Imagine this: you acquire a company, pay a substantial price for it, and three years later a letter lands on your doormat from a foundation claiming you have been infringing its trademark for years. The sellers knew about the risk. You knew nothing. And yet you are left empty-handed.
This is exactly what happened in a case decided by the Amsterdam District Court earlier this year — a ruling that every entrepreneur who is buying, or intends to buy, a company should know about.
The trigger: a cease-and-desist letter that set everything in motion
In 2021, Babilou Family Netherlands B.V. acquired the shares of a large childcare group that operated under the name “BLOS” at around 200 locations in the Netherlands. Three years later, in August 2024, the buyer was approached by Stichting Blosse Onderwijs. That foundation had held the Benelux word mark “BLOSSE” since 2017 — a name strikingly similar to “BLOS”.
In September 2024, a formal cease-and-desist letter followed: stop using the BLOS trademarks and have them cancelled. A settlement was not reached. The buyer then decided to rebrand all its locations, an operation that cost over €735,000. It sought to pass this bill on to the sellers.
What had been simmering beneath the surface all along
After the acquisition, the buyer discovered a 2018 trademark search in the mailbox of one of the sellers, who had handed over his entire business email archive. This search showed that the existing BLOSSE trademark could form a “fatal obstacle” to the registration and use of the BLOS mark, due to a direct likelihood of confusion.
The sellers therefore knew about the risk and nevertheless decided to use BLOS. They estimated that Stichting Blosse, at the time still a small local foundation, would not take action against this. That gamble initially paid off: both the word mark and the logo were registered without opposition and used for years.
The due diligence review
During the 2021 acquisition, the buyer conducted an extensive due diligence review. It explicitly asked about IP rights, registrations and any pending or threatened disputes. The answers were reassuring: there were no relevant IP disputes, and the sellers held, as far as they knew, the necessary IP rights.
However, the 2018 trademark search was not included in the data room. The correspondence about the BLOSSE risk was also missing. As a result, the buyer did not see that a serious trademark risk had already been identified earlier.
On the other hand, the buyer had also dropped the ball to some extent. In an early draft of the purchase agreement, it had initially removed the IP warranties and asked only limited specific questions about IP. The district court took this into account. Asking only about registrations and pending disputes is not enough if you want to understand the true risk profile.
What the purchase agreement provided
The purchase agreement included a W&I (warranty & indemnity) insurance policy. In principle, that policy provides cover if a representation or warranty given by the sellers later proves incorrect. A W&I policy of this kind means that, for a breach of the business warranties and representations, the buyer can in principle only turn to the insurer.
The sellers could only be held directly liable in cases including fraud, wilful misconduct and/or intentional concealment. But in the absence of any of these, the sellers’ maximum liability for warranty breaches was contractually capped at a mere €1.
On top of that, a 24-month time-bar applied to regular business warranties. The acquisition took place on 10 May 2021, while Stichting Blosse’s cease-and-desist letter did not arrive until 2024. The contractual deadline for filing a claim against the sellers had therefore expired, and the W&I insurance no longer provided cover either.
This left the buyer with only one way out: to prove that the sellers had knowingly concealed the risk or had otherwise been guilty of fraud or wilful misconduct. This is an extremely high bar, involving what is known as a “devil’s burden of proof”.
The court’s ruling: good faith, or looking the other way?
The district court therefore dismissed all claims. According to the court, the fact that the sellers had knowingly taken a risk in 2018 did not in itself mean that they had defrauded the buyer at the time of sale or had deliberately concealed the risk. They had weighed up the risk at the time and accepted it as a business decision. Making such a trade-off is, after all, what entrepreneurs do.
It was also significant that the BLOS trademarks had been registered without opposition in 2018 and 2019 and had been used without any problems for years. It was therefore plausible that, by 2021, the risk had completely dropped off the sellers’ radar. The court found it credible that they simply were no longer thinking about it during the due diligence process.
A notable detail was that one of the sellers had handed over his entire business mailbox, including the trash folder, to the buyer. It was precisely in that trash folder that the earlier correspondence about the trademark risk was found. According to the court, however, this did not point to a deliberate attempt to hide information: had the seller genuinely wanted to erase the information, he would have known that moving it to the trash folder would not be enough. There was therefore no bad faith.
Wilful misconduct offered the buyer no way out either. The buyer argued that this also covered reckless conduct, but the court disagreed. In the court’s view, this required deliberate, intentional misconduct, which was not the case here. A claim based on tort likewise failed, because the purchase agreement excluded liability “on whatever legal basis”, except for the agreed exceptions.
The key lesson
The outcome is a bitter one for the buyer. It paid a market-conform price for a company that carried a trademark risk it did not know about, while the sellers had in fact known about that risk. Yet it lost the case. How is that possible?
At the time, the sellers acted not fraudulently, but opportunistically. They took a gamble that initially paid off, subsequently forgot about the risk, and did not disclose it during due diligence because they simply were no longer thinking about it. Legally, that is not enough to meet the high threshold for fraud, wilful misconduct or intentional concealment. And the contractual coverage structure of the W&I insurance, combined with the short time-bars and the contractual exclusion of liability for the sellers, held up.
What does this mean for you as an entrepreneur?
This case shows that, in an acquisition, the IP rights of the company being acquired are a critical point of attention. This applies not only to large deals with W&I insurance, but especially also to smaller acquisitions where such protection is absent.
What should you take into account:
As a buyer, conduct thorough IP due diligence. Carry out your own trademark and trade name searches, and do not rely solely on the register or the seller’s warranties. Also ask detailed questions about earlier trademark searches, availability reports and advice, and map out the history of the relevant trademarks. This also applies to trade names, domain names and other relevant IP rights. In addition, make sure the purchase agreement includes appropriate IP warranties.
Pay attention to the time-bars in your purchase agreement. A 24-month time-bar for regular warranty claims is often, in practice, too short to discover IP defects. Trademark disputes with third parties may only surface years later. Where necessary, therefore, negotiate a longer time-bar for IP warranties, particularly for specific IP risks.
Pay close attention to the liability arrangements. Look not only at the period within which you can file a warranty claim, but also at any exclusions, liability caps and other limitations. Where necessary, negotiate broader or more specific arrangements for IP risks.
Understand what a W&I policy does and does not cover. A W&I policy can offer protection in an acquisition, but not all risks are insurable. Check in advance, therefore, which IP risks are actually covered by the policy.
As a seller, disclose known risks openly and clearly. State all known risks in the sale documentation, even if you consider them acceptable yourself. This reduces the risk of disputes and claims afterwards.
The core message remains simple: make sure IP rights are not a blind spot when preparing for an acquisition. Ensure proper legal guidance in carrying out due diligence and in drafting the related warranties and representations.
Do you need help with an acquisition? Or do you have questions about your IP rights and the associated risks? We, the business lawyers at The Legal Company, are happy to support you. Feel free to contact us at info@thelegalcompany.nl or call 020-3450152.
Blog by our IP law expert Hella Vercammen LL.M.
