Rules to stop opportunistic registrations of company names

Release date: 03/10/2008

On 1 October 2008 a new procedure came into force to prevent registration of company names by those seeking to take advantage of goodwill owned by another business.

This procedure is in addition to

• a business's right to complain to Companies House that a company name is "too like" an existing registered company name,
• a business's right to bring a passing off action.

A Company Names Tribunal has been established, staffed by Hearing Officers from the UK Intellectual Property Office.

A fee scale has been set, starting with an initial application fee of £400 and further fees of between £100-150 charged at successive stages of the procedure.

Costs will be awarded in favour of the successful party. Only a contribution will be awarded, so cost recovery will be less generous than in High Court proceedings

A right of appeal from an Adjudicator's decision lies to the High Court.

Section 69(1) (a) and (b) of the Companies Act 2006 came into force on 1 October 2008 and provide that an applicant (being any business or person with goodwill in a name) may object to a company's registered name on the ground:

(a) that it is the same as a name associated with the applicant in which he has goodwill, or

(b) that it is sufficiently similar to such a name that its use in the United Kingdom would be likely to mislead by suggesting a connection between the company and the applicant.

The procedure is simple. Form CNA 1 is completed and is sent with a cheque for £400 to the Company Names Tribunal. The form requires information about the applicant's goodwill or reputation, details of the business in which the goodwill or reputation has been generated, reasons for objecting to the name in question and details of the action that the applicant wishes the Tribunal to take.

If the Applicant shows either of the grounds set out in Section 69 (1) (a) or (b) (set out above) the Respondent, in order to defend the application, must show one of the following facts set out in Section 69 (4):

(a) that the name was registered before the commencement of the activities on which the applicant relies to show goodwill or,

(b) that the company (i) is operating under the name, or (ii) is proposing to do so and has incurred substantial start-up costs in preparation, or (iii) was formerly operating under the name and is now dormant or,

(c) that the name was registered in the ordinary course of a company formation business and the company is available for sale to the applicant on the standard terms of that business or,

(d) that the name was adopted in good faith or,

(e) that the interests of the applicant are not adversely affected to any significant extent.

If the Respondent can show none of the facts set out in subsection 4 then the application will succeed. Even if the Respondent can show any of the facts set out in subsection (4) (a), (b) or (c) then the application will still succeed if the Applicant shows that the main purpose of the Respondents (or any of them) in registering the name was to obtain money (or other consideration) from the applicant or prevent him from registering the name.

There is an initial fee of £400 with fees of £150 for filing a counterstatement, £150 on filing evidence and £100 for requesting a hearing. Apart from official fees, there will be legal costs incurred if the Applicant does not represent himself. The costs will depend very largely on the reaction of the Respondent. If the Respondent does not file a counterstatement or evidence to support the defence of his registration, the adjudicator will order a name change. If the application is defended, in most cases the costs will be modest and a hearing may not be necessary in many cases. In any event, the cost of this new procedure is likely to substantially lower than the cost of a passing off action. The successful party to the application will normally be awarded costs of the application by the Tribunal. This costs award will include any official fees incurred and a contribution towards legal costs and out of pocket expenses. The costs awards, like other costs awards in the UKIPO will not be generous and a lower proportion of costs will be recoverable than is recoverable in High Court proceedings.

The Tribunal's rules make it clear that there are no set time limits for the various stages of the complaint as these will be set on a case-by-case basis by the adjudicator. However, the normal time limits will be two months for filing the response to the complaint and two months for each round of evidence. If a direction is made for written submissions in lieu of a hearing, a time period of six weeks will normally be given. Extensions of time, even when time has expired, may be granted. It seems therefore that when a Respondent defends the application and wishes to prolong matters, the procedure may well take between 6 to 12 months.

It is important to realise that this procedure will only succeed where the Applicant can show that the name was registered in bad faith. Even if the company name chosen is too like a name in which goodwill is owned by the Applicant, if the name was registered in good faith, the application will fail. However, the Applicant may still be able to succeed with an objection to the Registrar of Companies under Section 28 Companies Act 1985 or by a passing off action.

For more information, contact Pina Mazzotti on pina.mazzotti@harveyingram.com or call 0116 257 6166.