Protecting the name of a family business



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Q.For three generations, Carroll Carpet Cleaners has been well known for its in-home and in-store services throughout southern New Hampshire and the Merrimack Valley of Massachusetts. Young Carl Carroll wants to make his own fortune, and so after five years working for his father, he decides to leave and set up his own business. He buys a panel truck, stocks it with tools of the trade, selects a business logo, registers his trade name with the New Hampshire secretary of state and makes equivalent business name certificate filings in Massachusetts. The name that Carl has selected? Carroll Carpet Cleaners.Carl tells his family that they never bothered to register Carroll Carpet Cleaners and that he is free to use his own name with his new business. The family is furious and wants to know, can Carl really get away with this? A. There is nothing more all-American than the small family business. But just as the family business may prosper through the blood ties of its owners, those family connections can also sow the seeds for division and eventual fracture of the family unit. The very public and expensive DeMoulas supermarket family dispute in Massachusetts shows how bad things can get.Of course, sometimes a family member leaves the business not out of animosity, but simply to make his or her own mark in the world.By definition, members of a family business are all engaged in the same enterprise. If one or more family members set out on their own, they may well stay in the same line of work. It can get complicated if the original business name includes the family surname, and the departing relatives also intend to use the family name.Carl’s father and grandfather could first start finger-pointing at each other. One or the other should have registered the trade name Carroll Carpet Cleaners in New Hampshire and Massachusetts. And they should have required Carl to sign an employment agreement that either prevented him from competing with the family business (often hard to enforce) or at least prevented him from using the family name in a similar business (easier to enforce).But father and grandfather Carroll shouldn’t be so hard on each other. They are correct that they should have registered their trade name (which is required by law). But registration alone may not have solved their problem. Absent a specific agreement, a family business probably cannot prevent another family member from using their common surname in a new business — even a business in the same line of work.People generally can use their own family name for their own business. Just registering a trade name can’t prevent that. There are a few exceptions, such as when a family name becomes “famous” in a particular field, such as McDonald with hamburgers and Chanel with women’s fashion.While Carroll Carpet Cleaners may have a good reputation, it lacks the widespread fame required for exclusivity in a particular field. That doesn’t mean that the family must give up. It likely can stop Carl from using “Carroll” in association with “Carpet Cleaning,” at least in this geographic area.Why? The older Carrolls were the first to use the name. Also, the two identical business names are likely to cause further confusion. The fact that only Carl registered the trade name does not make a difference, since trademark rights, in the end, depend upon priority in time, continuous use and use with specific products or services.A court would likely require Carl to stop using Carroll Carpet Cleaning for his business, but would permit him to use another name that is different enough, like Carl Carroll Floor Care. The court might even require some written disclaimer on new business advertising, like “Not affiliated with Carroll Carpet Cleaners.”Even better, the older Carrolls and Carl, perhaps with legal help, might be able to negotiate an agreement for him to modify his business name. In doing so, they can craft a contract that addresses matters with greater clarity and specificity than what a court might order.And while it provides limited protection, the original Carroll Carpet Cleaning should register its trade name, at least to put the world on notice as to that business.Would it have made any difference if Carroll Carpet Cleaning had been formed as a business entity using that trade name, such as a corporation or limited liability company? If that had happened, the secretary of state in New Hampshire would not permit Carl to register a similar trade name, but it would not affirmatively stop Carl from starting a sole proprietorship with that name. It would be up to the courts, or the parties, to sort out confusion and priority of use.Tom Donovan, a director in the Litigation Department at the law firm of McLane, Graf, Raulerson & Middleton, can be reached attom.donovan@mclane.comor603-628-1337.

 

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