The trade name and the brand, even being legal concepts with different brands, are confused countless times in our professional practice.
In essence, the difference is simple. The commercial name is responsible for identifying a company or establishment , individualizing its commercial activity compared to other competitors. While the brand seeks to distinguish the products or services from other similar ones that are within the market.
Notwithstanding this “simplicity”, we find ourselves involved in a legal entanglement and in a confusion that is not so easy to clarify. Although the legislation tries to clarify their differences, there are obstacles and administrative requirements that place both figures on a plane of excessive similarity. However, the nature of both are not similar, and we should not assume that this is the case because it is a recurring practical error.
Acquisition and existence of the right.
Just as everyone needs a designation that individualizes them, the same thing happens in the case of merchants when it comes to distinguishing their business.
On this occasion we must differentiate what a commercial transaction is, which does not necessarily mean a commercial activity . The latter, by pure concept, supposes an action or process carried out on a regular basis, while a transaction occurs in isolation. This is why the commercial activity that is individualized by the trade name is covered with this character of constant execution, which evidences the uninterrupted use of said name by its owner.
With this we see that exclusive use is the main reason why a trade name is acquired. This is indicated by Law No. 20-00 on Industrial Property, in its article 113 number 1): “The right of exclusive use of a trade name is acquired by virtue of its first use in commerce . […]”
This right evoked by Law No. 20-00 is maintained by the operation of the business over time. The existence of this right is intrinsically linked to the commercial activity carried out on a regular basis, without any interruption. Therefore, necessarily, when the commercial activity perishes and ceases to exist, the commercial name will have no reason to exist, and as an immediate consequence the right protected by this use will also have perished. This is what Law No. 20-00 provides when it states that “the right of exclusive use of a trade name ends with the abandonment of the name ”.
For its part, the nature of the brand is to distinguish products or services of the same kind, which in turn, allows the consumer to differentiate the market offers and acquire what they want.
Contrary to what happens with the Commercial Name, the right to the exclusive use of a brand is acquired through its registration . In this case, it is necessary to acquire the registration through the competent authority, to demonstrate ownership and benefit from its exclusive use within the market.
As we can see, the brand is not related to the executed business. We could understand that it is a means created by the legislator to protect the creation and innovation of industrialists, and thus allow them the opportunity to join the commercial traffic with equal opportunities compared to their competitors. Instead of identifying the establishment, this sign allows the consumer to recognize a product or service and consequently its manufacturer, regardless of the geographical location where they are.
From this we can understand that the lack of use will not be a reason for the right to the trademark to cease to exist. If so, we would have to know with certain accuracy, at what moment the product or service covered by the brand ceases to be consumed in the market, taking into account the national or international scope that certain products or services may have.
In this case, as the right is obligatorily granted through a registration, its cancellation will prevail so that the right ceases to exist.
practical confusion. Scope of the right.
Suppose that company Z has been using the commercial name “MADERA” for 10 years and constantly in the market, individualizing its carpentry workshop, which specializes in manufacturing square tables with 3 legs. On the other hand, at the beginning of the year, industrialist X placed 3-legged rectangular tables on the market under the “WOODS” brand.
Faced with this situation, company Z, even without having registered the trade name with the corresponding authority, decides to take action against industrial X, because the product generated under the brand “WOODS” creates confusion among consumers.
This situation, explained in a simple way, has several points worthy of analysis. At first glance, it might seem that industrial X will have a profit because it has the effective registration of its brand, which, by legal provision, grants it the right to individualize its products. The picture is not as simple as it seems.
Law No. 20-00 on Industrial Property does not limit the rights it grants to a certain area of the country, but its effects are valid at the national level. However, we must not forget that the very nature of both figures can transcend the provisions given by the legislator.
Trademarks in our country, by legal provision, have the acquisition of their rights from their registration , that is, it is an acquisition in abstract; while trade names grant rights from constant and effective use , that is, in concrete. One of the most common confusions lies precisely at this point. Trade names grant rights based on palpable and verifiable facts, that their owner continues to carry out the commercial activity that they individualize and support. Your registration is optional, not mandatory. In the case of trademarks, the reverse happens, they have as a sine qua non condition, a mandatory registration and approved by the competent authority, and its exclusive use starts from the registration itself.
The Supreme Court of Justice of the Nation of Buenos Aires has ruled on these differences indicating that
“The commercial name of the house and that of the brand are of a different legal nature. The right to the first arises from its use, is maintained by the operation of the business and does not require registration, while the right to the second is only acquired by the certificate that proves its registration.
The registration of the trade name is certainly optional, however, once it is registered, we should not conclude that the right of use has been obtained universally. Regardless of whether a legal figure is placed on paper, its nature does not change under any circumstances. For this reason, we must always be clear that a trade name registration would provide, in any case, a presumption of use in good faith, but it does not constitute the means of absolute proof to ensure ownership of this distinctive sign.
It is important to bear in mind that the use of the distinctive sign will be highly relevant when evaluating a case. This is how the International Court of Justice of the Andean Community has ruled, when it mentions that it is “the real and effective use of said distinctive sign that delimits the scope of protection of the right”
The term of use ‘real and effective’ supposes the exploitation in a constant and truthful way. For its part, the commercial name has its existence to individualize the establishment that executes a commercial activity, provided that said activity exists. We cannot understand that an isolated use for the exclusive purpose of maintaining the rights conferred is real and effective, since it would not support long-term economic activity.
Under these premises, company Z has its right clearly established, without any hesitation. Indeed, there is no guarantee that the consumer, once faced with both products, will be able to differentiate the work carried out by company Z or by industrialist X. We understand that in this situation, company Z has a priority right, under a name commercial recognized in the market that allows you to individualize your establishment and, consequently, your commercial activity. Industrial X, under this premise, could not exploit the use of its brand due to the evident collision between both distinctive signs.
Not all scenarios will be so manageable. The outcome of this hypothetical case could vary if the geographical conditions are different. If the commercial name of company Z only served to identify its establishment in the northern part of the country, nothing prevents industrialist X from distributing its products in the southern part of the country. Let’s not forget that the neuralgic reason for the existence of the right given by the trade name is the constant exploitation of the business within the commercial transit. It makes no legal sense or practicality to restrict the exploitation of a trademark in a territory where there is no knowledge of another sign with which it could be confused.
The purpose of the distinctive signs is to protect the product, service or value that is held to execute a commercial activity. It would be illogical to assume that a commercial name known by only 25% of the market affects the appreciation of 100% of consumers to make a purchase. In this case, if there is no geographical collision between the trade name of company Z and the brand of industrialist X, there would be no risk of confusion on the part of consumers, so the need to distinguish between the two products is rendered meaningless.
The Argentine doctrinaires Luis Eduardo Bertone and Guillermo Cabanellas de las Cuevas masterfully explain that before a
“ registered trademark after the constant use within the market of a trade name, both signs may coexist, to the extent that the owner of the registered trademark may not oppose his rights to the owner of the trade name within the area where it has been recognized its use , and the owner of the commercial name may not exercise its rights beyond those that are recognized by its use ” .
With this we must understand that the protection of the commercial name is not granted at the national level, while that corresponding to a brand is. The real and effective use constitutes the premise to determine the beginning and scope of a commercial name, while it is the registration that provides the owner of the trademark with the power of execution. This tells us that although industrialist X will have ownership of the “WOODS” brand at the national level, he will not be able to oppose his rights to company Z, since it has a commercial name recognized in the market prior to the registration of this brand. .
On the other hand, we must not clearly understand that company Z will not be able to expand its business using its commercial name if the registered trademark of industrialist X already exists. that transcends the ordinary sphere of positioning in the market, industrialist Z could not exercise the use of his brand.
This example materializes national cases such as “Farmacia Carol”, “La Sirena”, “Jumbo” and others. Even this recognition can overcome geographical barriers. There have been cases in which third parties who do not own recognized trademarks integrate products or services into the market, taking advantage of the efforts of others to position their products. How many times have we seen the ‘Disney’ or ‘Coca-cola’ trademarks used indiscriminately for these purposes?
The scope of the right of the trade name goes hand in hand with the nature of the business that supports it, and with the importance that it could achieve. The territorial expansion of commercial activity is extending the scope of this granted right, rewarding the recognition of an “establishment” that has broken geographical barriers.
Previously we mentioned that in our country the registration of the trade name is optional, and that this is not absolute proof of ownership of it. However, there are countries such as Spain, Argentina and Peru, where the registration of a trade name is not used in practice, and that does not mean that it is not protected. In these, the geographical exploitation of the name supposes the scope of its right, since these legal regimes have correctly interpreted that the holder of a commercial name only obtains rights over it in the place where it is actually used.
In this regard, the Court for the Defense of Competition and Industrial Property has ruled as follows:
“ In this case, it must be borne in mind that in Peru the trade name is protected within its zone of economic influence, so the Chamber is of the opinion that the owner of a trade name may only oppose…the registration of a trademark identical or similar to its sign, when the geographical area of influence of its trade name covers almost the entire Peruvian territory .
In this case, the exclusive right at the national level granted by the registration of a trademark may affect the distinctiveness of the trade name and cause a risk of confusion in the consumer. However, those trade names that do not have greater geographical significance, even when they show a previous use, will not be able to achieve the denial of the registration of the trademark ”
This does not happen in the case of brands. In order for the right of a trademark to be able to touch other territories, it is forced to be supported by the approval of the registration of the competent authority. A brand that is exploited in a territory without complying with the established registration standards, could be susceptible to actions for unfair competition and taking advantage of the effort of others, because
“The exclusive property of the brand and the right to oppose the use of any other that may directly or indirectly cause confusion shall correspond to the industrialist, merchant or farmer, who has fulfilled the requirements required by law “
The use of the trademark is optional and the registration of the trademark, in the form determined by the legislation of each country, will be sufficient for the exercise and ownership of the rights .
María del Pilar Troncoso Leroux
Troncoso Leroux, SRL
Article for Judicial Gazette
March 7, 2016.
