The phrase “corporate identity” might first call to mind branding and marketing—how a company distinguishes itself from others, and appeals to its target audience. But business owners should also be aware of the ways in which the law regulates aspects of corporate identity. Conflicting claims to a business’ identity happen more often than you might think. We’ve dealt with many small businesses in the past that were the unlucky recipients of a dreaded “cease and desist” letter—a warning that you’re infringing on the intellectual property or identity of another entity. In the legal context, corporate identity refers to the elements that make a business unique and distinguishable from other businesses. This can include the company’s name, trade marks, trade names, slogans, tag lines and website.
Although it’s not something that happens to the majority of businesses, infringement is common enough to draw your attention to it. A business can unknowingly infringe on another’s corporate identity in more than one way.
The Alberta Business Corporations Act sets out rules for a corporate name. The corporate name has proprietary protection, in the sense that it’s something the corporation “owns”. Although the Registrar of Corporations has the power to issue an order to a corporation to change its name, this is an issue often left to the corporations to police themselves. If one corporation has a name similar to another corporate name, the complainant has to prove that the new name is confusingly close to its name in such a way that the public or customers may confuse one for the other. This is commonly known as “passing off”, where one company attempts to gain an economic benefit by using an identity similar to another business, even going so far as to lead its customers to believe they’re dealing with the other business. Most businesses that find themselves potentially infringing on another are not actively malicious in this way, but rather set up a company and later find there is another company with a similar identity. Although it’s unlikely for small businesses to litigate over this, it could result in the inconvenience of having to change your corporation’s name, as well as wasted cost and lost goodwill in branding done up to the change.
Sometimes a corporation has a name that is not very brand-able, or the business wants to brand itself as something other than the corporate name. For example, it may operate a franchise and need to use the franchise branding, while the corporation itself is simply a numbered company. It is good business practice to register any operating name as a trade name with the Corporate Registry. The main function of registering a trade name is to tell the world what the corporation is “doing business as”, so there is a recognition of the party they’re dealing with. Because the Registry is a public record, once a trade name is registered, there is a presumption that whoever deals with the corporation under its trade name will also know the legal entity it is dealing with. For example, XY Holdings Ltd is not an attractive enough name for the branding of a business that manufactures a product called wacky widgets. Thus, XY Holdings registers a trade name “Wacky Widgets”. If a customer thinks it deals with Wacky Widgets but find out that it is not a legal entity, it may want to claim that it was lead to believe that it dealt with an individual, possibly a director of the corporation, who may be exposed to personal liability. The law requires a corporation to clearly disclose on all its material the corporate name, so that people know they are dealing with a corporation. A trade name serves mainly as public notice, and does not have proprietary protection; as such trade names can’t necessarily be claimed for exclusivity. Like corporate names, trade names are regulated by provincial law.
The main difference between a trade name and trade mark is the proprietary protection that a trade mark benefits from. A trade mark is registered with the Canadian Intellectual Property Office and is governed by the federal Trade Mark Act. A registered trade mark gives the holder the protection that nobody else may use the same mark in Canada unless the holder licenses the use. Trade marks therefore give a far wider and stronger protection than trade names and corporate names. If I want to use a logo denoting widgets for my business, and do not want my competitors to use my logo or something similar to it to pass off onto my customer base, I can choose to register the trade mark in Canada, or under international treaties in other countries as well. A trade mark does not have to be registered. If you use a mark for long enough, it acquires the same proprietary force, as long as you can prove that the public recognizes your business or product by that mark. However, the catch is that you have to prove it. Because litigation is so expensive and uncertain, it is almost always better to register the mark. Registration has other benefits like treaty preference in foreign registrations. Do not only think of a trade mark as a logo. Often you can get better protection from a “word mark” that only has words, rather than a specific design, colour scheme or font. In short, a word mark protects the words in whatever form they appear, where a design mark protects the words only in that specific design, font, arrangement and so on. To use my example, I may be better served by registering “Wicked Widgets” simply as words, than to register the logo containing the words in red.