Can a company be sued for using a similar name to an existing company? For example if a company was called "The Kraken liberties" and a new company were to be named "The Kraken Club", could the company come after it?
The jurisdiction is the UK.
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First of all, copyright law does not apply here. Names, titles, and other short phrases are not subject to copyright protection.
The basic rule in such trademark cases is to avoid confusing similarities to existing trademarks. If the existing name has been protected as a trademark, and the proposed new name is sufficiently similar that reasonable people might confuse the teo, thinking that the new firm is, or is part of the old one, or is somehow sponsored by, endorsed by or approved by the old one, then there might be a problem.
Trademark law applies only to names, phrases, graphics and symbols being used to identify or advertise and product or service, or to identify the source of such a product or service. But the name of a company is very often used to identify the source of that company's products or services, so it will normally be treated as a trademark and be subject to trademark law.
Trademark protection is normally limited by industry. If "The Kraken Company" was a maker and seller of seafood, say, while "The Kraken Club" was a dance club, there would probably not be any conflict between the two names as far as trademark law went. But if reasonable people could still be confused, and think that the good will and reputation of one should be attributed to the other, then there might still be a trademark issue. This is a more likely problem with well-known marks, and with ones that are used in multiple industries.
Even if , under the law, there is no trademark infringement, a company might still "come after" someone using a name that the company thinks is too similar to their mark. Such a company might well send a cease-and-desist letter, demanding that the recipient stop using the similar name or mark, and mentioning the possibility of a lawsuit. There is no way to predict whether a company will take such action. Some are quite aggressive about such issues, some are not.
Many cease-and-desist letters are never followed up, but quite a few do lead to legal action. Defending a trademark suit can be costly, even if the claim is rejected by the courts.
We on Law.StackExchange cannot advise on whether a particular name does or does not infringe on an existing trademark, nor on whether a company will file suit. One would need to consult a lawyer with experience in the trademark law of the particular jurisdiction to get useful advice on such a specific issue.