The issue centred on a popular pub and music venue named The Hobbit, which was accused of copyright and trade mark infringement by lawyers representing the Saul Zaentz Company (SZC) in California.

The company asked for all references to the characters to be removed, asserted that it has exclusive worldwide rights to the motion picture, merchandising and other rights in certain literary works of JRR Tolkien, including The Lord of the Rings and The Hobbit.

The threat of legal action was no doubt a shock for the owners of The Hobbit pub, which had traded with the name for more than 20 years.

While we don’t expect to see too many cases creating as many headlines this one did, it has highlighted a serious issue that all entrepreneurs and businesses could face.

Companies risk committing copyright or trademark infringement if they do not check whether there are any protected rights to a name, brand, design or image before embarking on a campaign or business idea which uses it.

Copyright
A company can commit copyright infringement if it uses an image which has been created by someone else, or it copies a substantial part of a work created by someone else, without the copyright owner’s permission. 

It is important to note that an image does not need to be registered for copyright to exist –copyright arises automatically on the creation of a work in which copyright subsists.

If you use a third party designer to come up with a logo or design for your business and there is no document transferring the copyright in the design to you, the third party designer will own the copyright in the design - even though you may have paid a significant sum to have it created for you.  For this reason it is important to have a written agreement with the designer, which states who will own the copyright in this work.  If the designer owns it, make sure that your agreement clearly documents what rights you will have to use the work.

Trademarks
In the case of trademarks, the owner of a registered trade mark has a statutory monopoly over the use of that mark in the context of the trade in which it has been registered.

You can commit trademark infringement if you use a mark or logo that is the same, or very similar, to an existing registered trademark, without the trade mark owner’s permission.

Such an action may be successful if the trade mark owner can show that either: the goods/services being provided by you are similar to those for which the trade mark is registered, or that you are unfairly taking advantage of the distinctive character or reputation of the trade mark.

For example, Asda experienced this with its use of the strap line “Spec saving at ASDA” and a logo used for its opticians services. The Court of Appeal held that these were too similar to some of Specsaver’s trade marks and Asda was found to have infringed some of Specsavers’ registered trademarks.

A company can also be liable for a legal wrong known as “passing off” which involves taking advantage of the reputation of another’s goods or services, by adopting a similar name or get up, or otherwise implying a link between his product or service and another’s. The principle here being "A man is not to sell his own goods under the pretence that they are the goods of another man" (Perry v Truefitt (1842)).

When choosing a new name or logo for your business it is wise to conduct checks of trade mark registries, Companies House, internet search engines or domain name registries, local phone books and any relevant trade journals or magazines to see whether another business is using your chosen name.  There is no central register that can be checked for this exercise, so to this end choosing a company name is never entirely without risk.

Overall, the key thing is for companies to be aware of the pitfalls and to safeguard against avoidable legal proceedings which could distract them from the core business.

Dorothy Agnew is a senior solicitor at Moore Blatch, a highly successful law firm with major strengths in corporate and commercial, property, dispute resolution and private client services. The  firm has offices based in Hampshire and Richmond-upon-Thames.