Demerger and Company name dispute

In a recent judgment the Austrian Supreme IP Tribunal had to decide on a dispute between the legal successors of a company. The sign KASTNER had been used since the 16th century for a confectionary in a small town in Upper Austria. In 2008 the business was split into the confectionary shop and an undertaking which produces and sells typically Austrian ginger bread.

After having bought the confectionary shop, the legal successor of the confectionary shop applied for several Austrian trade marks, all including the name of shop (KASTNER) which was a well known confectionary shop in the region. However, this was not appreciated by the other legal successor, the ginger bread producer, who was owner of several Austrian trade marks also including the name KASTNER and registered for goods and services in classes 29, 30 and 43. Accordingly, the trade mark owner filed cancellation actions against the younger marks of the confectionary shop. The confectionary shop on the other side counter claimed for cancellation of the older marks, arguing that he had older unregistered rights in the name of KASTNER due to use going back to the 16th century.

Although the confectionary shop owner bought the (unregistered) name rights as part of the corporate sale in 2008, the Supreme IP Tribunal found - in line with prevailing case law - that this only gives him the right to the continued use of the specific logo as it was used before. However, as this sign was only well known regionally, it could not serve as a successful basis for cancellation of an Austrian trade mark. This is due to the fact that the owner of an unregistered older sign would have to prove that he has gained unregistered rights within the whole territory of Austria in order to succeed against an Austrian trade mark that had legal effect throughout Austria by way of registration. The only exemption would be if the registered trade mark was only protected for specific goods and services that rely on a specific region in Austria, eg Radio Tyrol. However, as in the present dispute, production and sales of the claimed goods and services, especially confectionary, was not restricted to a specific region in Austria this exemption did not apply.

Thus, the trade marks of the confectionary shop were cancelled, although the confectionary shop is allowed to continue the use of the sign in its specific town.

This dispute once again highlights that when a business demerges, continued use and/or exclusive rights of the specific company name and other company signs should be stipulated in detail by contract in order to avoid lengthy and costly disputes as this one.

Dr Rainer Beetz, LL.M.