Protecting your Business Name and Brand via Section 12 of the BCA Posted onJune 17, 2024June 17, 2024 Stephen Sforza In the dynamic and competitive world of information technology, a business’s name is not just a legal requirement; it’s a cornerstone of its brand identity and customer trust. A recent decision by the Ministry of Attorney General pursuant to a Section 12 application under Ontario’s Business Corporations Act (“BCA”) has highlighted an avenue of protecting your business name against potentially deceptive and confusing corporate names. Case Overview An information technology business (the “Objector”), operating as a sole proprietorship under a registered business name, recently faced a threat from a competitor (the “Proponent”) who had incorporated its business under a virtually identical name many years later. As counsel for the Objector, our firm brought an application under section 12 of the BCA to require the Proponent to change its corporate name to a name that is dissimilar to the registered business name carried on by the Objector. The application was successful, showcasing how a Section 12 application under the BCA can enforce the legislative principles under Sections 9 and 10 of the BCA (the rules surrounding name prohibitions and restrictions on corporate names). These provisions aim to protect the public interest by avoiding confusion caused by similar corporate names while safeguarding the goodwill and brand established by pre-existing businesses. Statutory Scheme Section 12 of the BCA states that: “if a corporation, through inadvertence or otherwise, has acquired a name contrary to section 9 or 10, the Director may, after giving the corporation an opportunity to be heard, issue a certificate of amendment to the articles changing the name of the corporation….”. Section 9 of the BCA outlines limitations to the naming of corporations. Under s.9(1)(b), a corporation shall not have a name that is the same as or similar to the name of a known (A) body corporate, (B) trust, (C) association, (D) partnership, (E) sole proprietorship, or (F) individual, whether or not in existence, if the use of that name would be likely to deceive. The term “likely to deceive” has been interpreted through caselaw to mean a probability of deception, or confusion in the minds of person, or classes of persons, who might ordinarily be expected to deal with the relevant businesses (Re C.C. Chemicals Ltd [1967] 2 O.R. 248 (C.A.). In assessing whether the Proponent’s name is likely to deceive, the Director considered whether the factors under s.3(1) of Regulation 398/21 of the BCA were met, including: If the name would lead to the inference that the Objector and Proponent were operating in the same business; If the Objector and Proponent were associated or affiliated; and If the Proponent’s name would lead someone with an interest in dealing with the Objector to deal with the Proponent. Additionally, in determining whether the Proponent was in breach of s.9, the Director assessed the following matters outlined in s.4(1) of the Regulation 398/21: The distinctiveness of the whole or any element of the name and the extent to which it has become known; The length of time the name has been in use; The nature of the goods or services or business associated with the name, including the likelihood of competition among businesses using the name; The nature of the trade with which a name is associated; The degree of similarity in the names in appearance or sound or in the ideas suggested by them; and The geographic area in Ontario in which the corporate name is likely to be used. The statutory scheme highlights the importance of distinctiveness when registering a new name. Newly incorporated companies under the BCA cannot have the same names as other business names, regardless of whether such other names are registered under the BCA or not. The primary goal of section 12 is to protect the public from being subject to confusing names. Corporate names must therefore be distinct. Overview of the Facts In the section 12 application brought by DSF, the Objector was a sole proprietor operating under a business name registered under the Business Names Act (BNA) on June 10, 2014, which registration was subsequently renewed on April 3, 2019. The Objector operated an IT business in and around the GTA for the past 10 years and had established a strong market presence and customer base. Nearly six years later, in March 2020, the Proponent incorporated its IT business under a nearly identical corporate name as the Objector’s business name, except for the legal ending, “Inc.”. The Objector contested the Proponent’s name on the basis that the name was contrary to s.9(1)(b) of the BCA. This required proving that the Proponent’s name was the same as or similar to the name of a known sole proprietorship (the Objector’s business name), and that such name is likely to deceive the public and mislead customers into thinking the two businesses were associated. Submissions by the Parties The Proponent argued that the Objector should change its name, claiming that the name, whether in existence or not, would “be likely to deceive”. However, DSF countered by noting that names registered under the BNA are not subject to the same restrictions against identical or similar names as are names of corporations under the BCA. The Proponent also argued that the Objector did not conduct a NUANS search (the government’s business name and trademark search tool) before registering its business name under the BNA. DSF countered that a NUANS report is not required to register a business under the BNA. It was also clearly shown that the NUANS report obtained by the Proponent prior to its incorporation indicated that the Objector’s business name was registered in 2014; nevertheless, the Proponent proceeded to incorporate under such name. The Objector provided search documents, proof of business name registration (and renewal of registration), and customer testimonials from its website dating back to 2014. This evidence was used to demonstrate that the Objector was an active sole proprietor as referenced in subsection 9(1)(b)(i) of the BCA, and that it carried on business six years before the Proponent’s incorporation. Proving that the use of the Proponent’s name would be likely to deceive the public presented a significant challenge as this required proving that the name was distinctive. While there is no requirement for a name to be distinctive under the BNA, the case of Re C.C. Chemicals Ltd [1967] 2 O.R. 248 (C.A.) noted that broader and more descriptive names are more difficult to prove as confusing. This is because entities using such broad and descriptive terms in their names should expect others in the same industry to use similar terms in their names, thereby making such names less distinctive. The Director noted that both the Objector’s business name and the Proponent’s name were not particularly distinctive; however, the evidence put forth by the Objector regarding the goodwill it had garnered in the community prior to the Proponent’s incorporation, the overlap in business activities and customer bases, and the instances of Google searches for the Objector’s business name resulting in search results directed to the Proponent’s website were accepted as evidence that the Objector had developed a name that, when adopted by the Proponent, would be likely to deceive the public. Decision Based on the facts and evidence as presented, the Director found that: The names of the Proponent and Objector were very similar and nearly identical,separated only by a legal element; The Proponent and Objector appear to operate within the same line of business; and It is possible the Proponent and the Objector may provide services to some ofthe same customers in the same geographic regions in Ontario, and theObjector has provided evidence of the potential for customer confusion. The Director concluded that “there is a likelihood of deception or confusion in the minds of the relevant public, including a likelihood that the public could infer that the Proponent is associated or affiliated with the Objector, contrary to subclause 9(1)(b)(i) of the BCA”. As such, the Objector’s application under s.12 of the BCA was successful and the Proponent was ordered to change its corporate name within 45 days of the decision. If the Proponent fails to comply, the Director will amend the Proponent’s articles to change its name to its Ontario corporation number. Conclusion For those looking to incorporate in Ontario, this case emphasizes the importance of thoroughly searching for similar names prior to filing, to ensure your corporation’s name is unique and not deceptively similar to existing businesses (both visually and audibly). It also underscores the effectiveness of making a section 12 application under the BCA, presenting this as an avenue for businesses to enforce their naming rights without having to commence an action in court. If you operate a business, have developed goodwill in association with your business name, and encounter a similar threat of name-relation confusion, you may be able to seek recourse under section 12 of the BCA. For more information, assistance, or any other questions regarding corporate/commercial law, please contact Stephen Sforza at Devry Smith Frank LLP at (289) 220-3239 or at stephen@durhamlawyer.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” This blog was co-authored by summer law student, Jason Corry. Authors Stephen Sforza 289-220-3239 (905) 668-9737 stephen@durhamlawyer.ca