I don't see why you couldn't use it. It's her daughter's middle name and only she and you will know because most people forget baby's middle names once they aren't babies anymore. I also don't think you would need to ask permission. If you love it, go for it. If your sister doesn't like it, she'll just have to get over it especially if you don't tell her what you are naming your baby until he or she is born. Once you've announced what you are calling your baby to all your family and friends, it will be much harder for your sister to argue with it.