Choosing a Business Name: Harder than it Seems?

05
Mar 2017

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Choosing a name – the second most important thing!

One of the very important aspects when starting a business is choosing a registered name, precisely, a company name. The importance of this choice goes beyond legal and formal requirements. It means finding a way to distinguish oneself on the market and establishing customer recognition of the economic entity. Most notably, a business registered name is a commercial symbol and possibly the most important element that proves its value, ranks the economic entity and makes it stand out among the competition. Besides the fact that it is supposed to distinguish the entity from others on the market, the registered name also guarantees a certain quality of the product or service, therefore the value of the entity behind that name.

Company formation in Serbia requires careful consideration of the rules enshrined in the Law on Companies and the Law on the Procedure of Registration with the Serbian Company Register when it comes to the selection of a business name. However, this article argues that these norms alone do not provide complete information and legal certainty in the process of choosing a company’s name. This article concludes that those who decide to invest in Serbia need to be aware of numerous rules and their disobedience in practice in order to make sure that a chosen name is acceptable and will not bring any legal inconvenience. In this article, we will analyze the relevant statutory rules, the practice of Serbian Company Register and point out certain issues each of a company’s members should be aware of.

Question: to use a name distinctive enough or not?

Firstly, it is important to make a difference between two terms – registered name, on the one hand, and company name, on the other.

The Registered name represents identification and diversity factor of an economic entity that consists of several different elements. The company name is one of such elements. In company’s registered name company name is an obligatory element as well as a legal form of the entity and its headquarters address. Entrepreneurs business, on the other hand, does not necessarily has to have a special name besides entrepreneur’s personal name, description of the predominant business activity, designation of entrepreneurship and registered address.

The company name is to a large degree independently chosen element and embodiment of somebody’s creativity and recognition. When choosing that name there are a few, however, very strict norms that need to be respected. Business identity and reputation are protected by law, so their clients would not find themselves in confusion about the economic entity that they are engaging with and the quality of the product or service.

Therefore company’s name must not be identical to other company’s name. The law states that it has to differ from other company’s name in the sense that it does not cause confusion with the identity of another company.

However, confusion can be caused not only by identical but also with the similar company name. Thus rules of Serbian Business Registers Agency (hereinafter: BRA), in accordance with the Law on Procedure of Registration with the Serbian Registers Agency, state that not only identical, but the similar company name is an obstacle to registration as well. According to those rules, if there is a similarity between the desired company name and another already existing name to a considerable extent, the registration will be rejected.

However, what does similar name mean? Who decides on it? Which standards are applied to this evaluation? Anyways, seems like the best answer to these questions lies in the practice of BRA.

Rules of BRA and the Conflicting Practice

Once the application for registration of a registered name is filed to BRA, this institution questions and examines, ex officio, if the Register already contains the same or a similar name of another company or entrepreneur with the same or similar predominant business activity. According to BRA rules, two names must differ from each other by at least 3 characters, bearing in mind that generic words within the name are not relevant for that difference. Therefore, words such as trade, company, group, Trans, corporation (korporacja), cellar (podrum), club (klub), as well as other words that describe business activity of the economy entity, will not establish the required difference.

Now…What does this mean exactly? Precisely, words such as trade, company, group, Trans, corporation (korporacja), cellar (podrum), club (klub), as well as other words that describe the business activity of the economic entity, will not establish the required difference.

However, the statute very generously left to BRA to decide whether a certain name is similar to some other economic entity’s name and if there is a possibility for confusion. This statutory norm creates legal uncertainty to those who want to protect their registered name, as well as to those who do not want to bare unexpected consequences of harming other entity’s registered name, after their registration was initially approved by the BRA. Registrar’s highly inconsistent practice in approving registered names of economy entities consists of numerous different examples that are contrary to the law and rules of BRA. This practice is so inconsistent that not even trying to categorize it in a few examples would be enough to illustrate how differently the registrar acts in similar situations or to find alleged reasons and explanations for such conduct.

Predominant business activity is also a relevant factor when deciding whether the conditions for registering certain name are met. If business activity of two entities is similar or the same, the criteria become even higher.

Furthermore, the distinguishing factor is also a place of entity’s headquarters. Therefore, if somebody wants to register a name similar to other entity’s name, which has the same or similar business activity, and, on top of that, if those entities would operate in the same place or territory, then, that registration would have to meet the highest criteria of distinctiveness. Hence, registrar must evaluate similarity of two aspects, names and business activities, separately, in order to evaluate their final result.

These criteria lead to too many different and unpredictable results in registrar’s decisions. Apart from that, some of the criteria do not make much sense. For example, economic entities can change their headquarters address. Likewise, entities can open their representing offices in other places. What happens if the registrar approves two similar names in same or similar business activity in different places if they eventually start their business activity in the same territory?

Therefore, this system of evaluating the possibility to register entity’s name creates truly insufficient amount of trust in protection of entity’s name by registrar.

How inconsistent the registrar’s practice is, can be best demonstrated by an example. . Registrar decided that conditions for registration were met in both: Diet and Deit, Drvo – eksport and Eksport – drvo.

Furthermore, it remain unclear how is it possible that the registrar approves registration of both:  Pera & Marko DOO Novi Sad, for ,,other unlisted building activities” (code 4399 at the Classification of activities) and Održavanje (engl. Maintaining) Marko & Pera DOO Novi Sad for “cleaning and maintaining buildings”? This is extremely odd, specially bearing in mind that generic words and those which only indicate business activity are not a factor of distinctiveness.

Assigning such arbitrariness to the registrar leaves a place for mistakes, as well as for misuse of existing rules. By frequent and uncritical registration of similar names of different economy entities, both clients and economic entities could be brought to danger and inconvenience.

How to Protect a Company’s Name?

Company’s identity is protected by the Law of Companies. Namely, the company’s name is the subject of the protection. Bearing in mind that even this one element of the company’s registered name is protected by legal norms, indicates that legal protection of company’s identity is actually very wide.

First level of protection should be achieved before the registrar when deciding on application for registration of a company’s name. This decision will be based on the results given after checking the unified register’s data base. Procedure before BRA should prevent that more than one company with a certain name, or name similar to it, is registered in Republic of Serbia.

Protection by court represents the second-tier protection and a corrective factor in case the registrar makes a mistake.  In that case, an interested party can, by filing a lawsuit, seek from the court to oblige another company to change the name. In order to succeed in its claim, the party does not need to prove that wrongdoer’s name actually caused the confusion on the marker. It is enough that two names are similar and that they could cause confusion with the consumer of average knowledge and experience about the identity of two entities.

Be careful of the unfair competition!

The norm that refers to claim for protecting the company’s name does not also refer to entrepreneur’s business name since the special name is not an obligatory element of entrepreneur’s business name. Therefore, the Law on Companies states that entrepreneur’s registered name must differ from other entrepreneur’s registered name, whereas the Law on the Procedure of Registration with the Serbian Business Registers Agency, assures that all rules of BRA, that apply to other economic entities, are respected in this case too. This means that first level of protection does not differ whether it is a registration of entrepreneur or a company.

These provisions of the Law on Companies do not affect rights in accordance with the law regarding unfair competition and intellectual property.

Company name also represents intellectual, namely industrial, a property of an economic entity. Therefore, registered name is entity’s commercial symbol and the economic entity has a right to the distinctiveness of its registered name comparing to other names on the market. That right can be achieved in a couple of ways. Protection of company name, as intellectual property, can be achieved firstly by registration of trademark before the Intellectual Property Office.

However, while rights regarding intellectual property depend on registration at the Intellectual Property Office and affect only the subject protected by that registration, the protection against unfair competition is not based on any registration, but on general opinion that actions that are contrary to fair trade usage should be prohibited. Therefore, the protection of company name by law against unfair competition is an instrument that is always available. For example, in order to succeed in this claim, it is enough only to prove that the claimant used the name first.

In this way rules against unfair competition adequately supplement other norms regarding protection. On the other hand, the difference between protection against unfair competition and legal protection regulated by the Law on Companies is that the claim for unfair competition is not affected by any time limit. In addition to that, the wrongdoer does not have to be another company; it can be any economy entity.

Unfair competition is especially reflected in selling goods with marks and information that are a part of other entity’s name, in a way that causes confusion among clients regarding the source, producer, quality and features of goods. Usually, by using identical or similar trademark to the trademark of a competitor (whether registered or not) a user creates misapprehension that products of one entity are actually products of the competitor.

Because of significant privileges comparing to other remedies, economy entities in practice will usually, and in the best way, protect their name by claiming unfair competition.

Using other economy entity’s name could also represent a violation of norms of criminal law if it could be proved that the company wrongdoer had the intention to deceive clients by using someone else’s company name.

Legal (Un)certainty?

Unfortunately, it appears there is no legal certainty regarding this legal matter. Bearing in mind the inconsistent practice of BRA, seems like it would not be enough to follow the relevant law and the rules found on BRA`s website. BRA suggests using the search system that it provides on its website as an adequate method of checking if your desired company name is available, even though those search results show inconsistent practice. Therefore, an even more dangerous situation would occur if BRA actually approves registration application, since it does not protect you from other company`s claims regarding the possible harm to its name.

Therefore, it is the best to respect all of the aspects that prove the distinctiveness of your registered name. However, the best way to make sure that the process of establishing the company and its registration goes without any trouble is to entrust this with a law office of your choice that will carry out these procedures for you, help you with research and documentation as well as advise you on choosing a company name.

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