For good reasons family businesses often use a family name in their business names. The use of a family name has a number of benefits, from quickly identifying the familial association with the business to honoring the legacy of the family.
While a family name may serve to differentiate the family business from other businesses in a similar field, the law doesn’t provide an immediate right to prevent others from using the family name on competing goods or services. Before the law will recognize exclusive rights in a family name, consumers must associate the family name with a specific source and quality of goods or services rather than a mere association of the name with persons involved in the business.
There are several reasons for requiring this association. By granting exclusive rights in a family name, the rights of others with the same family name are impacted and courts are reluctant to forbid a person from using his or her own name in a business. Additionally, since family names are commonly used, consumers may not be confused if different business use the same family name (e.g., consumer will not initially assume that two “Smith’s Cafes” have the same owner). Finally, granting exclusive rights in a family name to one person can deprive consumers of useful information, i.e. knowing the name of the person involved in a particular business.
Putting these principles into practice, if I were to start a company using the name Moersfelder Fine Goods selling watches, consumers would not immediately identify the name with watches. Rather consumers would believe that members of the Moersfelder family owned the watch company. At this point, I would not have any legally recognized rights to prevent others from also using their family name Moersfelder. Once I have educated consumers to associate watches with the company name Moersfelder Fine Goods, then I begin to have rights recognized by law that I can enforce against other companies selling watches or related goods.
Even after acquiring rights in a family name, enforcing those rights faces additional hurdles. Courts will generally allow a party to use a family name in some form even if that name is already in use, provided that the new use is sufficiently different to avoid consumer confusion. For example, Edward Moersfelder may be entitled to use the name Watches by Edward Moersfelder even after I have established rights in the name Moersfelder Fine Goods for watches.
Protecting a family name can also present unique issues when members of the same family split and begin offering competing goods or services. This can lead to a dispute over who owns rights to the family name.
Making sure that there is a clear record of the ownership of the business name can prevent a drawn-out fight that may otherwise cause serious harm to the brand (as well as family strife). Establishing the ownership record can be done either through registration with a state or the federal government, through governance documents or through contractual agreement.
A different issue arises when a family name is sold along with a business. Without specific contractual prohibitions on the use of the family name, a normal assignment of the trademark rights will not prevent the seller from using the family name in some form in the future. From the seller’s perspective this is preferable because it will allow the seller to retain at least some rights to use the family name. From the purchaser’s perspective it may be important to impose additional contractual limitations on future use of the family name to protect the value of the brand acquired. In either case, the limitations on use of the family name should be carefully considered in a sale as the reputation and goodwill associated with that name are often very important assets.
Family names, apart from being an important part of the family legacy, can be protectable assets with significant value. Carefully considering protecting the name and the possible ownership issues early in the life of a new brand or mark may help to prevent difficult and acrimonious issues from arising in the future.