Choosing a Business Name -- The Changing Rules in the World of Internet

Complying with the few mandatory legal procedures for naming your small business is relatively simple. For some very small, local businesses, meeting these requirements and doing nothing more may be adequate. Until quite recently, a wide range of local businesses—small retail stores, repair services, and craft studios, for example—didn’t need to worry about registering a trademark or service mark. And to avoid possible claims that they were unfairly using another business’s name, they could feel relatively secure if they checked for possible name conflicts in state and local business directories and yellow pages with no need to do a more formal state or federal trademark search.

But today, the rules of the game are dramatically different. The reason is that in the world of the Internet, mail order, and rapidly growing national chains, the idea of “local” isn’t what it used to be. Today, even modest-sized businesses must consider taking name protection steps that used to be the sole concern of larger, more expansive enterprises. For example, you might think you have no problem if you’re choosing a name for a sporting goods store in a small town. Think again. If you happen to pick a name that’s similar to a sporting goods store that sells on the Internet, you are very likely to be accused of trademark infringement and probably forced to change your business name, even though the online store’s headquarters is located thousands of miles away.

These days, about the only time you might be able to ignore thinking about trademarks and service marks is if you have a tiny, local business that uses your own name—or a very common name—to market goods and services locally. In short, if you plan to sell services using your own name (Erin Carr Carpet Cleaners) or if yours will be a one-person, home-based business such as a graphic design service (All-In-One Design), you’re not likely to have a trademark problem.

But if your business is just a little bigger, such as a large camping equipment store (Wilderness Outfitters), or sells goods or services beyond a very local or industry-specific niche (RunningShoes.com Online Store), you really should take the time to understand the basics of trademark law—and conduct a name search to see if someone else in your field is already using your proposed name.

The reason to be absolutely sure you have the legal right to use your chosen business name is simple: You don’t want to invest time and money in signs, stationery, and ads for your business and then get a nasty letter from a large company that claims a right to the name you’re using and threatens you with a trademark infringement lawsuit. Just defending such a case in federal court can cost you upwards of $100,000, meaning that even if you’re sure that you’re in the legal right, you’ll probably wind up changing your name just to duck the lawsuit—no fun, given the investment you’ve already made.

Excerpted from Legal Guide for Starting and Running A Small Business, by Fred Steingold (Nolo).

 

 

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