No Trademark Rights in a Business Acquisition from a Bankruptcy

Anyone who takes over a business out of bankruptcy often thinks they’re making a complete fresh start—including the name, the logo, and the reputation the brand has built in the market. But what if that brand name didn’t actually belong to the bankrupt company at all? In that case, you’re buying something the trustee wasn’t allowed to sell, and you’ll find yourself in court the very next day. That exact scenario played out in Curaçao, and the outcome serves as a wake-up call for any entrepreneur considering an asset transaction—and it could just as easily happen to you tomorrow in the Netherlands.
Translated with DeepL.com (free version)

A Strong Brand, a Bankruptcy, and a Dangerous Assumption

For decades, a manufacturer of ice cream, fruit juices, and dairy products built a recognizable market position in Curaçao under the trusted brand name “LoVers.” The product was well-known, the name was beloved, and consumers immediately associated the brand with a specific promise of quality. When the company ran into financial trouble and was ultimately declared bankrupt, the opportunity for a takeover seemed attractive: buy the assets, including the brand name, and pick up where the bankrupt company left off.

The acquirer did exactly that. It purchased the assets from the bankruptcy estate and then simply continued under the same brand name. New packaging was printed, marketing materials were created, and communications to the public left little to the imagination: this was the same product, the same flavor—just under a different owner from now on. Slogans like “the same product, the same love” and “the flavor everyone knows—now from us” made the continuity explicit.

What the acquirer overlooked—or perhaps deliberately ignored—was that the brand name had never actually belonged to the bankrupt company.

The Crucial Distinction: Owner vs. Licensee

In trademark law, the distinction between the owner of a trademark and the party authorized to use it is essential. A licensee has the right to use a trademark, but that right is derivative; it exists by virtue of the permission granted by the actual trademark owner. If that permission lapses, the right to use or the license lapses as well. And what the trustee in bankruptcy has to sell is precisely what the bankrupt company actually owned.

In this case, the situation was as follows: the brand name had once been licensed by the founder to his own company. The intellectual property rights themselves had never been transferred to the company. After the founder’s death, those rights passed to his heirs, who subsequently transferred them to a separate legal entity. At the time of the bankruptcy, the company was merely a licensee and therefore not the owner of the trademark.

That changes everything. The trustee simply had no right to sell the trademark; it was not listed on the balance sheet as an asset of the bankrupt company. What the acquirer purchased was, in fact, merely a de facto right to use assets and liabilities without any legal basis.

Knowledge Makes It Worse – Bad Faith

What makes this case particularly pressing is that the acquirer knew there was a question mark hanging over the trademark rights. Before the acquisition, it had even negotiated with the “alleged” trademark owner to obtain a license. Those negotiations broke down. The acquirer then decided to gain access to the trademark through the bankruptcy estate.

The court took this knowledge into account. Anyone who, at the time of a transaction, knows that the rights may belong to a third party acts in bad faith if they begin using the trademark without that third party’s consent. The fact that the acquirer subsequently actively communicated that the products were a direct continuation of the well-known trademark only reinforced the court’s ruling.

What the judge prohibited—and why

These proceedings involved an injunction: an urgent interim relief proceeding in which the judge intervenes based on a preliminary ruling. In that context, the court could not definitively determine who the ultimate trademark owner is; a main action is still pending in the U.S. regarding that matter. However, the judge in the preliminary injunction proceedings found it sufficiently plausible that the trademark owner—in the sense of legal ownership—was not the acquirer, but rather the party that had acquired the rights from the heirs.

On that basis, a broad injunction was issued. The acquirer was ordered to cease the following within fourteen days of the judgment being served:

Use of the trademark name itself; that is, on packaging, in advertisements, and in all other commercial communications.

Using similar marks; the injunction was not limited to the exact trademark name but extended to all marks that correspond to or are reminiscent of it. Specifically, slogans and expressions containing the word “love” and a heart symbol were deemed infringing because they would lead consumers to associate them with the well-known trademark.

Suggestions regarding continuity: This is a notable aspect of the judgment. Not only was the direct use of the trademark prohibited, but so was any statement that could give the public the impression that the acquirer’s products are a continuation of the products previously sold under the well-known trademark. Anyone who attempts to retain the loyalty of existing customers by saying “we’re actually the same” is acting in violation of the trademark rights of the actual rights holder.

With every violation, the acquirer risks a substantial penalty. The argument that new packaging costs money and could jeopardize jobs fell on deaf ears with the court.

Three Lessons for Entrepreneurs Considering a Restart

1. Always verify who owns the intellectual property rights (IP due diligence)

A trademark registration in the name of a company is not the same as a trademark registration in the name of the owner. For every acquisition out of bankruptcy—as well as for a regular M&A (merger and acquisition) transaction—verify who the formal trademark owner is and whether the bankrupt company actually owned the trademark or merely used it under license. To do so, consult the relevant trademark registries and ask the trustee for complete documentation of the intellectual property position.

2. Knowledge Implies Responsibility

If, during negotiations, you pick up on signs that trademark rights belong to a third party, you have been warned. Proceeding with the transaction without securing those rights—or worse, using the trademark indirectly—is viewed by the court as acting in bad faith. This significantly weakens your position.

3. Communicating a relaunch without permission also constitutes infringement

Even if you do not use the brand name yourself, but suggest in your marketing that your product is the successor to a well-known brand, you may be infringing. The court considers this to be an unlawful attempt to capitalize on the rights holder’s reputation and customer base. Ensure your communication strategy is in order before announcing an acquisition.

Practical Checklist for the Acquisition of Assets from a Bankruptcy Estate

Before you relaunch a brand from a bankruptcy estate, follow these steps:

• Verify the trademark registration: Is the trademark registered in the name of the bankrupt company or in the name of a third party?
• Check whether any license agreements exist and who is designated as the trademark owner in those agreements.
• Explicitly ask the trustee for assurances regarding the ownership status of all intellectual property rights.
• Determine whether there are any pending proceedings—domestic or international—regarding the ownership of the trademark rights.
• A trademark is sometimes also used as a company’s trade name; verify whether both are transferred to the buyer.
• Engage a specialized IP attorney to conduct a due diligence review before signing the purchase agreement.
• Do not finalize your communication strategy until you have legal certainty regarding the use of the brand name.