What you as an entrepreneur need to know about descriptive trade names

Choosing a trade name is an important moment for every entrepreneur. The name must distinguish your company from that of your competitors. In practice, however, many companies opt for trade names that (partially) describe what they do or offer. But what about the legal protection of such descriptive trade names? When is there an infringement of a descriptive trade name? In this article, I will explain how the protection of descriptive trade names works and what you as an entrepreneur can do in the event of possible confusion.

What is a trade name anyway?

A trade name is the name with which you make your company visible to the outside world and with which you distinguish yourself from other companies. The right to this name arises automatically as soon as you actually use the trade name in economic transactions – for example in advertising, on your letterhead or as a domain name that makes your company recognisable. As soon as that use takes place, the Trade Name Act offers protection: another party may not use a trade name that is so similar to that of your company that it could lead to confusion among the public.

However, it is important to realize that not every trade name enjoys the same level of protection. Trade names that are descriptive, that say something directly about the nature of the products or services, have a weaker position from a legal perspective. For such names it is more difficult to successfully take action against infringement.

Why are descriptive trade names more difficult to protect?

Descriptive trade names generally lack “distinctiveness”. This means that they are too general to be automatically associated with one specific company. The public will therefore not automatically associate such a name with your company.

Furthermore, the use of descriptive trade names has increased in recent years. As a result, consumers and business customers have become accustomed to the idea that multiple companies use similar descriptive names. This makes it less likely that confusion will arise when different companies operate under largely similar descriptive trade names.

Although descriptive trade names naturally have little distinctiveness, they can still acquire it through commonality. That is, if it can be demonstrated that the name has become so well-known in practice that the relevant public immediately associates it with one specific company.

To make such commonality plausible, strong and convincing evidence is required. Examples of this include market research showing that the name is recognized, turnover data that substantiates market share, customer base data, and evidence of long-term and consistent use or intensive marketing efforts. In practice, however, the bar for demonstrating naturalisation is high. This means that companies with a descriptive trade name will generally have more difficulty demonstrating a likelihood of confusion and successfully claiming trade name protection.

 When is there a risk of confusion with descriptive trade names?

The fact that it is more difficult to demonstrate a risk of confusion for descriptive trade names does not mean that it is excluded. Whether there is confusion is assessed on a case-by-case basis based on a number of circumstances. The following are taken into account, among other things:

• The degree of similarity between the trade names: how similar are the names in terms of sound, spelling or meaning?
• The nature of the services and the degree of overlap: do the companies operate in the same sector or market segment?
• The degree of attention of the relevant public: is the trade name mainly seen by consumers or business customers, and how careful are they in their assessment?
• The manner in which the trade names are presented: how are the names communicated to the outside world, for example via logos, house styles, websites or social media?
• Any specific cases of actual confusion: have there been customers who have confused the companies with each other?

These factors are assessed in conjunction with each other. Trade name protection can therefore also be successfully invoked for a descriptive trade name, provided that the circumstances so warrant.

Can it also be unlawful conduct?

In some cases, the use of a trade name can not only be in conflict with the Trade Name Act, but can also be considered unlawful conduct.

Unlawfulness requires more than just confusion. There must be additional circumstances that qualify the other party’s conduct as unlawful. Consider situations such as:

• Intentionally causing confusion or deception: for example, when a party deliberately chooses a virtually identical name to attract customers.
• Taking advantage of the reputation or goodwill of an existing company: where the choice of name is aimed at profiting from the trust that customers have in the original company.
• Causing disproportionate disadvantage: for example, because the older company suffers damage to its image or market share, without a legitimate interest of the other party in return.

Questions?

Do you have any questions about this article or other questions regarding trade names? Please contact one of our attorneys by email, phone or fill out the contact form for a no-obligation initial consultation. We are happy to think with you.