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CAN COMPANIES BE SUED FOR USING A NAME SIMILAR TO ANOTHER COMPANY IN HUNGARY?
03 November 2023
The company name is an important asset of the company and also helps the customers when choosing between products or services. Therefore, a new company can only be founded with a name that is sufficiently different from existing companies. What are the legal options for a company if, despite the above, a new company with a very similar name has been registered? In our article, we analyse this question based on the recent decision of the Hungarian Supreme Court.
1. Facts and the claim
In the present case, the plaintiff was a Hungarian company established in 2007, with the name “CCC Ltd.”, and the defendant was a Hungarian company established in 2019, with the name “CC Ltd.”. Both companies' main activity was the sale of passenger vehicles.
The plaintiff argued that the defendant copied the plaintiff’s name in its own company name, e-mail address and domain name, without the plaintiff’s consent.
In its claim, the plaintiff sought the declaration that the defendant had infringed the plaintiff’s personality right and committed “passing-off” by choosing a company name which is very similar to the plaintiff's company name and requested that the defendant be prohibited from further infringement.
2. First and second instance decision and request for judicial review
The first instance court granted the claim. In the appeal procedure, the second instance court upheld the decision.
The defendant lodged request for judicial review against the final judgment.
The defendant argued that the personal rights referred by the plaintiff apply only to the use of the names of natural persons. In addition, according to the defendant, he did business under a trade name which was different from the plaintiff’s company name, therefore the alleged similarity of the company names was irrelevant.
Finally, the defendant argued that when registering a new company, the Court of Registration ex officio examines whether the name of the company to be registered meets the criteria for the exclusivity of the company name, which is one of the conditions for registration. Since the Hungarian Court of Registration has registered the defendant company in the Company Registry, its name may not violate the law.
3. The decision of the Hungarian Supreme Court
The Hungarian Supreme Court stated that the defendant wrongly claimed that the invoked personality rights could not be applied in the case. Under the Civil Code, the rules on personal rights also apply to legal entities, except where the protection, by its nature, can only be interpreted for natural persons.
Therefore, legal persons are also entitled to certain personality rights in addition to the property rights.
The right to bear a name is conferred on both natural and legal persons and is intended to distinguish a person from others. Precisely in view of this, both the Civil Code and the Companies Act contain provisions on the choice of names for companies, which serve, inter alia, to ensure that companies can be distinguished from one another.
The Hungarian Supreme Court stated that, although the Court of Registration decides during the registration procedure whether the name of the company applying for registration complies with the legal requirements, registration in the Company Registry does not exclude the infringement of personality rights relating to the use of names, neither the commitment of “passing-off”, which is an unfair market conduct and therefore a violation of the Hungarian Competition Act.
Thus, although the similarity of the company names cannot be remedied in a company proceeding before the Court of Registration, claims related to the violation of personality right (such as the right to bear the name) and unfair market conduct can be enforced in civil proceedings.
4. Comment
The Hungarian Supreme Court has confirmed its previous practice by stating that in case a company fails to distinguish its name from another company which was registered earlier, it may constitute the violation of the personality right of the latter, in which case, the company whose rights have been violated may seek the court to, among other sanctions, prohibit the infringing company from further infringement.
(In the article, we analysed Supreme Court Decision published under No. “BH 2023.9.213 ”)
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