Business mentor: Trademark a must to keep business safe

Q. "We own a small company called Zappo Electrical. One of our customers called us saying he saw 'Zappy' on a personalised plate on a van recently and thought it was us. It turns out the van is owned by another electrician who has just started in business as Zappy Electrical. What can we do to stop him using a name so similar to ours?"

A. Small business sector specialist Sarah Trotman asked Angela Wray, a trade mark specialist at AJ Park, for some advice:

Zappy Electrical is passing off its business as yours and it is important that you act quickly to stop it from doing this. The law has a remedy for this type of behaviour. It is the common law action known as "passing-off."

Common law means that it is a remedy created by the court and not based on a statute. The law of passing off prohibits rivals from representing that its goods or services are those of another trader.

To be successful in a passing-off action you must show that you have an exclusive reputation in the name Zappo. You must then show that Zappy, by adopting this name, is misrepresenting to customers that its services are yours, and that you will suffer damage as a result.

An action for passing off is usually run in conjunction with an action for breach of the Fair Trading Act 1986, which prohibits misleading or deceptive conduct.

Arguing an action in passing off or breach of the Fair Trading Act will involve proving that you have a reputation and goodwill in the name Zappo.

It can be time consuming and costly to prove this. Also, if your business is new you might not be able to prove that you have any reputation or goodwill in the name because you have not been using it long.

Also, if you operate in only one town, your reputation and goodwill in the name Zappo might exist only in that town. So you will not be able to stop Zappy from trading in another town where you have no presence.

And, on the flip-side, if Zappy establishes a reputation in another town, it might prevent you from trading in that town at a later date. This will be particularly important if you decide to expand your business or franchise it.

So, although a common law action in passing off can be effective in stopping a competitor using a similar name, it can also be problematic.

If however, you had a trade mark registered for Zappo for your electrical services, then you could simply point to this trade mark registration to stop Zappy from using this or a similar name for these services.

Enforcing a trade mark registration is an easier, quicker and cheaper way to stop a competitor from using a name that is the same or confusingly similar to yours.

A trade mark registration extends throughout the country and gives the owner an exclusive statutory right to trade using that name, or anything confusingly similar to it, for the goods or services for which the trade mark is registered.

A trade mark registration is infringed by use of the same or a confusingly similar mark in relation to the same or similar services. In this scenario, it is arguable that Zappo and Zappy are confusingly similar. Indeed, one of your customers has already been confused by seeing Zappy on the number plate.

So, if you had a trade mark registration, a letter to Zappy from your lawyer informing it of your registration and its alleged infringement of it may be enough to stop it using the name. If it still continued to use the name, then you could issue trade mark infringement proceedings in the High Court.

If you do not have a trade mark registration, it is still possible to file an application to register your trade mark. But it will take at least six months before your mark becomes registered.

If, during that time, your competitor continues to trade, builds up a reputation, and can show that customers have not been confused, then he could establish that he has honest concurrent use rights, and you might not be able to stop him from continuing to use the name.

The moral? It is important to register your name as a trade mark as early as possible.

Clearing your trade mark for use and registration and then applying to register it should be one of the key steps in starting up business.

While it may not seem important right now, your trade mark registration will provide you with the ammunition to stop a competitor from using yours or a similar name when the need arises.

* For more information on trade marks or general intellectual property issues contact Angela Wray on (09) 356- 3328