First to clear the air, I am going to run-through a definition of each type of designation, in a Merriam-Webster-esque style:
Trade Name: very simply, a trade name is the name or designation attached to a business. Many states allow you to register a trade name. The purpose of registering the trade name is, of course, to prevent other people/entities from adopting the same name and using it to steal customers from the true entity. Trade names do not afford any brand name protection or even provide you with unlimited rights to use the name (more on this later).
Business Name: a business name is the designation that you provide to the Secretary of State (or the Corporation Commission, if in Arizona) when you formally establish a business. There are certain naming requirements (such as including the word “Corp” or “LLC”, depending on the underlying entity), but the business name by itself does not have to be distinctive in order to be approved. Generally speaking, the name of the business can be similar to others (i.e. “Assured Home Inspections” vs. “Assured Home Inspectors”), there just can’t be direct overlap between two names.
Now that those definitions are clear (if they aren’t, then I am never going to consider working for Merriam-Webster), I am going to take on the first question I started out with. Let’s say you are a business owner and you want to start a BBQ restaurant (The Smokehouse King). To keep disgruntled patrons burned by hot grease from suing you personally, you set-up an LLC and call it “Smokehouse King LLC”. You get the notification papers from the state, you officially have a business. Great.
Then you think about the possibility of competitors, after all BBQ is pretty popular in your area and you already have inquiries from customers around the city thanks in part to your status as a lean, mean, grillin’ machine. You are worried, for example, that somebody will open up a competing BBQ joint across the city, in the furthest recesses where your competitor thinks you’ll never find out. “Surely my business name is enough to protect me. After all, the state blessed me with its approval and they are an official body. They’ll protect me if some hack wants to try and use a similar name.”
In your third year of business, you find that the proverbial hack you so eagerly dismissed has in fact opened up a restaurant on the East end of town, calling it “Somehouse Kings”. Moreover, he has been doing business under that name for over 2 years. Dismayed at the fact that somebody could have the gall to sweep up business by using a similar name, you get a trade name registration for “Smokehouse King” (fortunately, the hack failed to secure his trade name before you). “Surely the trade name is enough to protect me. No one else can use a similar sounding name, and I was the first to both use and register this name. I’m all set to go after this guy.”
The unfortunate thing about this story is that our friend is in no way “set”, at least to come out with guns blazing (meaning that he can’t just waltz into court, throw down his state’s registration papers, have some people speak to his reputation as a business owner, and walk away with an injunction against the competitor). True, our friend had a business name, had the trade name, and was operating before the competitor entered the marketplace. But to be able to sue anyone for unfair competition or trademark infringement, you have to show that the name somebody else is using is attributable to you.
When you use a name in the marketplace to sell goods or services, you have to use the name in a particular way so that it becomes attributable to you as the source. Generally that requires some kind of advertising. Not just your plain vanilla type of advertising (“We are ACME Company, here’s what we do!”). The advertising has to be done in such a way that consumers clearly connect products and services to your company whenever they see the ACME name in the marketplace. What kind of advertising does this? Well, your advertising has to be done in such a way that it leaves some kind of a commercial impression on a buyer. You can do this by any of the following:
- Distinctive styling of the name in advertising and communications (i.e. the word or symbol that you are designating as your trademark doesn’t blend in with the surrounding words either through font style or coloring)
- Communications that use the trademark as an adjective, not as a noun. Trademarks are source-indicators not product names. So if your product is a microprocessor used for smart phones, don’t use a trademark like “Cell Processor” and don’t use your trademark as the name of the product. This just puts consumers in the mindset that the brand name is the product.
- Most importantly, let people know the mark belongs to YOU. Tell people that the ACME mark is a trademark of Joe Blow, Inc. That way, people can connect the brand with you, but not necessarily get the brand and the company mixed up.