Avoiding Malpractice In Corporate Name Clearance

Profession:Waters, McPherson, McNeill, P.C.
 
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One of the most common duties performed by an attorney for a client is a Corporate name clearance. What attorneys do not know, however, is that a corporate name clearance alone is not enough to protect clients from potentially significant liability. Acceptance by the New Jersey Secretary of State of your client's business name as a corporate name will not give that corporation the right to use their corporate name in commerce, when faced with the superior trademark rights of prior users of the name. Federal trademark rights are not superseded by the acceptance of registration by the Secretary of State, which does not provide clearance for trademark or service marks, nor does it assess the risk factor associated with such use. Only an independent trademark search will look for the rights of prior trademark users, and may provide an early indication of whether your client's proposed corporate name will create a conflict. Proceeding without a trademark search may even expose an attorney to a possible malpractice suit.

Acceptance Of Your Client's Corporate Name By The New Jersey Secretary Of State Alone May Not Protect It From Liability

The rationale behind conducting a trademark search is very simple. Just because the New Jersey Secretary of State accepts a corporate name, does not mean that a company is allowed to use that name in business to identify products or services. While the New Jersey Secretary of State will search her own state register of corporations and, in some instances, the list of corporations qualified to do business in that state, it operates solely from its own state records, and not those of any other states, regardless of proximity. Even if other states are researched, international corporations are rarely, if ever examined. The New Jersey Secretary of State does not clear names for trademark or service mark use, nor does she evaluate or assess the risk associated with such use. In fact, the "vast majority of courts have stated that the acceptance of a corporate name by a state agency will be given 'no judicial weight at all' in litigation over rights to the name." Therefore, a bona fide trademark search will help address the issues left unexamined by a corporate name clearance. The paramount trademark rights of prior users of the name are founded in early and longstanding common law. These rights are not outweighed by any acceptance of registration by an individual Secretary of State. A "state does not pass upon the legality of a corporate...

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