business name does almost nothing to protect their company name. Unfortunately the only way to obtain registered name protection is to file a Canadian Trade-mark application and prosecute the application through to a registration. The Trade-mark index of our website includes links to various articles on the trade-mark process including a comprehensive list of the benefits of Trade-mark registration, the steps involved in a Trade-mark application, a lenghty set of frequently asked questions (FAQs), and a detailed dictionary and glossary. Some of this material is still under construction and you should feel free to call with respect to any questions which are not answered.
The specific reasons why the above registrations, including incorporation, do not protect your company name are as follows:
1. Registration of a sole proprietorship, general partnership, limited partnership, or business name is merely a precondition to legal use of the your name, the use of which name comprises an offence in the absence of a business name registratiion. Failing to register a business name may prevent you from enforcing your legal rights and/or prevent you from defending an action brought against you. Each type of Business Name registration, in virtually any jurisdiction, provides a minimal set of rules governing the registered business, some of such rules restrict which names and symbols can be used, but usually provide no specific protection for the registered name. In particular the registration provides no rights to use the name under the registering legislation other than would be available under the common law in any event. This means that registration of the business name is not a defence to liability for improper use of all or a portion of a business name or trade-mark owned by another party. Worse still, registered business names are searchable and registered trade-mark holders are usually on a formal watching program monitoring improper uses of trade-marks and registered business names, which may trigger a formal cease and desist letter, and more and more often, a demand for damages.
2. Incorporation creates a fictional legal entity that can sue or be sued in its own name. A corporation must use its full corporate name unless it registers a business name. The laws governing how corporations are to be organized and operated are significantly more complicated, however the restrictions on the use of corporate names and symbols and the lack of the grant of any enforcable right to use the incorporated name against third parties are similar. The articles of incorporation issued by most government offices often, but not always, include a warning that the liability for the selection of the corporate name lies with the corporation, and in some cases the incorporators, officers, directors, and rarely the shareholders. Again, the databases of corporate names are usually searchable, usually electronically. In the intellectual propery field, particularly trade-marks, officers and directors have been personally liable for trade-mark infringement, especially where they knew, or ought to have known of the infringement. Getting past the general, but not absolute, liimited liability of corporate entities is generally referred to as "piercing the corporate veil."
3. Clients facing name change demands, and somtimes damages, often say that they had the name searched. However, even the best search is not a defence to liability for infringement if a third party in fact has prior use of a confusingly similar name (not just identical names which is not the test). Further, clients who have registered problem sole proprietorship names, partnership names, and business names, often say that the government did a search before the registration. Unfortunately, these searches are not comprehensive and results are often not given to the registrant. Often only identical names are searched, which is a substantyially useless search. Further, numerous identical names are co-registered (for example identical franchise names registered to different parties, even in the same Province or Territory). No Canadian federal business names are possible except for corporate names. Names which are identical may not conflict and names which are not identical may conflict. Government emploiyees almost without exception are not allowed to give legal advice, and even if they attempt to do so any such advice is not a defence to infringement. In any event, the government will not stand behind any advice actually given.
4. In most Provinces, but not most Territories, a particular layout of NUANS search must be filed with Articles of Incorporation, wiithout which the Incorporation will not be authorized and a certificate of incorporation (or other constating document such as letters patent will not issue). This form of NUANS search usually includes three pages of incorporated and unincorporated business names and two pages of pending and registered trade-marks (5 pages in total). This search which provides a printout in a standard form is usually far better than manual government searches, however such searches are usually treated as screening searches only by Trade-mark Agents as searches for trade-mark purposes may run several hundred page, sometimes in excess of 500 pages, depending on the search involved. Once again, government empoyees may not give legal advice, and in any event this is not a defence to claims of trade-mark infringement. These NUANS (R) searches although printed, even if filed with the incorporating jurisdiction, are not a defence to infringement. Ttade-mark Agents who are also lawyers are in the best position to evaluate a NUANS search and and give an opinion as to the advisability of lenghtier trademark searches.