Oslo District Court tested over trade name and trademark priority issue

The Oslo District Court recently decided on the order of precedence between the trade name Canvas AS and the trademark KANVAS.

Inger Dyrø had traded as Canvas Dyrø, registered as a trade name in 1989, but decided to change her business into a limited company and filed to register Canvas AS in January 2007. Shortly thereafter, the registration was challenged in an administrative procedure by Stiftelsen KANVAS (a foundation), on the grounds that it should not have been allowed in view of the foundation’s registered trademark KANVAS (several classes, including class 42).

Administrative decisions
The first division of the Norwegian Intellectual Property Office (NIPO) decided in favour of the KANVAS foundation and revoked the registration of Canvas AS.

Deciding the appeal brought by Dyrø, the second (appeals) division affirmed the revocation of Canvas AS, limiting itself to a reference to the reasons given by the first division. The first division had stated that it had no legal basis to rely on the contention that the right to the trade name Canvas originated from the previously registered individual business, as it had to limit itself strictly to assessing the trade name registration on the basis of the grounds for objection.

Judicial review
The case before the district court was a judicial review of the second division’s decision.

Canvas's main contention was that its right to use the trade name Canvas followed directly from the use and registration by Canvas Dyrø in 1989. This use had begun and the registration had occurred before the KANVAS foundation registered its trade name and trademarks.

If the law were to be construed differently, one consequence would be that businesses with well-established trade names would risk being stricken from the register, not on account of a change in trade, but on account of a change in legal status. The plaintiff emphasised that whereas it is a legal requirement of any business seeking limitation of liability that the letters "AS" (abbreviation of "aksjeselskap", or joint stock company) precede or follow the trade name, for anyone trading as an individual business with unlimited liability the use of the individual's name, or at least his or her surname, is a legal requirement that also applies to the registration.

Danger of confusion
The court found that there was a danger of confusion between the trade name Canvas AS and the registered trademark KANVAS. The court noted that international class 42 includes certain fields of activity pursued by the plaintiff.

The court noted that it could not examine the question of the potential invalidity of the KANVAS registration. To rely on this defence, Canvas AS would have to bring a specific invalidity action against the owner of that trademark.

The question then was whether it was decisive that the Canvas registration was not a new registration, but rather a necessary formality in connection with the transformation from an individual business into a limited liability company that kept the old name; and whether the trade name should therefore maintain its priority over the trademark registration. The court found this to be the case and quashed the decision of the second (appeals) division.

The judge reasoned that a trade name can have significant goodwill value for a business. The value depends on how well known the trade name is, but also on what priority the trade name has with respect to similar names or trademarks. Whereas a trademark can be assigned to others, a trade name can be assigned or transferred only with the business operated by the owner. It could significantly diminish the value of such rights if the transfer of the business also led to a change in legal status, requiring a new registration in such a way as resulted in a loss of the priority to which the trade name was entitled.

The court found that it is implicit in Section 4-1 of the Trade Names Act that suffixes such as AS, DA or ASA (Limited, LLP or PLC) can be changed without the trade name losing its priority. In the case of individual businesses, the Trade Names Act requires that the trade name be comprised of the proprietor’s name. Contrary to the neutral suffixes (or prefixes), the proprietor’s name has a characterising function which allows the trade name to distinguish the business from others. The judge said it was to be expected that the non-characterising part of the trade name would frequently be used by individual businesses as a secondary trade name, and noted that this could create problems in situations where one proprietor succeeded another in the same business. Noting that there has to be a generally applicable rule, the judge then turned to a provision in the Trade Names Act that deals with the fate of trade names in the event of bankruptcy. The provision in question makes clear that there are certain situations in which those parts of a trade name that are left after the name of the individual has been removed are protected as an asset in their own right.

The court thus found a basis to conclude that when a business has been transformed from an individual enterprise to a limited liability company, the trade name – minus the individual’s name – can be assigned together with the business. It follows, the court said, that when the trade name is registered again in connection with the establishment of the limited liability company, it can claim priority from the original registration.

The judge noted that no precedent was available to shed light on the problem, and that the issues in hand had not been discussed in any other sources of law. The judgment is final and binding.

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