This article is written by Dhrubajyoti Bose, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from lawsikho.com. Here he discusses “Applicability of Trademark Laws in the Reservation of Company Name”.
A company name is the “virtual symbol” that is used to identify the activities of the company and plays an important role in creating and establishing a reputation of the company in the market. All stakeholders, including consumers and competitors refer to a company by its name. A company being a legal entity, holds a distinct position in its own name. Hence, while incorporation of a company, special attention is to be given in choosing the name.
The name of a company usually comprises three parts – the first part gives the company its unique identity in the market; the second part helps consumers to relate with the field of its operations. Consumers can easily identify the activities of the company by its name, which indirectly helps to promote the activities of a company. The third part is a statutory requirement. The company upon registration under the Companies Act is required to attach a suffix to indicate its type.
While choosing the name, it is always recommended to choose a suggestive or fanciful name. A suggestive name suggests the quality of goods or nature of services provided by the company. For example, “Makemytrip” provides online travel services including flight, rail or bus bookings, domestic and international tour packages etc. suggesting the nature of services provided. Fanciful names, on the other hand, do not describe or suggest the nature of goods or services that the company deals with. Nonetheless, when the name is not inherently related to the product or services, it is more likely that the consumers recall the arbitrary association between the name and the products or services under the name. For example, “Apple” for computers, “TATA” for TATA group of companies, etc.
A suggestive or fanciful name aids in easy reservation of the name for the proposed company along with its registration as a trademark in future. Both suggestive, as well as fanciful names helps to build up an association between stakeholders and the company. Based on the name, the company earns a reputation in the market. With continuous use, the name sometimes becomes synonymous with the products or services that it deals with. For example, for the longest time, “colgate” is used as a synonym for toothpaste and “bisleri” is used for packaged mineral drinking water.
Any proposed name for reservation should comply with Company Law and the Rules framed thereunder and Trademark laws. The Trade Marks Act, 1999 provides for registration of marks that can be used to identify the source of goods, or services, or other articles of commerce and for differentiating them from those of competitors. The trademark in lay man’s term is the “brand name” under which goods and services are offered in the market.
The Act lists grounds of refusal of registration of marks, along with certain situations where marks can be registered subject to fulfilment of pre requisite conditions. The Trade Marks Act plays an important role in determining a company name. Firstly, it is a mandate to comply with trademark laws, as a prerequisite of naming a company. If the proposed name clashes to an already registered trademark, then the same shall be rejected. Secondly, after incorporation of the company, the mark under which goods will be sold or services will be rendered will be its trademark. A trademark is operational from the instance goods or services are made available in the market under a brand name, and it is valid even without registration. Registration of a trademark gives its proprietor some statutory remedies in case of infringement. Lastly, it avoids any sort of confusion among stakeholders.
How to reserve a company name?
Section 4(4) of the Companies Act, 2013, requires reservation of name by making an application to the Registrar of Company (ROC) as- (i) the name of a proposed company; or (ii) The name to which the company proposes to change its name. The manner of making the application is listed out under Rule 9 of the Company (Incorporation) Rules, 2014. An application for reservation of name is to be filed through Form No. INC-1 accompanied by such fees as provided under the Companies (Registration offices and fees) Rules, 2014.
A company name can be reserved (as a name for a proposed company; or for change of name of an existing company) through the web based application called RUN (Reserve Unique Name) introduced by the Ministry of Corporate Affairs.[i] This facility can be used only by a registered user of the MCA portal. The same web client can also be used to change the name of an existing company. The applicant may submit two proposed names including the suffix, in order of preference, along with the application Fee of Rs. 1000. The applications will be processed and scrutinised by the Central Registration Centre (CRC). The name should comply with Company Name Availability Guidelines[ii] and Trademark laws. The major steps involved to reserve a name are:
- payment of fees;
- approval/ resubmission.
A company name approved through RUN portal is valid for a period of 20 days from the date of approval in case the name is reserved for a new company; or 60 days from the date of approval in case of change of name of an existing company.
Alternatively, the applicant may apply through the integrated SPICE Application for company registration. In that case, the applicant can only submit one name and two re-submissions for seeking approval.
What words cannot be used in a company name
A company name should be chosen with the vision of its long term use, with respect to the affairs of the company. The name should be such that it helps the stakeholders to connect with the company and helps to establish a brand. Generic and deceptively similar names are discouraged as it causes confusion among minds of the stakeholders. Also, deceptively similar names wound to bank upon the goodwill of another established company, thereby being unjustly enriched at the cost of another company.
The proposed name should never contain any word(s) as prohibited under Section 4 (2) & (3) of the Companies Act, 2013 read with Rule 8 of the Companies (Incorporation) Rules, 2014.
Section 4(2) of the Companies Act, 2013 states that:
“The name stated in the memorandum shall not—
- be identical with or resemble too nearly to the name of an existing company registered under this Act, or any previous company law; or
- be such that its use by the company—
(i) will constitute an offence under any law for the time being in force; or
(ii) is undesirable in the opinion of the Central Government.”
And Section 4 (3) of the Companies Act, 2013 provides,
“Without prejudice to the provisions of sub-section (2), a company shall not be registered with a name which contains—
- any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of, the Central Government, any State Government, or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force; or
- such word or expression, as may be prescribed, unless the previous approval of the Central Government has been obtained for the use of any such word or expression.”
Rule 8 of the Companies (Incorporation) Rules, 2014 illustrates upon the requirement of distinctiveness while choosing a company name. A company name should never be too similar to an existing name of a company or LLP. Similarity in names includes singular or plural forms of the two names. For e.g. Green Technology Ltd. is the same as Greens Technology Ltd. or Greens Technologies Ltd.; but SM Computers Ltd. is not the same as SMS Computers Ltd.
Further, generic names should be avoided. From the very nature, generic names are not distinctive. They do not warrant protection because if one seller could register a generic name, other sellers would be unable to describe their products and would thus be at a great disadvantage.
The proposed name should not be opposed to public policy. The name should not lead to the impression that the entity is having a connection or association with local/ state/ central government. Moreover, the name should not be prohibited by the Emblems and Names (Prevention of Improper Use) Act, 1950, or any other law prevailing in India.
Many of these requirements overlap with Sections 9 & 11 of the Trademarks Act, 1999, which deals with absolute grounds and relative grounds of refusal of registration of trademarks respectively.
Rapid industrialization and the growth of a market-oriented economy has allowed competing manufactures to offer consumers a wide variety of products in the same category. Often these products differ from each other in terms of quality, price, and other characteristics. Therefore, consumers need to be given an indication that will guide them to choose products of their choice from an alternative. Trademark serves to be this indication. A trademark serves for the manufacturing company as a badge of origin of a product specifying certain quality or characteristics of the goods or services. This is referred to as the quality function or guarantee function. Again, the trademark can be used for advertising the product. Further, a trademark can acquire a reputation in the market allowing the proprietor to license or franchise it or make other commercial uses of it. These are referred to as economic functions.
Checking if the name is registered
While reserving a company name it is imperative that a due check has to be performed of all registered names of companies and LLPs, along with trademarks in any of the 45 classes. The Fourth Schedule to the Trade Mark Rules, 2002 classifies goods and services into various classes. The first 34 classes group different categories of goods, while the remaining 11 classes categorise different services. It is an important step before filing the application through the RUN portal. If the name is similar or resembles too closely to an existing name, the same shall be rejected by the Central Registration Centre.
The name can be searched for any existing company name from the “Check Company Name” portal under MCA Services from the MCA website.[iii] A trademark search can be performed under the “public search for trademarks” portal, maintained by the Office of the Controller General of Patents, Designs & Trademarks.[iv]
It is also recommended to check availability of the domain name of the proposed name for the company. The same can be done through the portal maintained by NIXI, the National Internet eXchange of India.[v] In the age of internet and e-commerce, companies tend to advertise and perform business transactions over the internet. A domain name helps to set the business to a large group of consumers, and ensures visibility on the internet. It is advisable that the name of the company and the domain name should be the same to avoid confusion.
Process of reservation
The reservation process through the RUN portal can be broadly divided into 5 heads[vi]–
- payment of fees;
- approval/ resubmission.
The application for reservation of name can only be filed by a registered user of MCA. Hence, new users are required to create a login account[vii] first before using the service. An account can be created by selecting the category from “registered user” or “business user” and after filling up all required details. After login, users may click on the RUN (Reserve Unique Name) icon under the head ‘MCA Services’, to open the RUN portal.
It is not mandatory to attach any documents along with the application to reserve a company name. But, under certain circumstances few documents are required to be uploaded in the portal in pdf format for the verification process. Such documents includes, but not limited to:
- business activity of the company in brief;
- trademark application details or registered certificate if the name is based on trademark; NOC from trademark owner;
- if the name is based on any other company or LLP, then NOC in form of board resolution of that company or LLP;
- Approval from any regulatory authority if applicable;
The RUN portal requires the user to first enter the “entity type” of the proposed company from a drop down menu. Entity Type represents the Type/ Class/ Category of the proposed company. The second and third fields require the user to enter CIN and LLPIN respectively. The CIN has to be entered in case of change of name of an existing company, while the LLPIN has to be entered when an existing LLP wishes to convert itself into a company.
The next two fields require the user to enter the proposed names in order of preference. It is to be noted that in case of conversion of LLP to company, the proposed name shall be the name of the existing LLP except for the change in suffix ‘LLP/Limited Liability Partnership’.
In the last field comments are to be entered by the user. In this field, the user shall enter the objects of the proposed company in short and any other relevant comments in support of the proposed name.
Last, there is the attachment button where a user can upload attachments of documents mentioned above, if required.
- Payment of Fees:
Then after successful submission, SRN will be generated and the user will have to make payment and the application will be taken into consideration only after making payment. The payment can be made online through credit/debit card or NEFT. The name application fee is non-refundable. The SRN number is to be used for future reference or tracking of the application.
- Approval/ Resubmission:
Upon submission of the application, the MCA will process the application in 2-3 working days. The user can check the track status of his application on the MCA portal from MCA services – “Track SRN/ Transaction status”. If the name is found available by MCA and subject to fulfilment of all the requirements, then the same shall be approved and an email will be sent to the user confirming the approval. Otherwise, it will require the user to re-submit names. In such a case the application status shows “sent for resubmission” and an email will be sent to the registered email id.
The email shall contain the time period within which re-submission is required to be made or else the application will be rejected. In that case, a new application is to be filed along with the fees. In case, the name is not approved in the second chance then also the application will get rejected and a new application will be filed.
The initiative taken by the Government of India, to move to a digital platform to reserve company name is definitely a welcome step. The online procedure is a cost effective and a comparatively faster. It is a simple and easy process, which requires the applicant to enter only three relevant fields, as compared to the erstwhile filing of form no. INC-1, which required the applicant to submit detailed information, viz. proposed directors, proposed subscribers, proposed State/RoC, company type, class, category, sub-category etc. Further, the requirements of obtaining a DIN and DSC has been done away with under the RUN portal. The time involved in processing the name reservation application will also be reduced since only the proposed name needs to be checked against the ‘Entity type’ and the relevant name rules.
[vi] FAQ’s on RUN, https://www.mca.gov.in/MinistryV2/runServicerFAQ.html
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