DBA vs Corporation w/ Trademark...Interesting Situation

[chet]

First, I'm in Florida.

So i have a few interesting questions for anyone who is well versed in business law. The situation is somewhat complicated so please look at each fact before considering a response.

Original owner of business sells to a second owner who we'll call owner#2. Owner #1 agrees to a legal non-compete for 5 years with Owner #2's corporation. Owner #2 keeps the business alive for 2.5 years and then sells the business to owner #3.

Owner #1 allows owner #2 in their agreement to "do business as" owner #1's name. owner #2 uses the name and during this time, owner #1's friend (with his permission) forms a corporation (but doesn't compete) with the same name as owner #2's DBA. Owner #2 seems upset...but owner #1 does not compete with owner#2.

Then, owner #1's friend trademarks the name 3 weeks before owner #2 sells to owner #3. Owner #1's agreement says that he cannot compete with owner #2's corporation...but owner #3 forms a new corporation which owner#1 feels means his non-compete is no longer standing.

Owner #3 does file a DBA and florida grants him permission to use the name, however the name he filed under is trademarked.

I know this is confusing...but i can provide actual links to sunbiz.org to show when each business was formed and i'm just wondering if owner#3 has any right to use a name which is trademarked by another corporation of the same name. is there anything i don't know about which could allow owner #2's agreement to carry over to owner#3? at this point, it seems like owner#3 should have to change his name...and he has been notified of this...however owner#2 assured him he could file a DBA with his new LLC and continue on as owner#2 did when the non-compete was up.

 

[divgradcurl]

I know this is confusing...but i can provide actual links to sunbiz.org to show when each business was formed and i'm just wondering if owner#3 has any right to use a name which is trademarked by another corporation of the same name.

More to the point, why does #1's friend think they are entitled to a trademark in the first place? Trademark rights accrue through use in commerce, they don't arise automatically via registration. Even if you register a trademark, if someone else is using the mark without registration, your later registration does not "trump" their rights acquired via use in commerce.

Besides, if two companies don't compete, there is no reason why they can't be using the same "trademark" or same name.

As far as the noncompetes are concerned, whether or not #1 is still bound will depend on the exact language in the contract -- but the GENERAL rule is that contracts can be transferred, and absent any language to the contrary, there is no reason to believe #1 wouldn't still be bound by the noncompete assuming the noncompete was sold to #3 along with the business.

But the only way to know for sure is to have an attorney look at all of the contracts and facts of your situation, and advise you accordingly.