Monday, December 19, 2011

How name mixups can hurt an existing business

An interesting discussion on the internal SBDC listserv recently. Some of the info has been redacted for confidentiality reasons.

One of our advisors has a service provider client who has been in business for more than 10 years. He recently had a telephone call from a customer complaining about his work. He explained to the customer that he had not done work for her and after further investigation of her receipt she realized that the work was done by another company with a very similar name. Unfortunately both company’s are even located on the same street (different towns).

Upon further investigation of the new company my client discovered several dissatisfied customers. He contacted the new business owner who is not willing to change his company name. My client is wondering if anyone has any suggestions on ways to distinguish his company from the other. He is currently in the process of meeting with managers of local home improvement stores to make sure they are aware of the situation and referring the correct company to their customers.

Some of our colleagues chimed in.

*Who has the DBA or LLC?
It seems to me that whomever has registered the business first has the right to use the name. A lawyer can issue a “cease and desist” order to the other company on behalf of your client, IF you client legally registered the name before the other company started using it.

*I think we all need to know what a dba is and what it is good for. My understanding of a dba is that the name is filed in the county where one operates as a business and is allowed exclusive use of that name in that county. Here in our county, when a dba is applied for at the clerk’s office, that name is researched to see if it is already in use. If not, a dba can be issued. If the name is in use, the applicant chooses another name.

The original client may want to consider publishing a notice stating his position and having his attorney write a letter to the other party strongly suggesting SBDC counseling on business formation.

*A DBA filing is not exclusive. We had a new start-up purposefully usurp the outstanding reputation of a lady who had been offering services from her home for many years. The new filing was just down the road, same town, exact same name, etc. In some cases trademark protection makes sense, however, in this case perhaps investing money in advertising, signage, etc. would be effective.

*I’m by no means an expert on trademark law, but a foundation of it is to disallow the possibility of confusing the end user (in this case, a customer). One doesn’t necessarily have to register for a trademark in order to gain legal protection. If the client was first in the door with the name (i.e., registering as a DBA), and has a provable history of operating under that name, then someone who comes along with a similar name, and operating in the *very same* industry, is, by golly, confusing the end user (and damaging the reputation of another). I’m not someone who wantonly suggests legal action as the source of action, but it would seem to me (not knowing the whole story) that the client has a case.

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