Goodwill and trade mark survival - Kuits Solicitors Manchester

Goodwill and trade mark survival

Goodwill and trade mark survival

24th May 2021 - Published by Kuits Intellectual Property Team

The 17 May was a long awaited sigh of relief for hospitality and indoor venues across England, desperate to open their doors after the winter lockdown. Sadly however, not all businesses have been lucky enough to survive the pandemic; the ONS predicted that by April this year, 906,000 were at risk of closure, amounting to almost 15% of all UK businesses.

With so many brands ceasing to trade, from large household names to small independents, businesses are left questioning whether they still have a right to their goodwill and trade marks following closure. Can a competitor step in and make use of these assets or do the rights remain firmly defendable by the owner?

Goodwill

Goodwill is the very essence of a business that attracts custom, in particular, its name, reputation and relationship with others. Passing off is the piggy-backing by one business on the goodwill of another, causing misrepresentation as to the source of goods and ultimately damage to the brand.

A well-known brand that has ceased to trade may seem like an attractive opportunity for a hopeful competitor seeking to copy its brand identity and effectively trade off its reputation. This could include copying a brand’s name, logos, web design or anything that makes it identifiable to the public.

However, once a business ceases trading, its goodwill is not necessarily abandoned and up for grabs; owners may still be able to succeed in a claim of passing off even after their business has been closed for several years. Essentially, the abandonment must be deliberate, with no intention of the business ever being recommenced.

Even so, it is not clear how long the goodwill lasts before it is lost. Generally, courts will weigh the period of time since trading ceased against the amount of goodwill that was amassed in the first place to decide if, or how much, residual goodwill remains. Previous cases have seen prominent goodwill lasting for as long as 9 years but where distinctiveness is lost or there was limited goodwill to begin with, it is likely to be much fewer years.

While goodwill remains, claims in passing off can still be brought but once lost, goodwill cannot be revived and neither can the rights that come with it.

Trade marks

In relation to trade marks, the law is a somewhat clearer cut. UK registered trade marks last for a minimum of 10 years from the date of registration and can remain valid for a certain period even if the owner ceases to trade.

Trade mark owners are afforded a period of five years within which their rights are fully enforceable, even if the trade marks are no longer in use. However, following this period, rights become more difficult to enforce. Any individual can apply for the mark to be removed from the register, or apply non-use as grounds for defending infringement proceedings.

What amounts to use in this context must be more than token i.e. it must not serve solely to preserve the rights. Genuine use may include preparation to put goods on the market, use by authorised third parties, or for marketing and advertising purposes.

Caution must be taken if the trade mark owner plans on re-commencing trade; if they are able to provide proper reason for non-use, the period of five years may be extended. Serious but temporary disruption to trade that arises independently of the owner may suffice, but could only afford them a little more time.

Conclusion

While the effects of the pandemic have been devastating on many, they may not be conclusive for all. Despite having to close their doors, some businesses may have the benefit of being able to continue trading online and others will be hoping to make a comeback.

The law is reluctant to extinguish intellectual property rights simply because a business has ceased to trade and instead affords a period of grace, allowing for brands to protect themselves through uncertain times such as those that we face today.

Get in touch with a Trade Mark Solicitor in Manchester

If you find your business in this situation, it is important to ensure you are protecting your intellectual property. If you need more information on the protection or enforcement of your rights, or if you are contemplating adopting the trading style of a former business, please contact IP Partner Claire Meyers on 0161 838 7816 or email clairemeyers@kuits.com.

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