State tries to loosen up restrictive trade name rules

When Lane Cheney, a real estate broker from Newmarket, planned to build an apartment complex on a hill, he wanted a name as pretty as the view.

He didn’t think it would be much of a problem. Six months he applied for the trade name of his firm, Premium Management Company, the Secretary of State’s Corporation Division approved it, despite the fact that there were more than a dozen businesses registered with the name “Premium” in it.

This time, however, “Vista” didn’t make it. Neither did “Skyline.” “Outlook Properties” was out as well. Too close to Outlook Associates Development.

All told, Cheney had a list of 15 names, and by the time he got to No. 11 – “Crestview Realty” — his frustration was building. Only Crestview Nashua had a similar name, and his complex was in Newmarket, not even the same county. Surely, the state wouldn’t say there would be confusion, thought Cheney.

But Cheney had to track down the owner of Crestview Nashua – “some guy who was working out of his house” – to get his permission to u se the name.

“I was just frazzled,” he said. “Luckily he was a nice enough guy to give me permission, but it was exasperating. I spent two weeks and a fortune with this name thing.”

What’s in a trade name? In New Hampshire, that is not the question. The question is: Is the name “deceptively similar” to any other name?

“The hardest thing for a business to do in this business-friendly state is forming the name,” said Sen. Joe Foster, D-Nashua, during a Senate debate on whether to remove the “deceptively similar” qualification from state law.

The Senate voted for the change by passing a floor amendment to House Bill 1348, a change that must be reconciled with the House version. But as it stands now, the New Hampshire trade name standard will still be more nebulous than those in most of the rest of the nation.

Fewer and fewer names

New Hampshire is one of the few states in the country that has such a subjective standard for trade names. Most states have the more objective “distinguishable on the record” threshold.

A dozen years ago, Dick Samuels, an attorney at McLane, Graf, Raulerson & Middleton, worked with a group of attorneys but failed to change it, when the state was adopting the model business corporation act.

Secretary of State William Gardner endorsed the change, and still does, on the basis that his office didn’t have the resources to be a judge, but the House Commerce Committee at the time “wanted to safeguard the sanctity of small New Hampshire business, so we had to reinsert this old standard into the new law,” remembers Samuels.

Still, as more states adopted the more objective standard and as more and more small businesses became active in the state, fewer and fewer names were available. This became especially evident to out-of-state businesses, which have to register in New Hampshire in order to conduct business here.

If the foreign corporation’s name is similar to a New Hampshire business’ name, “you would have to adopt a fictitious name. How silly is that? This is a business doing business with that name in every other state and maybe 100 countries … but in New Hampshire, they have to come up with another name,” said Samuels.

‘Peter’ or ‘Pete’?

Thing also are difficult for business start-ups. You can now check for the names of active businesses on line, but that doesn’t tell you whether a name is deceptively similar to another name.

“It’s pretty tough here,” said Diane Fenton, paralegal for the Concord law firm of Sulloway & Hollis, which represents CT Corporation, a company that incorporates names all over the nation.

Because New Hampshire law is “so vague,” she said, “you can’t really do a name check [on line].”

You could file a name by mail, but then learn that your name does not pass muster good, delaying the process for days, if not weeks. Or you could travel down to Concord and wait in line in a crowded office that is only open from 9 a.m. to 3 p.m. And that office is getting increasingly overwhelmed as the number of business filings continues to increase in New Hampshire.

Fenton used to leave a list of names there to get them approved by the next day. Now, “sometimes it takes two, three or four days,” she said. “It’s not easy to get a name as it is, and it is getting harder and harder.”

Jane Northcott, supervisor of the Corporation Division, won’t argue the point. Her clerks try to answer whether a name is OK or not right then or there, but when a business wants to stick to its name, Northcott becomes the initial judge. She says she gets interrupted 15 or 20 times a day with such appeals.

“It’s very time-consuming,” she said. “If a customer might want extensive searching, it does take a lot of our staff time.”

If the business is still not satisfied, the decision is up to Deputy Secretary of State David Scanlan, said he has to deal with three to five such appeals a day. But if Scanlan gives in too easily he will hear from those businesses with similar names, arguing – and sometimes going to court – that the state violated its own “deceptively similar” standard and gave away an existing business’ good name. Those appeals would lesson considerably if “distinguishable on the record,” Scanlan said.

Under the current standard, Peter would not be able to name his business Peter’s Construction if there was a Pete’s Construction somewhere in the state, Scanlan said. However, under the “distinguishable on the record” standard, both names would be allowed. Under either standard, however, “Peat’s Construction” wouldn’t make it.

This is the example Sen. Russell Prescott, R-Kingston, gave in defending the “deceptively similar” language. Peter should not be able to cash in on Pete’s good reputation. People who thought they were hiring Pete may end up with a less experienced, or less trustworthy, Peter, he said.

“It’s a consumer protection issue,” Prescott said.

In the end, the Republican Senate sided with Sen. Clifton Below, D-Lebanon. “Are we going to be overly protective or encourage entrepreneurship?” Below said. “We should lighten up a little when it comes to registering trade names.”

But neither the House nor Senate was prepared to go all the way. In both versions of the bill, names can only be used if they are “distinguishable from, and not the same as, or likely to be confused with or mistaken for.” Such language is likely to appear any final version, should it go to the Governor.

That means that the Corporation Division may still have to make subjective judgments, said Samuels.

“What may be confusing to one person may not to another,” he said.

But it is a step in the right direction, said Northcott. And the bill will allow for electronic filing, which means businesses will soon be able not only to go on line to learn about similar-sounding names, but their purpose, their location and even their principals, so they can do the research themselves to determine whether such names are confusing. That change should come about this fall.

“Between the two, that should make life so much easier for us and the public,” Northcott said.

There is a dark lining in the silver cloud. Filing fees are going up.

Categories: News