VwGH: EU Trade Mark Purchase as Concealed Distribution

Sept 9, 2022 Benn-Ibler Rechtsanwälte

The Austrian Administrative Court (Verwaltungsgerichtshof, VwGH) has affirmed that the purchase of an EU trade mark is a covert distribution if the trade mark is identical to a company's previous name lettering.

The appellant was a limited liability company (hereinafter referred to as GmbH) in which the managing partners each held one half of the shares. Since 2006, the company had been using the name “TS” as its company name and also been the exclusive user of its associated logo, “TS”, ever since. At no point in time did the shareholders or others ever use the company name and logo in a different context.

On February 4, 2011, the “TS” logo was registered with the (present-day) European Union Intellectual Property Office (EUIPO) as an EU trade mark, with the shareholders as trade mark owners. In 2012, they sold the logo to the GmbH for a purchasing price of EUR 80,000, with EUR 40,000 to be paid to each of the two shareholders.

Among other things, the GmbH claimed annual depreciation of EUR 8,000 as an operating expense.

The tax office did not recognise the expenses for the trade mark acquisition and presumed a concealed distribution.

Both the Austrian Federal Fiscal Court and the Administrative Court shared this view, as follows:

In principle, concealed distributions must satisfy the criteria for arm's length transactions. The trade mark had been applied for use with precisely those goods and services which were the business purpose of the GmbH, and bore the company’s name. However, the GmbH had a prior trademark protection against the EU trade mark based on the company’s “TS” name lettering according to Sections 9 (1) of the Austrian Unfair Competition Act (Bundesgesetz gegen den unlauteren Wettbewerb, UWG), Sections 43 of the Austrian General Civil Code (Allgemeines bürgerliches Gesetzbuch, ABGB), and Section 37 of the Austrian Commercial Code (Unternehmensgesetzbuch, UGB). The GmbH could have objected to the EU trademark registration or requested its deletion.

A conscientious manager would not have purchased the EU trade mark in view of the company's protective rights. The purchase therefore does not stand up to arm's length scrutiny.

VwGH Ra 2020/15/0031-3 (3 March 2022)