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Why can’t two businesses have similar names?

On Behalf of | Dec 13, 2023 | Business Law

Have you ever seen two businesses that are clearly unrelated but that have similar names? There are situations in which this can be completely legal and not a violation of anyone’s intellectual property rights. After all, business names often are not trademarked or protected.

That being said, it is certainly not always permissible for a new business to use a name that is the same or similar to an existing business. When is this practice prohibited?

When there’s potential for consumer confusion

First and foremost, businesses may not be allowed to have similar names if it’s going to create consumer confusion. 

This is why businesses can sometimes have similar names if they are in different geographical locations – like different states – or if they work in very different industries. Consumers are not going to get confused if a restaurant and an auto repair shop have similar names. But if two restaurants have the same name, that could certainly be confusing, so this situation is viewed much differently.

The type of business structure matters

It’s also important to consider the type of business structure that is being used. For instance, with partnerships and sole proprietorships, even a registered business name is not going to be trademarked. However, incorporated companies do often have the exclusive right to use their names.

In other words, a small local business may be able to have the same name as another local business. But neither one of them could take the name of a well-known international corporation, as that would certainly cause consumer confusion.

Legal complications with a company’s name

Business owners need to be aware of their intellectual property rights and how to avoid potential violations. Those who do find themselves in a dispute over intellectual property also need to understand all of their legal options at this time.