Liability & indemnity

Nando?s vs. Fernando?s: The brand making claims of trademark infringement

After chicken giant Nando?s launched legal action against a small restaurant it believed had lifted the chain’s branding, Grid Law founder David Walker helps business owners protect themselves against similar claims of trademark infringement.

How many times have we seen news stories about a small business being ?bullied? into rebranding by a much larger rival? Far too often!

It happened again recently when the owner of Reading restaurant Fernando?s claimed that Nando?s was threatening to sue him for trademark infringement.

We saw pictures of him stood outside his shop, saying how frustrated he was. He went on to say that he had invested every penny he had into starting the restaurant and the cost of rebranding could force him to close.

This is a real shame, because situations like this are entirely preventable. If, as a small business owner, you find yourself in this situation, what should you do?

First, you have to act quickly. If you?re in the wrong, this will limit the damage and potentially the compensation you may end up having to pay. If you?ve done nothing wrong, then you need to nip this in the bud before any damage is done to your brand.

So, in this case, is Fernando?s in the wrong? Are they being bullied into rebranding by Nando?s?

The legal position

Trademarks protect brands. When you register a trademark, the law gives you the exclusive right to use that trademark in relation to the products and services you have registered it for.

If another business uses a brand that is identical or confusingly similar to the registered trademark, they are said to be infringing the brand owner?s intellectual property rights. This gives the brand owner the right to stop them. They can force the infringer to rebrand and also claim compensation for the losses that they have incurred (if they can prove, for example, they have lost sales).

Alternatively, they can claim an account of profits. That is the amount of money the infringer has made from copying the brand or trading off the back of brand owner?s reputation. Small business owners often claim this is unfair.

They suggest that the larger business is obviously ?threatened? by them and claim that they?re not really doing any harm so should be allowed to continue. But that?s not their decision to make.

Businesses invest a great deal of money into building their brands and customer loyalty. The law protects this investment by allowing brand owners to register trademarks. The trademark owner then has a choice about what they want to do. It?s entirely up to them if they want to stop someone else from building a business off the back of their reputation.

We saw the two extremes of this in another recent case when a convenience store was forced to change its name from ?Singhsbury?s?. Sainsbury?s took a strict view and asked them to rebrand. When they changed the name to ?Morrisinghs?, Morrisons said they didn?t mind and wished them well.

Just because a small business has been threatened with trademark infringement, it doesn?t mean that they have to immediately rebrand. If we look at the Nando?s versus Fernando?s case, the name is not an identical copy.

This means that Nando?s has to prove that customers are likely to be confused between the two restaurants or think that there?s an association between them.

As a Nando?s regular, I wouldn?t be confused by the two if it was just the name that was being used.

However, in this case, it seems like other trademarks or elements of the Nando?s brand were also being used, so this strengthens the case against Fernando?s.

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Family-run coffee company takes on Coca-Cola in trademark dispute

A family business in Devon could face a big re-branding bill after fizzy drinks giant Coca-Cola threatened it with legal action if the owners don?t change its name.

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If Fernando?s really wanted to use that name, they should have made an extra effort to ensure all other aspects of the brand were easily distinguishable from those of Nando?s. This would mean there was less chance of confusion and they would have a much stronger defence against claims of trademark infringement.

When it comes to trademark infringement claims (or any legal dispute for that matter), prevention is always better than cure.

This means that small business owners should take care before naming their new business, products or services. For guidance on creating a new brand, please take a look at my previous article, Overcoming branding issues for a new business.

When you have an idea for a new brand, the first thing you should do is carry out a search for any pre-existing brands that are likely to cause a problem.

The owner of Fernando?s claims that the inspiration for the name was a TV game show. However, with trademarks the inspiration for the name is irrelevant. The law looks at the brand itself, not the inspiration behind it.

Searching existing trademarks

The first place to search is the Intellectual Property Office (IPO). They have a database of all existing UK trademarks. It?s free to search and you can look for trademarks consisting of words, logos or both.

You can also search by trademark owners. This is a really useful feature because if you know of an existing business operating in the same area as you, you can find out what trademarks they own and steer clear of them.

If the IPO search is clear, you should then carry out a general Google search to see if anything else is found. This is important because there may be unregistered trademarks with a strong reputation that wouldn?t be found on the IPO database.

Unregistered trademarks have less protection but if they have a strong reputation, the brand owner can still defend their rights and take legal action for passing off.

If you do find a brand that?s identical or similar to the one you wanted to use, don?t despair. You may still be able to use it and I explain more about this in my previous article, How two identical brands can co-exist.

If both searches are clear, you can then develop your own distinct brand and protect it by registering it as a trademark.

Even if you decide you don?t want to register your brand as a trademark, I highly recommend you at least consider it. By thinking through the process and carrying out the searches you?re likely to develop a far stronger brand, and also dramatically reduce your risk of being sued for infringing someone else?s trademark.

If you decide to use a similar brand to an already existing one, do so with extreme caution. The more famous the brand, the greater their strength will be in forcing you to rebrand. You may receive a quick PR win if they threaten you with trademark infringement and you accuse them of bullying, but it?s likely to cost you far more in the long term.

If you have made a genuine effort to create your own brand and you think the threats of trademark infringement are purely speculative, don?t be afraid to fight back. It?s an offence to make unjustified threats of trademark infringement and this could give you the right to sue them!

As always, if you have any questions about protecting or defending your brand, please feel free to email me at editors@businessadvice.co.uk and I?ll happily answer them for you.

Catch up on David’s recent articles covering all things legal for small business:

• Comparative advertising: Three dos and don?ts for a legal campaign
• Are statements made during contract negotiations legally binding?
• How to deal with fake business reviews that seek to damage your reputation

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