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Protecting business identity against passing off and other abuses

14 August 2019
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Identity is an important concept synonymous with individuality, uniqueness, distinctiveness, character and personality. In a business, identity takes on utmost importance. Not only must the business entity be readily identifiable among its customers, but the goods or services it offers must also be identified or associated with it.

A unique identity may of course be targeted by those seeking to cash in on it for nefarious reasons. In Uganda, we have seen an increasing number of disputes concerning well-known multinationals that seek to enter the market, only to discover that opportunistic speculators have registered the famous names associated with the multinationals as company names. The intention is to extract payment from the multinationals in order to relinquish rights to the names.

Such scenarios should make the protection of their business identities a priority for companies doing business in Uganda.

Under the law, a business must have a business name or a company name (if so incorporated). The process of incorporating a company starts with reserving the desired name.

Implications of reserving a name

In Uganda, the registration of companies is governed by the Companies Act, 2012 (“the 2012 Act”). Under Section 36 (1) of this Act, the registrar may, on written application, reserve a name pending registration of the company or a change of name by an existing company. Any such reservation shall remain in force for 30 days or a longer period, if there are special reasons why the registrar should allow this, but not for longer than 60 days.

During that period, no other company is entitled to be registered with that name. Where the name sought to be reserved is similar to one already on the Register of Companies, then the Registrar will decline to reserve the name.

It is important to note that registration only serves to bar a later application for registration of that name, or a confusingly similar name. The 2012 Act does not enable a registered company to use the registration of its name as the basis for preventing another person from making unauthorised use of that name.

For this reason, although not mandatory, consideration should be given to registering the company name as a trade mark in respect of the relevant goods or services.

Furthermore, the registration of a company name does not, of itself, give the absolute right to use that name in trade. Notwithstanding registration, the name might conflict with prior rights held by other parties under the Trademarks Act, 2010 or at common law.

Bear in mind that in Uganda, the Register of Companies and the Register of Trademarks are two different registers and a search of one does not include the search on the other. It is therefore advisable, when applying for reservation of a company name, to conduct a search of the Register of Trademarks in order to avoid petitions to the Registrar of Companies to have the company struck off for being undesirable under Section 36 (2) of the 2012 Act.

This section provides that no name shall be reserved and no company shall be registered by a name which, in the opinion of the registrar, is undesirable. The 2012 Act does not detail with specificity what would qualify as an ‘undesirable name’ and leaves such determination to the discretion of the Registrar of Companies.

South African case law offers some guidance

Some guidance can be found in a South African decision of the Supreme Court of Appeal, Polaris Capital (Pty) Ltd v The Registrar of Companies and Another 2010 (2) SA 274 (SCA). In this matter, the Court stated:

‘In my view it is inappropriate to attempt to circumscribe the circumstances under which the registration of a company name might be found to be “undesirable”. To do so would negate the very flexibility intended by the Legislature by the introduction of the undesirability test in the section and the wide discretion conferred upon the Court to “make such order as it deems fit”. For the purposes of the present matter it suffices to say that, where the names of companies are the same or substantially similar and where there is a likelihood that members of the public will be confused in their dealings with the competing parties, these are important factors which the Court will take into account when considering whether or not a name is “undesirable”.’ [Emphasis added]

The common law principles concerning passing off also have an impact on whether a company may use its registered company name in trade. The law of passing off was summarised in Reckitt & Colman v Borden [1990] R.P.C. 341, HL at 406 as, ‘No man may pass off his goods as those of another’.

By implication, this offers some protection to a business that has established goodwill as a result of the use of a name/brand in respect of goods or services. Another business may not register that name as its company name if doing so would engender a misrepresentation that the source of its goods or services is the same as that of the business with established goodwill.

The value of goodwill in Uganda

In Abercombie & Kent Ltd v Abercombie & Kent (Uganda) Ltd & Others HCCS No. 1035/95, both the Plaintiff and the Defendant were registered on the Register of Companies, the Defendant having been incorporated before the Plaintiff. However, the Court found that,

’the Plaintiff had acquired a business reputation which it had built over the years as ‘Abercombie & Kent’ and therefore it has a right to restrain anyone else from injuring its business by using that name.’

The Court in Abercombie quoted Parker-Knoll Ltd v Knoll International Ltd [1962] P.P.C. 265 as follows:

’In the interests of fair trading and in the interests of all who may wish to buy or sell goods the law recognises that certain limitations upon freedom of action are necessary and desirable. In some situations the law has had to resolve what might at first appear to be conflicts between competing rights. In solving the problems which have arisen there has been no need to resort to any abstruse principles but rather – to the straight forward principle that trading must not only be honest but must not even unintentionally be unfair.’

The Court then issued a permanent injunction restraining the Defendants from carrying on business under any name constituted of the words ’Abercombie & Kent’ or any semblance thereto as to be likely to deceive or cause confusion.

This decision is of immense benefit to companies that have built goodwill in the Ugandan market before seeking to register company names or trademarks, and should go some way towards addressing the predatory practice of passing off.