Navigating the name game: trade marks vs company names

On 2 February 2024, Jesse and three of his friends (Irvin, Nathan, and Damian) received a $1 million seed investment from Venture Capitalists to launch their exciting fintech product, JIND, which was coined from the first letters of their names. Within just six months of receiving the investment, they had grown their team to include three new staff, incorporated a South African company called JIND (Pty) Ltd, secured a cozy office space in the bustling suburb of Sandton, built a JIND website, set up social media accounts, and incurred several expenses towards the marketing and advertisement of JIND. No expense was spared in marketing their product, and their efforts were paying off, with JIND gaining traction and the number of customers being onboarded increasing daily. The prospects for JIND looked promising to say the least.

Then, on 29 August 2024, it all came to a grinding halt, albeit temporarily. Jesse received a letter of demand from an attorney representing a microfinance company, Leicho (Pty) Ltd, based in Bloemfontein. The letter revealed that Leicho (Pty) Ltd holds registered South African trade marks for the word mark JIND in Classes 9, 35, 36 and 42. The register pages for these trade marks were included in the letter of demand, and they showed that the word trade mark JIND was registered in Classes 9, 35, 36 and 42 in 2002 in the name of Liecho (Pty) Ltd. The company appears to have been using the trade marks since 2000 for financial and technological services. The letter of demand claimed that JIND (Pty) Ltd.’s use of the name infringed on these registered trade marks and demanded that they stop using JIND or risk being sued for trade mark infringement. Naturally, Jesse and his team were confused as to why the Companies and Intellectual Property Commission (CIPC), which is the South African agency responsible for registering companies, permitted the registration of their company, JIND (Pty) Ltd, and who exactly this Leicho (Pty) Ltd is that is threatening them with litigation?

While the above story is fictional, it is a situation that occurs more often than most people realize. I have lost count of the number of times that I have sent a letter of demand to an erring party who incorporated a company name that is confusingly similar to my client’s trade mark and the response to my letter, sometimes arrogant, is that the CIPC permitted the registration of the company and should have stopped them from using the company name if it was confusingly similar to a registered trade mark. As a result, they say, it is not their problem and tell me that my client should take it up with the CIPC.

Roles and Responsibilities

According to the Companies Act, CIPC should not permit the registration of company names that are confusingly similar to a trade mark, however, in reality we know that this check between registers does not happen. Accordingly, the onus rests with the incorporator of the proposed company to conduct a search of the trade marks register to confirm that the proposed company name does not conflict with an existing trade mark. Reliance on the defense that a company name was permitted by the CIPC, despite the existence of a trade mark will not suffice in proceedings before the Companies’ Tribunal.
The danger in permitting a company name that is confusingly similar to a registered trade mark is that there is a risk that customers may incorrectly infer an association between the company name and the registered trade mark. The risk is further heightened if the company provides similar services to those provided under a registered trade mark. For example, you are driving through a street and come across a restaurant called Debonairs Food (Pty) Ltd, selling African delicacies. As a pizza lover, you would immediately question whether Debonairs Pizza has expanded its operations to include African delicacies. Upon further research, it turns out that Debonairs Food is not at all associated with or connected to Debonairs Pizza. As a result of the initial confusion that Debonairs Food (Pty) Ltd may cause unsuspecting customers, it would be in Debonairs Pizza’s interest to ensure that Debonairs Food (Pty) Ltd immediately cease operations.

Understanding the Legal Landscape

Section 11 of the Companies Act 71 of 2008 provides clear guidelines for choosing a company name, including that a company name must not be the same as a registered trade mark owned by another person or a trade mark with a pending trade mark application. If a conflict arises, an aggrieved party may lodge an application with the Companies Tribunal for an order to have the offending company name changed. Such an order may include legal costs. Depending on how extensively the infringing party has used the registered trade mark, the trade mark owner may also institute legal proceedings for trade mark infringement, potentially seeking damages for unauthorised use.

A Proactive Approach

Before incorporating a company name and investing in marketing and publicity, it is important to conduct a trade mark search to ensure that the company name is not the same as or confusingly similar to an existing trade mark, especially for similar product offerings. The hassle and cost of navigating litigation and rebranding after sinking money into marketing can be onerous, which should be avoided.

If you receive a letter of demand informing you that your company name is confusingly similar to a trade mark, it is important to conduct your research to verify the authenticity of the claims in the letter of demand. It is possible that you have built up common law rights of use in and to the company name, even though it may be confusingly similar to a trade mark. If you are unsure whether your company name has acquired common law rights, you are encouraged to consult with an Intellectual Property Attorney to assess the merits of your case. If it is determined that you have not acquired common law rights of use, considering a company name change could save you from a costly legal battle. Always remember that these letters are sent to provide you with an opportunity to amend your company name amicably, avoiding escalation.

Going back to our story above, Jesse and his team would unfortunately have to amend their company name, social media accounts, and delete any reference to the word JIND or risk being sued for trade mark infringement, amongst others. Based on the given scenario, the odds appear not to be in their favour. In essence, an upfront due diligence goes a long way toward steering clear of these challenges, ensuring a smoother path for your business venture.