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Trademark after dissolution of a company in Latvia

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The implementation of Moneyval recommendations this year resulted in the liquidation of risky companies. In the first weeks of 2019, the number of liquidated companies exceeded 7000, which is not only more than a year before, but even more than several years together.

In the beginning of this year, the Register of Enterprises made the automated removal of non-active companies from the Commercial Register.[1] While the procedure provides publication of an announcement about the suspension of company activity and an invitation to appoint a liquidator, only a few companies applied for “normal” managed liquidation.

As a result, a huge amount of companies “automatically” dissolved. Unlike the “normal” liquidation when, after the settlement of debts, the liquidator divides the remainder of the property of a company among the members, “automatic” liquidation does not provide reset of company assets. The Commercial Law of Latvia, Art. 317, part 3, provides that the property, which has remained after exclusion of the company from the Commercial Register, shall be considered as equivalent to property without heirs, and under the Latvian Civil Law, Art.417, shall escheat to the State. As to the real estate, government and municipality institutions have already fixed the practice of taking over the property without heirs but trademarks recorded in the name of dissolved companies according to the Latvian Trademark Register, do not fall into the focus of state authorities’ attention.

It should be also note that even during “normal” liquidation the appointed liquidators sometimes forget to divide the intellectual property among the members. As a result, a trademark, according to the law, shall escheat to the State but formally belongs to a company which does not longer exist. If any person, for example, a parent company (if the trademark was recorded in the name of an affiliate) or a successor of liquidated company’s business is interested in using the trademark and enforcing the right thereof, it shall have to go through all the circles of hell a very complicated procedure to get to the trademark.

For this purpose an interested party shall submit a claim to recognize the trademarks as the property without heirs to the court. After the judgment of finding the fact it comes the turn of a sworn bailiff in conjunction with the State Revenue Service to sell the trademark by organizing an auction or price inquiry. If no other person wishes to acquire the trademark, the interested party has a chance to get the trademark.

In view of the aforesaid it not a surprise that the interested persons prefer to file a new trademark application and to lose the priority rather than get involved in a trial and follow up the execution of the judgment. Consequently, no one trademark recorded in the name of a liquidated company was acquired by an interested person although approximately five to seven trademarks remain “ownerless” each month.

There is no ground for such a complicated procedure. First, the Latvian Law on Civil Procedure, Art.289, provides that the court shall determine legal facts only if it is not possible through some other procedure for the applicant to obtain the relevant documents, which confirm such facts, or if such documents have been lost, stolen or destroyed and the possibility of renewing them is not available. As the information about dissolution of companies is publicly available (published in Latvijas Vēstnesis) and the recorded trademark owner can be easily checked in the Latvian Trademark Register, there is no objective need to turn to the court for recognizing the trademark as a property without heirs according to the Commercial Law of Latvian and the Latvian Civil Law. Second, the Latvian trademark market is so undeveloped that organizing auctions or price inquiry in order to sell the trademark for the highest price is not effective due to low demand for such kind of assets. The most probable and often the only person who may be interested in purchasing the trademark is the new trademark user e.g., liquidated affiliate’s parent company or a successor of liquidated company’s business. Taking into account that selling of the trademark for indefinite time is not possible (as the trademark can expire) it can be considered a good chance if an interested person exists and wishes to buy the trademark.

Having reviewed the practice of dealing with the trademarks recorded in the name of liquidated companies, the author was impressed by the approach of the United Kingdom. The assets still owned by the company after dissolution will pass onto the Crown as ownerless property, thus becoming bona vacantia assets.[2] The Bona Vacantia division (BVD) of the Government Legal Department deals with intellectual property previously owned by a dissolved company which now belongs to the Crown. BVD can sell bona vacantia trademarks for its open market value subject always to the following minimum prices: for a UK trademark £1,000, for an EU trademark £2,000.[3] It is not required to recognize the trademark as the property of the Crown, instead, an interested person shall fulfill some requirements and submit several prescribed documents to the BVD for demonstrating that the dissolved company was the owner as well as person’s interest in purchasing the intellectual property and the future intentions for using it.

In Latvia, for the time being, the companies under liquidation shall draw more attention to their assets including trademarks. If the trademark will not be used, the liquidator can attempt to sell it to a third person. The chances for success in trading of the most Latvian trademarks are not high, but they are zero if the trademark is not offered for sale at all.

The last but not least is the rule of the Latvian Trademark Law that the trademark assignment shall become effective with respect to third parties on the date of its publication in the Official Gazette of the Patent Office. Consequently, the trademark assignment from the company under liquidation to the new owner shall be recorded in the Trademark Register before the company is removed from the Register of Enterprises of Latvia.

 

[1] Ķirsons, M. Lielā tīrīšana reģistrā. Dienas bizness, 11.02.2019. Available:  https://www.db.lv/zinas/liela-tirisana-registra-484173 - reviewed 02.04.2019.

[2] What happens to company assets when a business is closed? Business Rescue Expert. Available: https://www.businessrescueexpert.co.uk/what-happens-to-company-assets-when-a-business-is-closed/ - reviewed on 02.04.2019.

[3] Buy intellectual property (BVC8): Guidance.GOV.UK, 06.12.2013. Available: https://www.gov.uk/guidance/buy-intellectual-property-bvc8 - reviewed on 02.04.2019.

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