Legislature(1999 - 2000)

04/30/1999 03:28 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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CSSB 93(FIN) - NAMES OF ORGANIZATIONS & BUSINESSES                                                                              
                                                                                                                                
Number 1115                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG announced the committee's next order of business                                                              
is CSSB 93(FIN), "An Act relating to the purposes of certain                                                                    
businesses and corporations; relating to the names of businesses                                                                
and organizations; relating to the registration under the Alaska                                                                
Trademark Act of marks that resemble the name of another business                                                               
or organization; and providing for an effective date."                                                                          
                                                                                                                                
Number 1130                                                                                                                     
                                                                                                                                
DAVID GRAY, Legislative Assistant to Senator Jerry Mackie, Alaska                                                               
State Legislature, came forward to present SB 93 as aide to the                                                                 
Senate Labor and Commerce Standing Committee, the bill sponsor.                                                                 
Senate Bill 93 was introduced in response to a request from the                                                                 
Department of Commerce and Economic Development (DCED) to attempt                                                               
to clear up a real confusion in the state's responsibility for                                                                  
registry or acknowledging names of the various corporations and                                                                 
private businesses throughout the state.  The state recognizes                                                                  
names of different corporations and private entities in three ways.                                                             
In Alaska Statutes 10.06, 10.20, 10.35, 32.11, the standard is that                                                             
the name may not be the same or deceptively similar to the name of                                                              
another corporation or public entity.  In Alaska Statute 10.25, the                                                             
guideline is that the name shall be distinct from the name of                                                                   
another corporation.  In Alaska Statutes 10.50 and 32.05, the                                                                   
guideline is that the name is distinguishable on the records of the                                                             
department.  These three different standards distributed through                                                                
the state's statutes are cause for a tremendous amount of confusion                                                             
and draws the DCED into an enormous amount of controversy.                                                                      
                                                                                                                                
                                                                                                                                
MR. GRAY stated SB 93 is an attempt to establish one standard,                                                                  
"distinguishable on the record," which is used by most states and                                                               
is recommended by the "Uniform Code Commission."  He indicated a                                                                
representative of the department is also present to answer                                                                      
technical questions.  Mr. Gray explained to the newer members of                                                                
the legislature that, from his experience, without something like                                                               
this they would indeed receive some complaint from an irate                                                                     
constituent on this subject.  He described the complaint could be                                                               
that someone else was, in the constituent's view, taking the                                                                    
constituent's [business] name, or it could be that the constituent                                                              
filed a name and found out someone else has that name.  Mr. Gray                                                                
indicated there is not much which can be done in these situations;                                                              
in his experience it has been a very difficult issue to resolve to                                                              
anyone satisfactorily.                                                                                                          
                                                                                                                                
Number 1292                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG asked if the committee had any questions for Mr.                                                              
Gray.  The chairman noted the bill's length seems to result from                                                                
repeating the same thing in different sections of the statute,                                                                  
questioning if they were being relatively repetitive.                                                                           
                                                                                                                                
MR. GRAY answered that is correct.  There are three different                                                                   
standards distributed through a great deal of statute which are                                                                 
being reduced to one standard, "distinguishable on the record."  He                                                             
indicated he wished the department to describe why it wishes to                                                                 
have this standard, why it should be in this place, and how this                                                                
might resolve the current confusion.                                                                                            
                                                                                                                                
CHAIRMAN ROKEBERG questioned if there has been any testimony from                                                               
businesses providing an example this could correct.                                                                             
                                                                                                                                
MR. GRAY replied he does not have any direct testimony from                                                                     
businesses on record.  However, there has certainly been no                                                                     
objection.                                                                                                                      
                                                                                                                                
CHAIRMAN ROKEBERG indicated he is thinking of the Alaska State                                                                  
Chamber of Commerce, the National Federation of Independent                                                                     
Business (NFIB), et cetera.                                                                                                     
                                                                                                                                
Number 1373                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO pointed to the Senate Finance Standing                                                                    
Committee minutes of April 9, 1999, in the bill packet which                                                                    
mention the case of "Wild Iris" and the "Wild Iris Cafe" provided                                                               
by Dawn Williams of the DCED.  Representative Halcro  quoted, "'She                                                             
said the department felt they were different but "Wild Iris" did                                                                
not.  Therefore, a lawsuit was filed and the State was brought into                                                             
the suit.'"                                                                                                                     
                                                                                                                                
MR. GRAY indicated the Senate Finance changes were mainly technical                                                             
amendments.  The language in SB 93 regarding the adoption of                                                                    
regulations to "interpret or implement" a subsection, et cetera,                                                                
was changed to "implement".  Mr. Gray indicated this change was                                                                 
made in about 15 places and had been the wish of one of the Senate                                                              
Finance co-chairs.  Mr. Gray noted there had also been one small                                                                
technical amendment requested by the department which had made                                                                  
eminent sense.                                                                                                                  
                                                                                                                                
CHAIRMAN ROKEBERG indicated the detail-oriented nature of the House                                                             
Labor and Commerce Standing Committee.                                                                                          
                                                                                                                                
Number 1485                                                                                                                     
                                                                                                                                
DAWN WILLIAMS, Records and Licensing Supervisor, Division of                                                                    
Banking, Securities and Corporations, Department of Commerce and                                                                
Economic Development, came forward.  Ms. Williams stated she is the                                                             
corporations supervisor for the DCED and asked for the committee's                                                              
questions.                                                                                                                      
                                                                                                                                
CHAIRMAN ROKEBERG requested she explain the legislation.                                                                        
                                                                                                                                
MS. WILLIAMS replied the department has corporations, limited                                                                   
liability companies (LLCs), limited partnerships, limited liability                                                             
partnerships (LLPs), nonprofit corporations, religious                                                                          
corporations, plus a few more.  Basically, there are three                                                                      
standards for deciding who can have what name.  Ms. Williams                                                                    
indicated the current standards for the limited liability companies                                                             
are unfair.  The department is attempting to require all entities                                                               
to use one standard to determine whether or not their name is                                                                   
available.  Additionally, this legislation would allow more                                                                     
entities to file with the state, either as a corporation, limited                                                               
liability company, or simply as a business name.                                                                                
                                                                                                                                
Number 1539                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO noted it was mentioned in the Senate                                                                      
testimony that 25 other states have adopted this same language.  He                                                             
questioned if these states had solicited comments from chambers of                                                              
commerce, et cetera.  Representative Halcro questioned if this is                                                               
a problem that exists and if that is the impetus for the                                                                        
legislation in other states.                                                                                                    
                                                                                                                                
MS. WILLIAMS said she really does not know the answer.  She would                                                               
think that most states have adopted the wording through the Revised                                                             
Model Business Corporation Act (RMBCA) done by the American Bar                                                                 
Association ["national bar association"].  Ms. Williams noted that                                                              
language is "the (indisc.) must be distinguishable on the record."                                                              
                                                                                                                                
CHAIRMAN ROKEBERG requested Ms. Williams repeat the example of the                                                              
Iris case and possibly a few others.                                                                                            
                                                                                                                                
MS. WILLIAMS answered that "The Wild Iris" was on file with the                                                                 
Division of Banking, Securities and Corporations as a registered                                                                
business name.  The division received a new registration for "Wild                                                              
Iris Cafe."  The division felt the names were different; it was not                                                             
confused by the two names at that time.  The Wild Iris decided the                                                              
department was wrong and basically brought suit against the Wild                                                                
Iris Cafe and against the state.  Through the department, with the                                                              
assistant AG [attorney general], it was decided that possibly The                                                               
Wild Iris was correct, maybe there is confusion, because the two                                                                
entities are in the same type of business.  Ms. Williams noted she                                                              
thought this is the restaurant business; she thinks one entity is                                                               
in Anchorage and the other in Fairbanks.  She commented she had                                                                 
been confused about that at the Senate Finance hearing.                                                                         
                                                                                                                                
CHAIRMAN ROKEBERG questioned if she was no longer confused.                                                                     
                                                                                                                                
Number 1657                                                                                                                     
                                                                                                                                
MS. WILLIAMS replied she believes so.  The department decided that                                                              
the names were possibly confusing to the public.  Unfortunately for                                                             
the state, business entity conflicts should not be decided by the                                                               
state - they should be decided by each individual entity.  A new                                                                
corporation first of all needs to make sure there is no other                                                                   
entity with the same name the corporation wishes to use.                                                                        
                                                                                                                                
CHAIRMAN ROKEBERG asked how one does this.                                                                                      
                                                                                                                                
MS. WILLIAMS answered one looks in trade magazines, newspapers,                                                                 
business licensing, and the Division of Banking, Securities and                                                                 
Corporations of the DCED.  She described the example of a business                                                              
obtaining a business license and then attempting to register the                                                                
business name with the division.  In the example, Ms. Williams                                                                  
noted she was simply speaking of a business obtaining a business                                                                
license, not a corporation, partnership, et cetera.  In her                                                                     
example, the division already has a corporation on file with this                                                               
same name and therefore will not file that business registration.                                                               
However, the first business is still out there doing business under                                                             
that name because it has a business license to do that.  It is up                                                               
to the corporation to stop that business entity from using the                                                                  
name.                                                                                                                           
                                                                                                                                
CHAIRMAN ROKEBERG questioned that the corporation would have to                                                                 
bring cause of action for this.                                                                                                 
                                                                                                                                
MS. WILLIAMS answered in the affirmative.  She described that there                                                             
could be a business with a business license out there doing                                                                     
business on its own.  A corporation starts up, picking this great                                                               
name.  The corporation files with the division as a corporation and                                                             
the division has no other name like that on file.  Two years later                                                              
the corporation finds out this small entity has the same name and                                                               
had it first.  Ms. Williams questioned which entity has rights to                                                               
the name.  She said it is not up to the state to decide who has                                                                 
right to the name; it is up to those entities to go to court and                                                                
determine that.                                                                                                                 
                                                                                                                                
Number 1748                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO mentioned he knew of a restaurant called                                                                  
Chilly's in Anchorage on the Old Seward Highway towards Huffman                                                                 
which suddenly went from "Chilly's" to "Eric's (ph)."                                                                           
Representative Halcro noted the only thing he could think of was                                                                
that "Chilly's (ph)," the national chain, came in and said "'Hey,                                                               
excuse us, but you're using our name.'"  He asked if the division                                                               
gets involved in that type of situation where a name is trademarked                                                             
or copyrighted.                                                                                                                 
                                                                                                                                
MS. WILLIAMS replied the division cannot get involved in that.  She                                                             
indicated, however, SB 93 contains a statute change regarding                                                                   
trademarks within the state.  Ms. Williams explained no                                                                         
duplications are allowed with federally-registered trademarks but                                                               
she indicated state trademarks extend only to the state they are                                                                
registered in.  She noted someone can register a trademark in                                                                   
Alaska that may already be registered in Washington; the division                                                               
does not do any searching or anything.  Ms. Williams stated, "The                                                               
trademark statutes and the business name or corporate name                                                                      
standards don't look at each other.  What we're doing with the                                                                  
statute change is making it so that if when somebody files                                                                      
trademark, we actually at our corporate database or our registered                                                              
business name database and make sure that somebody's not stepping                                                               
on somebody's toes within our own section, so that we can stop                                                                  
those problems."  She noted these problems have occurred.                                                                       
                                                                                                                                
REPRESENTATIVE CISSNA assumed because of the onus of responsibility                                                             
on the business owner, that there must be numerous cases of                                                                     
businesses with the same name in various towns, and even in the                                                                 
same town.  She commented her own business name is very close to                                                                
another business name; it has been true for 20 years and neither                                                                
business cares.  Representative Cissna said she is assuming this                                                                
wouldn't change that ability.                                                                                                   
                                                                                                                                
Number 1861                                                                                                                     
                                                                                                                                
MS. WILLIAMS answered that every business has to have a business                                                                
license; business licensing does not have name statutes.  Numerous                                                              
businesses can have the same business license name.  However, the                                                               
Division of Banking, Securities and Corporations, which deals with                                                              
corporations, liability companies, partnerships and registered                                                                  
business names, cannot have one name on file that is the same as                                                                
another.  It doesn't matter who has a name outside who has not                                                                  
registered with the division - this doesn't change anything for                                                                 
those people.  If there is a conflict between these businesses that                                                             
are outside the division, they have to settle that themselves.  It                                                              
is not the state's problem; it is not something that the state can                                                              
determine.  Ms. Williams said no other state she knows of is in the                                                             
name conflict business.  She commented, "They don't determine                                                                   
whether this person way out here and this person way out here                                                                   
shouldn't have the same name or not.  It's when they come to                                                                    
register with the state that they have the problem."                                                                            
                                                                                                                                
CHAIRMAN ROKEBERG confirmed from Ms. Williams that the business                                                                 
licensing is under the Division of Occupational Licensing.  He                                                                  
indicated there has been some discussion about changing that.  The                                                              
chairman asked if she knew the procedure regarding using a name on                                                              
a business license; he questioned if there wasn't some warning or                                                               
something on the application itself.                                                                                            
                                                                                                                                
MS. WILLIAMS replied she is not sure about warnings.  If a business                                                             
has "Inc." [incorporated] in its business name when it files its                                                                
business license, Business Licensing will send the business a small                                                             
blue card informing the business it should contact the Division of                                                              
Banking, Securities and Corporations.  If a business has "Inc." in                                                              
its name, it should be a corporation.  Business Licensing also                                                                  
sends a blue card to inform a business that it can register its                                                                 
name and that it might want to check with the Division of Banking,                                                              
Securities and Corporations to see if another business has a name                                                               
like that.                                                                                                                      
                                                                                                                                
Number 1960                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG asked how a non-corporate entity registers a name                                                             
with the division.                                                                                                              
                                                                                                                                
MS. WILLIAMS answered, under Section 10.35.  She explained that a                                                               
business can file an application with the division if it has a                                                                  
business license.  Currently, the business can register that                                                                    
business name if the business's name is not the same as or                                                                      
deceptively similar to another name on file.                                                                                    
                                                                                                                                
CHAIRMAN ROKEBERG indicated he wondered if this applied to any type                                                             
of business, mentioning sole proprietorship, partnership, LLC, LLP,                                                             
et cetera.                                                                                                                      
                                                                                                                                
MS. WILLIAMS answered that only business names or d/b/a [doing                                                                  
business as] names could be registered as sole proprietorship                                                                   
entities.  LLCs, LLPs, and all of those entities, have to file                                                                  
articles of incorporation or certificates of partnership.                                                                       
                                                                                                                                
CHAIRMAN ROKEBERG noted, then, they would already be under the                                                                  
division's jurisdiction.  However, if a sole proprietorship wanted                                                              
to register a name with the Division of Banking, Securities and                                                                 
Corporations, they could do so.                                                                                                 
                                                                                                                                
MS. WILLIAMS confirmed that is correct.                                                                                         
                                                                                                                                
CHAIRMAN ROKEBERG questioned whether a common multiple partner-type                                                             
business would be required to be registered with the division.                                                                  
                                                                                                                                
Number 2010                                                                                                                     
                                                                                                                                
MS. WILLIAMS indicated this type of business would not necessarily                                                              
be registered.  She explained the only entities that must register                                                              
with the Division of Banking, Securities and Corporations are                                                                   
corporations - whether nonprofit or for-profit and including                                                                    
religious corporations, limited liability companies, limited                                                                    
liability partnerships, limited partnerships, and cooperative                                                                   
corporations.                                                                                                                   
                                                                                                                                
CHAIRMAN ROKEBERG commented, then, sole proprietorships or                                                                      
combinations of family businesses wouldn't necessarily be                                                                       
registered [with the division].                                                                                                 
                                                                                                                                
MS. WILLIAMS indicated that is correct.                                                                                         
                                                                                                                                
CHAIRMAN ROKEBERG confirmed, though, these businesses could                                                                     
register under the business name registrations.  The chairman noted                                                             
the committee had received some correspondence a year or two                                                                    
previously from a gentleman in Juneau with a landscaping business.                                                              
As the chairman recalls, a disgruntled employee of this business                                                                
left and then filed the business name with the business registry,                                                               
in effect almost stealing the business.  The chairman indicated                                                                 
there was a large conflict because the owner of the business did                                                                
not have the business name currently registered, lacked a business                                                              
license or something.  Chairman Rokeberg asked Ms. Williams if that                                                             
rang a bell with her.                                                                                                           
                                                                                                                                
MS. WILLIAMS replied it did, but not clearly.  She commented, "Our                                                              
statutes -- and this is why I say we're not in the name finding                                                                 
business ...." The entities have to go to court themselves to                                                                   
determine who has legal right to that name.  The first person who                                                               
registers a name with the division, whether corporate name or                                                                   
business registration, is the one who has it.  That doesn't                                                                     
necessarily give the entity legal title to that name; it is up to                                                               
the courts to decide who has legal right to that name.                                                                          
                                                                                                                                
CHAIRMAN ROKEBERG indicated this is because the name could be                                                                   
copyrighted or trademarked in another jurisdiction, or the business                                                             
might be a sole proprietorship which has had a business license for                                                             
a number years but finally decided to incorporate, and wouldn't be                                                              
on the registry, et cetera.                                                                                                     
                                                                                                                                
MS. WILLIAMS indicated the chairman is correct.                                                                                 
                                                                                                                                
CHAIRMAN ROKEBERG noted, though, the issue here is what the courts                                                              
should use in interpreting the criteria or standard for the name.                                                               
He questioned which standard is being used for the registry                                                                     
(indisc.).                                                                                                                      
                                                                                                                                
Number 2123                                                                                                                     
                                                                                                                                
MS. WILLIAMS answered the standard most used currently is "the same                                                             
as or deceptively similar."  This has been in use for years, but                                                                
the "distinguishable" standard is the newest standard.  It is the                                                               
one most states are currently using; at least 25 states have                                                                    
adopted it in recent years.                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG asked, "Was it using 'deceptively similar'?"                                                                  
                                                                                                                                
MS. WILLIAMS agreed.                                                                                                            
                                                                                                                                
CHAIRMAN ROKEBERG questioned that the division believes by changing                                                             
the standard, more businesses with deceptively similar names that                                                               
are distinguishable on the record will be able to register,                                                                     
resulting in the $30,000 and progressively increasing fiscal note.                                                              
He confirmed Ms. Williams agreed.  The chairman asked if the                                                                    
division believes it will actually increase its revenue.                                                                        
                                                                                                                                
MS. WILLIAMS answered that she personally sends out several letters                                                             
a month informing businesses their names are deceptively similar to                                                             
another name on file and therefore cannot be registered.  The                                                                   
business can choose another name or does not even have to register                                                              
it.  With the "distinguishable" standard, the business will be able                                                             
to register that name, resulting in more revenue [for the state].                                                               
Ms. Williams noted it is not a great deal of revenue, but it is a                                                               
bit more.  In response to the chairman's question, Ms. Williams                                                                 
informed the committee the fee to register a business name for five                                                             
years is $25.                                                                                                                   
                                                                                                                                
CHAIRMAN ROKEBERG indicated in the landscaping case the name may                                                                
have been registered but not renewed after five years, and thus                                                                 
someone else could have filed it.                                                                                               
                                                                                                                                
MS. WILLIAMS agreed.                                                                                                            
                                                                                                                                
Number 2200                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG questioned if there is anything in statute that                                                               
the division should warn (indisc.) business that there is another                                                               
business with a similar name, if an entity had what would formerly                                                              
be considered a deceptively similar name but would now be allowed                                                               
under "distinguishable on the record."                                                                                          
                                                                                                                                
MS. WILLIAMS answered there is nothing currently in statute.                                                                    
However, the division does inform businesses of other similar names                                                             
when businesses inquire about registering their name.                                                                           
                                                                                                                                
CHAIRMAN ROKEBERG asked if there is any regulatory or statutory                                                                 
requirement for the division to do this.                                                                                        
                                                                                                                                
MS. WILLIAMS replied not at this time.  If the legislation passes,                                                              
the division is planning adopt a policy which would include that.                                                               
It would be similar to Utah's current policy.                                                                                   
                                                                                                                                
CHAIRMAN ROKEBERG questioned the length in pages in Utah's policy.                                                              
                                                                                                                                
MS. WILLIAMS answered that Utah's is approximately two to three                                                                 
pages.  It encompasses a great deal, explaining what names would be                                                             
available compared to names on file, et cetera.                                                                                 
                                                                                                                                
CHAIRMAN ROKEBERG asked Mr. Gray if he thought the bill sponsor                                                                 
would mind if the committee amended the legislation slightly to                                                                 
tell the division to do this.                                                                                                   
                                                                                                                                
MR. GRAY replied whatever works for the division and is good                                                                    
government.                                                                                                                     
                                                                                                                                
MS. WILLIAMS indicated the division would have no objections.                                                                   
                                                                                                                                
CHAIRMAN ROKEBERG noted the division's testimony is that it is                                                                  
doing this now but it does not have an obligation to do so.  It                                                                 
seems to him the division might have an obligation - that is why it                                                             
is doing it.  He mentioned providing good service.                                                                              
                                                                                                                                
Number 2279                                                                                                                     
                                                                                                                                
MS. WILLIAMS thinks the division probably feels it should and                                                                   
therefore does so in most cases.  The division would not mind                                                                   
having that in statute.  In response to the chairman's comment                                                                  
about not wanting to add two or three pages, Ms. Williams indicated                                                             
she thinks a statement could accomplish this purpose.                                                                           
                                                                                                                                
CHAIRMAN ROKEBERG interjected they could put something in to the                                                                
effect of implementing regulations to provide for informing the                                                                 
public of similar names so the public is aware there are other                                                                  
names out there which could be used, to avoid any conflict.  The                                                                
chairman asked if that would be helpful for the division.                                                                       
                                                                                                                                
MS. WILLIAMS replied she doesn't know if it would be helpful.  She                                                              
thinks it would be helpful to the public and the division is there                                                              
to help the public.  The division is attempting to get as many                                                                  
corporations, entities, et cetera, to file with the state so that                                                               
these entities can continue doing business.                                                                                     
                                                                                                                                
2328                                                                                                                            
                                                                                                                                
CHAIRMAN ROKEBERG called an at-ease at 4:10 p.m.  The committee                                                                 
came back to order at 4:13 p.m. [TAPE CHANGED MANUALLY DURING THE                                                               
AT-EASE]                                                                                                                        
                                                                                                                                
TAPE 99-50, SIDE B                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG commented he would like to get some more                                                                      
information regarding the trademarking (indisc.) in order to carry                                                              
the legislation on the floor, unless it is assigned to                                                                          
Representative Halcro.  The chairman confirmed there were no                                                                    
further witnesses on SB 93 and closed the public hearing.                                                                       
                                                                                                                                
Number 0035                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO made a motion to move CSSB 93(FIN) out of                                                                 
committee with the accompanying positive fiscal note and individual                                                             
recommendations.  There being no objection, CSSB 93(FIN) moved out                                                              
of the House Labor and Commerce Standing Committee.                                                                             

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