Using the brand name of a company that is closing down

[Stuart Smith]

Hi,

I currently work for a medium sized UK based manufacturing company that is part of a large multi national group.

The company that I work for is currently going through consultation with a view to close and in my personal opinion will do so within the next three months. As far as I know the company is not going into liquidation and will look to fulfil as many customer requirements as possible prior to closing preventing further damage to the group name.

I am currently looking into starting a new business utilising one of the company's brand names as it is fairly well known to the industry, before going further with my plan I would like to know if anybody could help me with advice regarding potential legal issues if I were to start trading using the same or a similar name. In order to give a better understanding of the group structure I have listed below:-

US Corporation.
European Arm of US Corporation which is a group of four companies.
Company I work for is one of the four European companies.
Company I work for has four brands two of which will be transferred to one of the other three European companies.
I would like to setup a new business using one of the two brands/product lines that will not be transferred under current proposals.

Hopefully that makes sense.

 

[The Byre]

The structure is 100% irrelevant. The name belongs to the UK company and the US parent. To use it, you would need the permission of your present employer.

Look up 'trademarks' and 'passing off'.

 

[Clinton]

I'm with @The Byre

I am currently looking into starting a new business utilising one of the company's brand names as it is fairly well known to the industry,

You want to use their brand because it's worth something i.e. because they've built some value in it.

Why don't you offer to buy that intellectual property from them if they no longer want it? That would be both the decent thing to do and the legal thing to do.

 

[Stuart Smith]

Last year the company dropped another brand/product line due their belief that it was no longer a viable concern however when approached by someone to buy the 'brand' off them they refused due to the high legal costs associated and the relatively low value of the brand itself - i would expect that this would be the same.

Understand that the structure is not relevant - just wanted to put some context into what I was trying to get across. They may well transfer the ownership of the trademark to the other company with a view to prevent any competitor utilising it (there is a similar product made at one of the other companies) if they did this but I still decided to market my business with a similar brand name would they have a strong case against me? or could i argue that the business that I am setting up is similar to what they decided was no longer a profitable business?

I suspect the overall answer is that I would need to approach them to gain their view on what would happen if I were to carry this out - problem with that is that I have unofficially been offered employment at group level upon closure of the business that I currently work for, this would probably be rescinded should i mention any of this to them.

 

[Clinton]

The legal costs are not an issue for them as you would pick up both their costs and yours (as it's you who wants to acquire the brand).

If you decide to use their brand without permission then, yes, it's a violation of their IP rights. Whether they'd choose to sue or not is not something we can predict. But if they did take you to court they'd almost certainly win.

I have unofficially been offered employment at group level upon closure of the business that I currently work for, this would probably be rescinded should i mention any of this to them.

Yes, it probably would be rescinded. Why is that a problem?

 

[The Byre]

There are other reasons that companies are reluctant to sell brands. Right at the top, comes reputation. I can think of one German manufacturer of very high quality professional audio gear, who decided to pull out of audio and concentrate on their core business of plant and machinery.

They sold the brand to some US concern, who immediately started branding really bad and cheap Chinese rubbish.

Another reason is that they may want to re-enter the market in years to come.

Yet another, is they may be in-line for a M&A one day and the new parent may want to use that brand for something similar.

A defunct brand here and now may be worthless, but one day, someone may just think to themselves "You know what - we should really relaunch the Hillman Imp!"

A way around this, would be for them to license the brand to you, on condition that you fulfil certain obligations, e.g. quality, non-competition outside the UK, whatever. If you step off the straight-and-narrow, they could pull the license.

Assuming you do not want to continue employment with them, another option is to 'invoke' the brand by using an alternative name that makes it clear that it is something else and from somebody else. e.g. If they sell the brand 'Blue Widgets' you could start to peddle 'Red Widgets'.

No trademark infringements and not passing-off.

 

[The Byre]

And before I forget - just because a brand is no longer a badge on a product, does not mean that it does not have a purpose.

Imagine their reaction if you go beasting up to head office, offering the local head honcho £50,000 for a brand that they are using in a license swap to transfer £10m every year from the UK to Ireland, Luxembourg, or Belgium!

Things like brands, patents and other IP are often vital tools in getting money out of the UK legally.

Yet another consideration - I have just been dealing with the (ailing) fortunes of a company that, as part of a $205m rescue deal, has had to agree to comply with strict gross revenue ratios AND hand over every bit of IP to a finance company.

You may think it's theirs to sell, but (like most people's houses and cars) it could easily really belong to the bank!

 

[obscure]

They may well transfer the ownership of the trademark to the other company with a view to prevent any competitor utilising it (there is a similar product made at one of the other companies) if they did this but I still decided to market my business with a similar brand name would they have a strong case against me? or could i argue that the business that I am setting up is similar to what they decided was no longer a profitable business?

Their case wouldn't be strong.... it would be cast iron.
Their brand is protected under trademark law. Even if they stop actively using it it retains legal protection for several years. Using it without their permission exposes you to being sued for Trademark infringement. Using a name that is similar exposes you to being sued for "passing off" (trying to mislead customers into believing you are this company).

If you want to use their brand your only option is to license it from them. Otherwise do what every other company does and come up with your own name/brand.