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What Constitutes Unfair Competition in Business

by | Nov 16, 2015 | Business Law


Competition is highly encouraged in modern society. Adults thrive on it in the workplace. Employers use it to increase productivity. Businesses jostle against their closest “competitors” for the top selling products in the industry. Parents even put their kids in competitive sports to instill the need for “healthy” competition at a young age. So what is “unfair” competition and how does it relate to the business industry? What constitutes unfair competition in business?

Consider a highly publicized trademark case that continued for over 16 years. The basis of this particular case of unfair competition in business is that two different companies, Sealtight and Sealtite, have names that are so phonetically similar that it results in unfair competition. Sealtight filed suit against Sealtite alleging copyright infringement. They claim that the phonetic similarity between the two business names leaves consumes confused as to which brand is which and which products they offer. The question the Court has to answer is whether or not the issue has resulted in a loss of business for the plaintiff, Sealtight. They haven’t yet made their decision.

In the business world, companies use specific words, phrases, logos and other symbols to identify their company, their brand and their products. Legal registered trademarks can even include shapes, sounds and colors, but two basic requirements have to be met prior to qualifying for trademark protection:

It must be in use or intended to be in use for commerce and it must be distinctive – distinctive enough, in fact, to allow consumers to differentiate between different products or services.

Another example in recent news with allegations of trademark infringement was a case of two health clubs that had names that sounded similar (again with the phonetic similarity). The Court used a number of different factors as they attempted to decide if trademark infringement was evident in the situation, including:

The distinctive nature of the mark-it’s strength in the marketplace;

Proof that consumers were confused (in this case evidence was found in a Yelp review);

Services provided that are similar; and

Intentions of the business.

To sum up, a business that purposefully develops a name or logo for the company that is similar to that of a competitor, they’ve landed themselves in the very gray area of potential trademark violations – unfair competition practices. They may not be immediately subjected to a penalty, but they should definitely take care to consider the applicable laws and any associated legal complexities before they continue on their merry way.

If you need to discuss a situation regarding copyright or infringement in southern California get in touch with the experienced attorneys at The Law Office of the Law Office of Ernesto Aldover. We can make sure you understand your legal options and help you keep your business protected.