Wednesday, April 19, 2006
A name isn't a trademark
THE federal Government has been urged by an advisory body to fix up the business-name system to stop small businesses from inadvertently infringing trademarks, which can drive them into bankruptcy.
Five years ago, Tina Hanson and Bo Ernfridssin, who owned an online swimwear business called Absolute Beach, were given the shock of their lives when Swedish liquor giant Vin & Sprit told them they had infringed on their trademark.
The company argued it owned the trademark for "absolute" and "absolut" in numerous product categories and one was swimwear.
The couple fought the issue, having successfully registered business and domain names, but lost with legal bills topping $1 million. The business disappeared but the potential remains for a business to register a name that could infringe on someone's trademark.
"Under the current arrangements, people can set up a business, commence trading under a registered business name and be unaware that they are infringing an existing trademark," says the federal Industry Parliamentary Secretary Bob Baldwin. "This can lead to expensive legal disputes, loss of reputation, and, in some circumstances, may even result in a business closing down."
The business-names crisis has been a direct consequence of state government pettiness and undoubtedly has some connection to revenue raised from business registrations.
ACT Small Business Commissioner Michael Schaper in March called for the reorganisation and rationalisation of the confusing business-name registration system.
"At present, there are at least three critical, different types of business-name registration processes that a firm can use," he says. "They are overlapping and highly confusing." The rules also differ depending on what business structure is used by an operation.
"If you're a sole proprietor or partnership, you must register a business name with your local state or territory government," Dr Schaper says. "And if you want to trade interstate, you must register separately in each state."
On the other hand, if you operate a company, you only have to register once, with the federal Government, through the Australian Securities and Investments Commission - and that provides national coverage. But wait, there's more: "Finally, you can also take out a trademark registration, which is operated by IP Australia, and overrides any state business name registration or company title."
For some very small operators, taking out a trademark on a business name might seem over the top, but small operations of today can be the McDonald's of tomorrow.
Some years ago a variety of local businesses that were using the trading name Lone Star were contacted by US lawyers who told them they had to stop using their client's name.
The internet age with businesses registering domain names has opened up the world's eyes on the business names being used around the world and small businesses are more easily caught for infringing trademarks.
A name change not only involves wiping off the value of the goodwill created but also means new marketing expenses and can drive businesses into bankruptcy.
Now the Advisory Council on Intellectual Property (ACIP) has reported on the relationship between trademarks, business names, company names and domain names. It concludes that small business needs help to prevent an intellectual-property nightmare over the way they identify their businesses.
"These identifiers all serve a different purpose and misunderstanding of this by businesses may in result unwanted consequences for businesses," Mr Baldwin says.
Among ACIP's recommendations:
* Business names should only be registered if searches of the trademark register show there is no conflict with registered or pending trademarks in the same field of business activity.
fudotAmend the Trade Marks Act 1995 so that registered business and company names may provide some protection when they were used prior to the registration of an identical or confusingly similar trademark.
* Integrate state and territory business name systems.
The report also makes a strong case for state and federal governments and their respective agencies that work with small business to put more work into educating the sector.
It is ironic that something called intellectual property - which covers many assets of businesses, including patents, logos, slogans and designs -- have been handled in such a dumb way by small business and the governments that serve them.
In recent times we have seen an international battle where an US company secured a trademark for "Ugg Australia and Ugh-Boot". At one stage it looked like our ugg boot makers were not going to be able to use their own Aussie icon brand name.
Then there was another controversy when someone tried to register "Made In Australia" as a trademark, which would have meant local producers would not have been able to use the term on exportable goods.
Ahead of the ACIP report, Dr Schaper suggested a blank-slate approach starting from now would come up with a much better system to handle business names.
"Unscrambling the mess will require commitment from every state and territory government, and will be a good indicator of their commitment to genuine micro-regulatory reform," he says. "The nation's entrepreneurs and business owners deserve nothing less than a concerted attempt to tackle this issue."
