Iceland vs Iceland: government takes legal action against supermarket

The Icelandic government is taking legal steps against Iceland Foods, a U.K. supermarket chain which owns the trademark for the word "Iceland".

The U.K. chain's trademark was registered in 2014 and applies across Europe, according to the European Union Intellectual Property Office, but now Iceland's Ministry for Foreign Affairs has applied for the trademark to be declared invalid.

The ministry claims the chain has aggressively pursued Icelandic companies which use the word Iceland, even in cases where their products or services do not compete. As a result, Icelandic companies are often unable to describe their products as Icelandic.

"This untenable situation has caused harm to Icelandic businesses, especially its small and growing companies. A company or product made in Iceland or by an Icelandic company should be able to represent itself using the name of the country," the ministry said in a press release.

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Iceland's shop sign

Iceland Foods, which was founded in 1969, said it regretted the government of Iceland's decision and said it had not been approached recently by the government to try and achieve a fair solution to avoid legal action.

"While we will vigorously defend Iceland Foods' established rights where there is any risk of confusion between our business and Iceland the country, we have been trading successfully for 46 years under the name Iceland and do not believe that any serious confusion or conflict has ever arisen in the public mind, or is likely to do so," the company said in a statement provided to CNBC.

"We hope that the government will contact us directly so that we may address their concerns."

Unless Iceland Foods can reach an agreement with the government, the legal battle could last for years, warns Sharon Daboul, trademark attorney at IP law firm, EIP.

"The food company is unlikely to want to share the exclusivity they have enjoyed in the term, by virtue of this European trade mark registration and decades of use, and they would certainly not want to open the door to non-Icelandic opportunists who might try to ride upon the success of their British brand in the EU," she told CNBC via email.

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