Can Your Former (or Current) Business Partner Use Your Business Name?
Business partnerships can go sideways when one partner decides to do their own thing. Sometimes doing their own thing involves using your business name for their own side projects, to start a separate business venture or to steal your customers for themselves. Sound crazy? Consider these real-life examples:
Co-owner of a business is using your company’s email account, including email signature identifying themselves as a representative of your business, to negotiate a deal they have not told you about.
Former business partner of a closed restaurant starts using your restaurant name in a separate place they’ve opened on their own.
Your partner registered a new business on their own that has a surprisingly similar name to your former business and they’re shopping for deals for that company, not the one you own together.
Your business partner is making references to your business name in marketing materials they have for a separate business.
When things are hunky-dory in a business with multiple owners, issues like who owns the name of (and rights to) the business are an afterthought – if a thought at all. One you find out that your partner is using your business name for themselves, your instincts are “hey, they can’t use our name!” You might be right but the legalities are less than clear. If you find yourself grappling with this question, understanding the legal nuances involved can help you protect your brand and livelihood.
Ownership of Business Names
In Pennsylvania, business names fall under the category of "trade names" or "DBAs" (doing business as). The ownership of a business name is typically established through a few key methods:
1. Registration with State
Registering your business name with the Pennsylvania Department of State confers very limited rights to you. Basically, the DOS will not allow someone else to register a name that is identical or very similar to your name. However, registration does not give you exclusive use of that name beyond those registration restrictions.
2. Trademark Registration
If you want to ensure you have a strong legal claim over your business name, consider registering it as a trademark. In Pennsylvania, you can register a trademark with the state or federally through the United States Patent and Trademark Office (USPTO). A registered trademark provides several advantages:
Exclusive Use: Registering your trademark generally grants you the exclusive right to use the name in connection with the goods or services specified in the registration.
Legal Recourse: With a registered trademark, you can more easily enforce your rights if someone else—partner or not—attempts to use your business name without authorization.
3. Partnership & Operating Agreements
If you and your former partner had a written agreement regarding the business name, such as a partnership agreement or operating agreement for your limited liability company, that document is crucial in determining ownership rights. You can include provisions clarifying the owner of the name, the members’ rights to use that name and who has the rights to the business name if the relationship ends. If you’re concerned about this risk, you can amend your existing agreements to address this issue clearly.
If none of the above are present, the situation can be murky. You may have rights under the common law if you’ve been using the name in commerce. This often depends on factors like the length of use, the geographic area, and the level of customer recognition. If your former partner uses a name you have built brand recognition around, you could have grounds to object. But, in a general partnership, both partners generally have equal rights to use the business name unless otherwise specified. This can lead to disputes, especially if one partner feels that their contribution to the business justifies exclusive rights to the name.
Evaluating the Risk
If your former partner begins using the business name, the following factors can help you evaluate your options:
Are you Still in Business Together? If you are, your partner’s use of your business name to benefit anyone but your business could be a breach of the duty of loyalty owed by your partner to your company.
Are They Using the Name in a Similar Market? If your former partner is using the name in the same industry or targeting the same consumer base, it may lead to consumer confusion. Pennsylvania law typically protects against this type of infringement.
Is There Intent to Deceive? If your former partner is using the name to mislead customers or capitalize on your goodwill, this could bolster your case for seeking legal action.
The Duration of Use: How long has either party been using the name? If your former partner used the name only recently, you might have a stronger claim based on your prior usage.
Protecting Your Business Interests
If you believe your current or former partner is (or might be) unlawfully using your business name, here are steps you can take to protect your interests:
1. Send a Cease-and-Desist Letter
If you have established grounds for your claim, you may choose to send a cease and desist letter to formally request that your former partner stop using the business name. Its always a good idea to put your objections and concerns in writing.
2. Check Your Business Agreement for Dispute Resolution Provisions
Your partnership or operating agreement may have provisions that address how disputes between business partners are resolved. If the letter does not resolve the issue, you will need to avail yourself of your agreed-upon dispute resolution mechanism. That might include mediation or arbitration of the dispute.
3. Consider Mediation
In some cases, a collaborative approach can lead to an amicable resolution. Mediation can provide a platform for both parties to discuss the issue and potentially reach a settlement. If both parties are willing, this is a great way for each side to hear from an objective third person about their respective rights and obligations. Its also far less expensive than litigation.
4. Litigate if Necessary
If other methods fail, litigation can provide a route to protect your business interests. Courts can issue injunctions against trademark infringement and award damages.
Navigating the intricacies of business name rights and who can use the name can be daunting. Should you find yourself facing this situation, remember that legal guidance is paramount. Ensuring you have the right support can mean the difference between losing a key business asset or emerging from the dispute with your rights intact. Seek legal advice from one of our experienced business attorneys to fully understand your rights and options. An attorney can help you evaluate your case and determine the best course of action.