Licensed use of trade name by private limited sister company: prevent problems!

It is common practice in the business community for sister companies or branches of the same company to all have the same name, sometimes in combination with a (different) second name. But if a sister company is sold and no longer forms part of a group company, which company is entitled to continue using the trade name? Intellectual property lawyer in The Netherlands Hidde Reitsma explains, based on a recent ruling.

Sister companies both use the trade name TSO

The facts in the case used as an example in this blog are as follows. The company Technical Support Oosterhout has used the trade name TSO since 2000. After it was founded in 2001, the sister company TSO Noord also uses the trade name TSO. Also after the two companies (due to the sale of Technical Support Oosterhout in 2008) no longer formed part of the same group and continued as independent companies, they still used the name TSO.

Lawyer entitled party objects to continued use

It is only after the assets The assets of a Dutch company reflect the value of all that the company possesses
» Meer over assets assets of TSO Noord are transferred to another owner in 2010, that Technical Support Oosterhout objects to the continued use of its trade name. This results in legal proceedings, in which the lawyer ofTechnical Support Oosterhout claims, among others, that TSO Noord should fully cease to use the abbreviation TSO. The lawyer of TSO Noord opposes this withdrawal and states that Technical Support Oosterhout is misusing its rights.

Tacit licence use of trade name

The court finds that, since it was founded in 2001, TSO Noord has used the abbreviation TSO, the trade name of Technical Support Oosterhout. Technical Support Oosterhout gave permission for this use because TSO Noord was its sister company. This permission is considered, in a legal sense, as a tacit licence.

Court: licence not legally terminated

The issue is then whether this licence at some point in time legally (automatically) ceased to exist, as is argued by Technical Support Oosterhout. This is not the case. It follows neither from law, nor from any contract, that the licence ceases to exist when TSO Noord is no longer a sister company of Technical Support Oosterhout. Furthermore, even if this were the case, Technical Support Oosterhout should have and could have protested earlier against the continued use.

Termination continuing performance contract licence

The court finds that TSO Noord, also after the breach with Technical Support Oosterhout, had this licence and therefore legally uses the trade name. Can Technical Support Oosterhout now terminate the licence? The court does not find so. Withdrawing the licence would have extremely adverse financial effects for TSO Noord, because it would then have to change its name. Technical Support Oosterhout argues that the continued use of the name TSO could lead to danger of confusion. But the court fails to see why that danger would be greater after the transfer of 2010 than after the division of the companies in 2008. The court finds that Technical Support Oosterhout misuses its authority to withdraw the licence (a continuing performance contract) at this point in time. The claim is dismissed.

Dutch law firm for Intellectual Property and Trade Name Law

This ruling once again demonstrates how important it is to make proper arrangements for the use of a trade name by a sister company or a subsidiary. As long as the companies are part of the same group company, most of the time there are no problems. But if parts are split off and become the property of another party, the use of the original trade name, word marks or other intellectual property rights, becomes unclear. We therefore advise that you conclude a licence for each use, that arranges issues such as continued use after transfers and divisions. The intellectual property experts of AMS can help you with this. For more information please contact our firm.