The family name will also have a strong emotional attachment for the family members, who will fight to protect the name and its goodwill from any potential damage.
In this article, we examine the unregistered trade mark issues that can arise in relation to a family business’ name.
A family business trading under the family name should, over time, build up a significant reputation and goodwill in that name.
Family businesses must protect this goodwill from competitors that may seek to obtain an unfair commercial advantage by ‘passing off’. Passing off occurs when a business makes a misrepresentation (intentionally or unintentionally) that is likely to confuse the public, causing damage to the family business. For example, if you were to set up a shoe shop under the name ‘Clark’s Shoes’, that business could cause damage to C&J Clark’s longstanding ‘Clarks’ footwear family business in a number of ways:
What if the competing business is a family business trading under its family name?
In some instances, the competing business may be trading under its owner’s family name. There is a very limited defence to passing off in this situation, which is only available if:
As a result, the circumstances in which this defence may be used are limited.
What if a dissenting family member sets up a rival business under the same name?
A 2004 case involving Sir Robert McAlpine Limited and Alfred McAlpine plc provides a good example of how to prevent this.
In 1935, Alfred McAlpine left the McAlpine family construction business, Sir Robert McAlpine Limited, and started his own construction business, Alfred McAlpine plc. The companies co-existed, fairly peacefully, until 2003 when Alfred McAlpine plc re-branded itself ‘McAlpine’. Sir Robert McAlpine Limited claimed that this was passing off.
Although both companies acknowledged that goodwill in the name ‘McAlpine’ was jointly owned, the judge concluded that Alfred McAlpine plc’s use of ‘McAlpine’ misrepresented that Sir Robert McAlpine Limited and Alfred McAlpine plc were connected, or that Alfred McAlpine plc solely owned that goodwill. The court, placing great emphasis on the use of the distinguishing prefixes ‘Alfred’ and ‘Robert’, granted an injunction to prevent Alfred McAlpine plc from trading solely under the name ‘McAlpine’.
What if the family business is sold? Can the family continue to use its own name for a competing business?
When the family business is sold, the sale agreement will include covenants preventing the seller from using its own name in competition for a specified period. Even after these covenants have expired, the seller can be prevented from using his own name in competition, and so this should be avoided.
How can family businesses protect the family name?
The most effective way of protecting a family business’ name is to register it as a trade mark in the key territories in which it markets, or intends to market, its goods or services. A trade mark registration provides a right to stop anyone else using a confusingly similar mark for similar goods or services.
Without a trade mark registration, the right to protect goodwill through passing off arises only after a substantial period of use and is restricted to a business’ particular locality. This creates uncertainty and so should be avoided.
Family businesses should also periodically conduct internet searches to check whether their name is being used by other businesses in the same market, and should seek specialist legal advice as soon as any issues arise.