Assignment and Licensing of Trademarks
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- Post published: 14/01/2023
- Post category: Intellectual Property Rights
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Introduction to Assignment and Licensing of Trademarks
Understanding the process of assignment and licensing of trademarks in India is a paramount issue. The process of marketing and strategic management would surely open a plethora of broadening horizons in this domain, for the licensor and licensee likewise. It all depends upon the development of a brand, and the use of the brand, which collectively form a factor to boost marketing in various sectors.
The Trademarks Act of 1999 was updated to reflect modern business processes and do away with unfair brand rivalry. The Act is intended to protect the rights of a proprietor who devotes time, effort, and money to his trademark and to establishing its reputation in the market. The Act also aims to protect consumers from being duped into purchasing a product of inferior quality simply because it bears the same mark as the proprietor’s or an authorised user’s mark, or a mark that is confusingly similar to the proprietor’s mark.
A registered owner may assign or licence the use of his trademark in accordance with the Act. The goodwill of the involved business may or may not be used in the assignment and licencing. It is not necessary to register a trademark in order to assign or licence it.
Every owner of a brand or trademark has the right of selling, transfering, assignment and licensing of trademarks, etc. their respective brand or trademarkin line with legal procedures, much like in the case of tangible property like land. An owner of a brand or trademark may assign or licence his or her rights in relation to that trademark. The Trade Marks Act, 1999 in India covers both trademark licencing and trademark assignment.
Assignment and Licensing of trademarks helps the proprietor to generate more revenue, enact broader and easier territorial expansion, enjoy protection from illegal use of one’s marks, develop easy advertisement across different places, increase consumer recognition and popularity among other benefits.
What is Assignment of a Trademark?
Meaning of Assignment of a Trademark : – Assignment of a trademark means to transfer the owner’s right in a trademark to another person . The transferring party is called the assignor, and the receiving party is called the assignee. A written assignment made by the parties involved is what the Trade Marks Act of 1999 defines as “ assignment ” under Section 2(b).
Basically, Transferring ownership rights to another person is known as assignment . Ownership rights to a select number of goods or services, or to all the goods or services that the proprietor has registered, may be assigned, unless there is an accompanying trade mark. If they work in various nations, it might potentially benefit more than one person.
Thus, where legal rights are transferred, an assignment should be made in writing; however, a trademark cannot be assigned or transmitted if doing so would give rise to several owners having competing rights, as doing so would mislead or confuse the general public.
Who can Assign a Trademark?
Section 37 of the Trademark Act of 1999 defines the phrase “trademark assignment.” According to the definition, a trademark assignment is giving up ownership of a trademark and a brand mark. According to Section 37 of the Trademarks Act of 1999 , the person listed as the trademark’s proprietor in the register of trademarks has the authority to assign a trademark and receive consideration for such assignment for doing so. So, the owner of a trademark has the option to transfer ownership to another party.
What are the different kinds of Trademark Assignment ?
The different kinds of trademark assignments are as follows : –
- Complete Assignment : – The owner of the trademark assigns all rights in the trademark to a new owner, including the ability to receive royalties and make additional transfers. For instance, X is the owner of the brand “ABC.” By way of a contract, X totally transfers to Y his trademark “ABC.” After that, X will not have any legal claim to the “ABC” brand.
- Partial Assignment : – Regarding only particular services or items, the trademark owner assigns the trademark to a different party with respect to only specific services or goods. The sale of the trademark’s ownership is limited to certain services or goods. For instance, X is the owner of the sauce and dairy product brand ABC. X transfers to Y the rights to the brand “ABC” regarding exclusively dairy goods while keeping the rights regarding sauces.
- Assignment with Goodwill of Business : – The owner of a trademark transfers to another person the privileges, rights, values, entitlements and values associated with a trademark. Here, the absolute ownership over the rights and value of a trademark associated with the product is transferred from one entity to another. When a trademark is assigned along with goodwill, the assignee is permitted to use it for any category of products or services, including those that the assignor was already using. For instance, X is the owner of the “Sherry” hair product brand. X assigns the goodwill of the “Sherry” brand to Y. Y will be permitted to use the “Sherry” name in relation to food goods and any other products they produce.
- Assignment without the Goodwill of Business : – The trademark owner assigns to the assignee all rights and entitlements in the trademark regarding goods or services that are not in use. The assignment without goodwill is also known as “gross assignment”. In the event of an assignment without goodwill, the assignor places restrictions on the transfer of trademark rights. The assignor transfers the trademark with the caveat that the assignee is not permitted to use it in connection with any products or services that the assignor is currently using. For instance, “A” is the owner of a brand and uses his trademark for selling computers. “A” sells his brand to “B” such that “B” will have no rights to use the brand trademark for selling his computer products. However, “B” can use the brand trademark in the chain of businesses other than a computer.
Pre-Requisites for Assignment of Trademark
The pre-requisites for assignment of a trademark are as follows : –
- The trademark assignment should be in writing.
- The assignment should be between two identifying parties, i.e. assignor (owner of the trademark) and the assignee (buyer of the trademark).
- The assignor should have the intent and must consent for the trademark assignment.
- The trademark assignment should be for a proper and adequate consideration (amount).
Assignment Agreement of Trademark
Through a properly drafted trademark assignment agreement, the owner of a trademark often assigns it to the assignee.
The following considerations should be taken when drafting the trademark assignment agreement : –
- The duties outlined in the agreement should not adversely affect the trademark’s rights.
- The choice and requirement of whether the business’s goodwill is included in the assignment or not must be made plainly known.
- The aim of the transaction or assignment should be made explicit in the agreement.
- It is necessary to specify the geographic area in which the assignee has the values and rights to the trademark.
- It is necessary to notice the transfer of the ability to claim damages and file lawsuits for current and previous infractions.
- The contract must be properly executed, which means it must be notarized and stamped in accordance with the relevant Stamp Act.
- It is necessary to mention the witnesses and signatures.
- It is necessary to state the location and date of agreement execution.
- The assignment’s day and date, as well as the parties involved, must be noted.
- The agreement should specify whether or not the legal successors of the assignor and assignee are subject to its obligations.
What is the process of Assignment of Trademark?
The following steps are included in the trademark assignment process in India : –
- Through a trademark assignment agreement, the trademark owner (assignor) transfers his or her ownership of the mark to the assignee;
- By submitting an application of a trademark assignment in Form TM-P to the register of trademarks, the assignor, assignee, or both, may make a combined request to register the assignment;
- Within six months of the assignment date, Form TM-P must be submitted to the trademark registrar. After six months of assignment, the application can be submitted, however the fee may change appropriately;
- The assignment must be publicised in the manner and for the duration specified by the trademark registrar;
- The trademark registrar’s office should receive a copy of the advertisement and the registrar’s instructions; and
- The trademark registrar will register the assignee as the proprietor of the trademark and record the specifications of the assignment in the register upon receipt of the trademark assignment application (form TM-P) and necessary documents;
Documents Required for Assignment of Trademark
Along with form TM-P, the following papers must be delivered to the trademark registrar : –
- Agreement for a trademark assignment;
- Certificate for a trademark;
- The assignor’s NOC; and
- Documentation proving the assignor’s and assignee’s identities.
What are the restrictions on Assignment of Trademark?
According to the Trademarks Act of 1999, trademark assignment is subject to the following limitations : –
- Restriction on Parallel Use : – When a trademark assignment leads in the formation of exclusive rights in various people in respect to the same or comparable goods or services, and it is likely to mislead or cause confusion, the assignor is not permitted to assign the trademark. Multiple exclusive rights pertaining to the same/similar items or services in the hands of various people are therefore not permitted. It forbids several parties from using a trademark in connection with identical or similar goods or services in a simultaneous manner.
- Restriction on Multiple Territorial Use : – When a trademark assignment leads in the development of an exclusive right for several individuals in different regions of India in relation to the same or similar goods or services, the assignor is not permitted to assign the trademark. When an assignment leads in the development of an exclusive right in multiple individuals throughout India for the same or comparable goods or services that are sold or provided outside of India, the assignor is not permitted to assign the trademark. As a result, it is prohibited to grant rights to same or similar goods or services in various parts of India.
What are the benefits of Assignment of Trademark?
The benefits of Trademark Assignment are as follows : –
- The trademark assignment enables the trademark proprietor to encash the value of his/her brand.
- The assignee obtains the rights of an already established brand due to trademark assignment.
- The trademark assignment supports the assignor and the assignee to expand their respective businesses.
- The trademark assignment agreement enables the assignor and the assignee to establish their legal rights in case of any dispute.
What is Licensing of Trademarks?
Meaning of Licensing of Trademarks : – Licensing of Trademarks simply means the permission granted by the owner of the trademark to a third person. Such a license is granted in consideration of a Royalty. For Example: – Where an owner of a brand authorizes and allows a third party to use its brand/mark in the course of trade for goods/services. The most important thing to remember is that ‘licensing’ is not sale of the mark or absolute transfer . The ownership to the mark is retained by the owner/holder and only a limited right to use, sell products under the mark etc are given to the third party.
Through the process of trademark licencing, a registered trademark owner authorises a third party to use the trademark or logo without giving up ownership of the mark . Simply said, trademark licencing enables the registered owner to permit other parties to use the trademark or brand name without transferring ownership of the trademark. The conditions of the Trademark Licensing Agreement allow the trademark owner to impose additional limitations on the use of a registered trademark. For the agreed-upon commercial uses of the registered trademark, the registered trademark owner may receive royalties from the licensee.
It should be emphasised that only a limited number of rights relating to a registered trademark are granted to the licensee, and that the registered trademark owner retains sole ownership of the licenced trademark as well as all other relevant rights.
The licencing of service marks and trademarks in India is covered by Section 49 of the Trademark Act, 1999 . Trademark licencing typically depends on some agreed-upon terms and circumstances relating to the proposed product’s quality level, the preservation of the established status of the product and Trademark, exclusivity for the same, the various ways the Trademark may be used, etc. An agreed-upon period is used for trademark licencing. There are no specified legal conditions or time limits for trademark licencing in India according to the Indian Trademarks Act.
Who can grant a Trademark License?
The trademark licence can only be given by the registered trademark’s owner or holder . It would be appropriate to mention that both registered and unregistered property can be transferred under Indian law. A trade mark may be transferred by an assignment or a licence.
In India, there are two types of licences for trademarks that are registered: a simple licence agreement that pertains to permissive use and a registered user, where the licence agreement is registered with the Registrar of trademark. The licensee is granted specific legal rights under this licence.
Why is a Trademark License Granted?
To formally allow a third party to utilise the registered brand, a trademark licence is provided. It is typical for foreign businesses, particularly IT businesses, to offer trademark Licenses in other nations so that their trademarks can be used there. For instance, a brand owner may authorise another individual to use his trademark in connection with goods and services during commerce.
The Trademark License is not being sold; it is being granted. Licencing simply gives the right to use it.
A person other than the registered proprietor of a trademark may be registered as a registered user, according to statutory language in Section 48 of the Trademark Act. Therefore, the rules of this act may permit the use of a registered trademark, but only if both parties comply with the relevant requirements.
Process for Registration of a Trademark License
A Registered User is currently registered under Section 49 of the Trademarks Act of 1999. In this case, the Licensee is the Registered User.
Permitted use of a trademark is defined under Section 2(1)(r) of the Trademarks Act. It refers to the following :
- With which he is connected during trade;
- In respect of which in the trademark remains registered for the time being;
- For which he is registered as a registered user;
- Which complies with any conditions or limitation to which the registration of the registered user is subject;
- In respect of which the trademark remains registered for the time being;
- By consent of such registered proprietor in a written agreement; and
- Which complies with any conditions or limitation to which such user is subject and to which the registration of the trademark is subject”.
The registration of a trademark license agreement is not mandatory under the law. But registration always comes to the rescue as it forms a record/ evidence in possible future disputes. In the case of Himalaya Drug Co. Pvt. Ltd., Bangalore vs. Arya Aushadhi Pharmaceutical Works, Indore , AIR 1999 MP 110 the Court ruled that if a company fails to prove that it is a registered user then the suit is liable to be dismissed. It is therefore always good to register the Trademark License with the Trademark Office. Only a Registered owner/ Proprietor of the Trade Mark is competent to launch proceedings for the trademark infringement as per the Trademarks Act, 1999. If a User is not registered under the act then he cannot maintain the suit under the Act.
Therefore, to register the trademark license : –
- The agreement must be in writing;
- The trademark owner and the intended user should apply for registration (section 49) with the Trademark Registrar jointly;
- The form to use for the application is TM-U;
- Relationship between the parties
- Duration of the use
- Goods/services for which it is applicable
- The government fee of Rs. 4500 for each mark shall be paid.
According to the Act’s provisions, a registered user may be granted permission to use a registered trademark, but in order to do so, the registered owner of the Trade Mark must enter into a contract with the prospective registered user.
Within six months of the date the parties’ agreement was formed, an application for registration must be submitted. If everything is acceptable, the Trademark Office (TMO) will subsequently register the user. Following that, the user will be a “Registered User” of the trademark.
The Trademark Office will notify the trademark owner and any other registered users of the same trademark and publish it in the Journal.
What are the benefits of a Trademark License?
The benefits of Licensing of a Trademark : –
- Financial Gain : – The trademark is widely used for commercial gain, and the owner receives royalties as a result. This financial gain benefits both parties. By granting the licence to the licensee, the licensor, who previously could not capitalise on his trademark due to lack of resources or exposure, can now use those resources to his advantage and benefit more. A portion of the income are also given to the licensee.
- Expansion of the Trademark Owner’s Business : – The Trademark owner’s business grows and expands its reach into new regions. Since the licensee(s) can leverage their distribution abilities for business expansion, the company is no longer restricted to a specific geographic area.
- Expanding the Brand Recognition of a Trademark : – The Trademark becomes well-known in areas where it was previously unknown. The licensee is allowed to widely publicise using his resources.
- Increase in Trademark Popularity : – As the Trademark is recognised to more individuals and consumers, it gains popularity. By boosting sales, this increases revenue and facilitates the trademark’s continued licencing.
- Workload Redistribution/Reduction : – In a sense, the Licensee joins the Licensor as a partner. Because the licensee is equally responsible for upholding the quality of the goods, he produces using the trademark, the licensee’s workload is lessened and he need not worry about the quality of the products.
Under what conditions can a Trademark License be cancelled?
Cancellation is possible in the following situations : –
- If the provisions of the agreement are broken or violated;
- If the mark is used in a manner not permitted under the agreement;
- If the mark is utilised to trick consumers or the public by creating confusion;
- If any party withholds information that is important and necessary to the agreement;
- If one of the parties makes false statements or cheats.
The Trademark Office notifies the Trademark owner as well as any additional registered users who might be impacted by the cancellation of the Trademark License. The official cancellation cost is Rs. 4500 for each mark.
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Licensing of Trademarks
Sep 29, 2021
40 likes | 41 Views
ud83dudc49 u2705 For view source: https://bit.ly/3lUJVf5<br>A trademark is an important business asset that offers protection to a brand. Businesses own valuable trademarks, which, once registered, can be licensed out. The rights that flow from a trademark can be licensed to others to receive royalties for commercialization. Licensing your trademark can be a beneficial business strategy that can not only strengthen the brand but also allow for expansion into new markets. Licensing involves permitted use by a person on his goods or services of a trademark belonging to a proprietor, provided the proprietor
Licensing of Trademarks A trademark is an important business asset that offers protection to a brand. Businesses own valuable trademarks, which, once registered, can be licensed out. The rights that flow from a trademark can be licensed to others to receive royalties for commercialization. Licensing your trademark can be a beneficial business strategy that can not only strengthen the brand but also allow for expansion into new markets. Licensing involves permitted use by a person on his goods or services of a trademark belonging to a proprietor, provided the proprietor exercises the quality control and authorizes the application of the trademark on such goods and services. What is Trademark Licensing? Trademark Licensing refers to the process where the owner of a trademark (the licensor) gives another person (the licensee) the right to use the trademark. Common examples of trademark licensing include merchandising partnerships, franchising, or beverage brands such as Coca-Cola allowing independent bottlers of their soft drinks to label the finished product with the COCA-COLA trademark. Advantages of Trademark Licensing There are many advantages of licensing a trademark, such as:
Access to new markets: In the case of marketing and distributing channels, allowing licensees the right to use one’s trademark can help to expand the business; Increase in consumer recognition; Distribution of workload; and Partnerships: Trademark licensing can lead to benefits for the business life and functioning of the parties involved. Types of Trademark Licenses 1.Exclusive License It grants the rights to commercial use of the trademark solely to the licensee. In effect, it also excludes the licensor from using it. The licensor receives a sum for licensing, and the licensee receives any future profits or incurs losses arising from commercialization. Limitations can be placed on exclusive licenses so that the licensee is restricted to use the mark within a specific class of product or geographical area. 2.Sole License A sole license is an adaptation of an exclusive license where both the licensor and licensee can use the trademark. However, the licensor is not permitted to license the trademark to another third party. 3.Non-Exclusive License As the name suggests, a licensor can grant a non-exclusive license to multiple licensees. Drafting a Trademark Licensing Agreement Many famous trademarks, such as ‘Harley- Davidson,’ ‘Pizza Hut,’ ‘Baskin Robbins,’ are represented by agencies who seek out appropriate licensees. After the parties make contact, they sort to discuss the basic terms of the agreement. It is fairly common for owners of well-known trademarks to dictate the terms and furnish the agreements for merchandise licensing. Often these terms are on a “take it or leave it” basis; if the licensee doesn’t agree, the trademark owner will
go elsewhere. In other cases, a licensee will furnish the trademark license agreement. Usually, before entering into an agreement, the licensee and the licensor work out all the business terms. Even after the terms are agreed upon and, the license is furnished, the parties can make additional changes. Payment of royalties depends on industry trends. To use a trademark on merchandise, such as clothing, a licensee must pay royalties ranging from 2% to 10% of net sales. A trademark owner may accept a lump-sum payment for a one-time license, for instance, the use of the image on 100,000 T-shirts at a sporting event. Although the terms of every license are different and may be freely negotiated between the licensor and licensee, all licenses must at least include the following provisions to be valid: The legal names of the licensor and licensee; Identification of the trademark(s) that are the subject of the licensing agreement; Identification of the products/services with which the licensed mark may be used; The geographic territory in which the licensee may operate and sell his products/services; Quality control provisions that set forth clear standards as to the nature and quality of the licensed products/services; Whether the license is exclusive or non-exclusive; The duration of the license; The amount of any royalty payments or other compensation due to the licensor and when those payments are to be made; The responsibilities of both parties upon the termination or expiration of the license; and The consequences of breaching the license and the period in which the breach must be remedied. From a licensor’s perspective, the quality control provisions of a trademark license are the most important. The licensor must continuously make sure that the licensee’s products/services meet a certain standard, or else the value of the licensor’s trademark could be harmed. Furthermore, licensors often require that any advertising and promotional materials created by their licensees be approved before public dissemination. The failure of a licensor to demand and enforce strict quality control can leave the licensor’s trademark vulnerable to attack by third parties, and the trademark may ultimately be deemed to have been abandoned. Unlike other forms of Intellectual Property (IP),Trademark Rights in
most countries can arise from and can be destroyed by the use that is made of the trademark. A trademark owner who allows anyone else to use his trademark must therefore take special care to ensure that his trademark rights are not diminished by the arrangement. In particular, the trademark owner should ensure that the licensing arrangement does not jeopardize: The value of the trademark; The security of the Trademark Registration; and His exclusive ownership of the trademark rights. Therefore, through strategic trademark licensing arrangements, brand owners can not only increase brand awareness but also generate significant income. Today, the majority of successful, well-known brands rely on the licensing model for their success. However, at the same time, a well-structured licensing agreement is important to maximize the value of a trademark while safeguarding against possible consequences and risks. Trademark licenses, if carried out with proper care and caution, can ultimately enhance brand equity and produce revenues for a brand owner. ✅ ✅ For more visit: https://www.kashishipr.com/ Don’t forget to follow us on social media: Facebook – https://www.facebook.com/kashishipr/ Twitter – https://twitter.com/kashishipr Linkedin – https://www.linkedin.com/company/kashishipr/ Pinterest – https://www.pinterest.com/kashishipr/ Tumblr – https://kashishipr.tumblr.com/ Contact - US Email Id: [email protected] Website: www.kashishipr.com
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Difference between Trademark Assignment and Trademark Licensing
- Posted On January 23, 2023
- Posted By By Zarana Mehta
- Articles - Tradmark
- Trademark Assignment Vs Trademark Licensing
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Trademark Assignment and Trademark Licensing – What is the Difference?
Table of Content
One of the major differences between Trademark Assignment and Trademark licensing is that the assignment of a registered trademark is a change in ownership. On the other hand Trademark licensing is the transfer of certain rights (in a limited manner) of a registered trademark while maintaining ownership of the trademark. First let’s, take a look at “What is Trademark Assignment and Trademark License?” and the Benefits of Trademark License and Trademark Assignment, and then move on to the differences.
What are Trademark Assignment and Trademark License?
Trademark Assignment: According to the Trade Mark Act of 1999, the person entered in the trademark register as the proprietor of a trademark has the authority to assign a trademark and to give an effectual receipt for any consideration for such Assignment. The assignment is the complete transfer of ownership from the trademark owner to a third party. Trademark assignment is classified into two types:
- The assignment without goodwill – the assignor restricts the assignee with the condition that the assignee cannot use the trademark assigned with the goods and services that the assignor already uses.
- Assignment with goodwill – the assignor transfers the rights and value of the trademark associated with the product to the assignee.
Trademark License: Trademarks are valuable business assets that protect your brand. Licensing your trademark can help your business strategy by expanding your brand’s reach into new markets and territories. In trademark licensing, the owner of a specific trademark can grant a third party the limited right to use the trademark in exchange for a royalty while keeping ownership with himself/herself.
Benefits of Trademark Assignment and Trademark License
- Every trademark assignment is recorded in the registry records and serves as proof of ownership of the trademark.
- It is quicker than registering a new brand name.
- Both parties benefit because the assignor receives a reasonable price for the brand name while it is well-known in the market, and the assignee benefits from the already-established brand.
- It helps in the expansion of the brand’s reach.
- It has the potential to improve business life and operations.
- The mark has become more popular and well-known as a result of licensing.
- The company’s workload is decreasing.
What is the Difference between Trademark Assignment and Trademark Licensing?
- A trademark assignment is a transfer of ownership of the trademark registration . Whereas in licensing, the original owner retains ownership and proprietary rights to the trademark, but only a few limited rights to use the brand are granted to the third party.
- The assignment agreement must be in writing. Licensing does not have to be in writing.
- An assignment may be entirely or partially; a licence grants you rights for a specific period of time.
- An assignment is not time-sensitive; ownership has been transferred. Licensing is only valid for a certain amount of time.
Both trademark assignment and licensing are important terms, which necessitate careful planning. The creation and use of a brand are involved in trademark licensing and trademark assignment. All of these are available to the proprietor and are effective management methods.
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What is the difference between Assignment of trademark & Licensing of trademark?
- Posted By: Obhan&Associates
- Date: August 25, 2017
In case of an assignment of a trademark, there is a transfer in the ownership of the trademark registration and in case of licensing, the proprietary rights of the trade mark continue to vest with the original owner but only few restricted rights to use the brand/trademark are given to the third party.
Taxability Of Assignment And Licensing Of Trademark
- November 21, 2022
- IP Licensing
An intellectual property right is an intangible right. It is uncontested that the “brand” is often the most valuable asset to a company and the brand name is solely a goodwill and incorporeal property. As trademark denotes the valuation of a company’s goodwill, it is a crucial economic and commercial tool considered to be an intangible asset that can be sold, pledged, assigned, and franchised. Taxation of transfer of right to use of intellectual property law has always been environed by relative obscurity. The confusion regarding the collocation of the specific regime under which the transaction of a trademark should have been governed can lead to disparities.
[Image Source: Istock]
- Licensing does not create propriety interest it means to endow some right to a person relating to the IP to make use of the said IP in a restricted way but does not create any proprietary interest. Therefore, the licensee and the owner of the IP are incomparable.
- Assignment means “transfer of rights”, endowing ownership to the assignee and accrediting them to make use of the IP in whatever manner, subject to such agreement.
Pre GST Regime: Vague landscape of transfer of Trademark for the purpose of tax liability
Income generated by the transfer of intangible assets (here, trademark and copyright) is in the nature of ‘capital gains and not ‘business income’, and is, therefore, taxable  . Permanent transfer of Trademark did not amount to the rendering of service as the person selling these rights no longer remains a “holder of intellectual property right ”  therefore for the ‘assignment’ of trademark no service tax is applicable. The key ingredient for determining if any service related to intellectual property rights is taxable under service tax or not is to see if there has been “…temporary transfer of any intellectual property right OR there has to be the permission to use or enjoy any intellectual property right”  .
VALUE ADDED TAX
VAT is levied on “sale and purchase of goods”. Right to use property, i.e., Brand name for consideration is a ‘sale’ under the definition of ‘sale’ in VAT Act , 2008 read with Article 366 (29A) of Constitution and on amount of consideration, VAT is chargeable.  The demarcation of the taxability was indistinct and it was critical to distinguish the transfers that constituted a transaction assessed by VAT.
The Apex court laid down an exclusivity test to determine the constituents of a transaction for the transfer of ‘rights to use’ the goods, the transaction must fulfill the following five conditions-
- There must be goods available for delivery and a consensus ad idem as to the identity of the goods
- The transferee should have the legal right to use the goods consequently all legal consequences of such use including any permission or license required thereof should be available to the transferee
- For the period during which the transferee has such legal right, it has to be the exclusion to the transferor this is the necessary concomitant of the plain language of the statue viz. “transfer of right to use” and not merely a license to use the goods; and
- Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to the others. 
Inclining contrarily, it was later held in different cases that Transfer of rights to use goods of incorporeal character such as trademarks, copyrights , patents, etc. is exigible to state value added tax and that there need not be any exclusive and unconditional transfer.  That means Transfer of right to use goods relating to a goodwill or Brand name, will be within the ambit of sale and exigible to VAT under VAT Act , 2008 
It was held in BSNL case that “ even when there is a transfer of ‘right to use’ a trademark, it would not give rise to taxable event if the owner of the trademark retained to itself a right to make further use” , which, later on was subsided in various judgments as “ dealing of altogether another facts and issue ” that the transaction of a trademark should attract tax even if there may be various transferees and the transferor continues to use goods. Tax liability under VAT remained a subjective matter of facts.
Earlier the obscurity related to intellectual property law is diminished by the advent of GST. Center and state simultaneously levied a tax on supply, goods, and services.
It is significant to note that the difference between the permanent and temporary transfer of the trademark is also irrelevant under the GST regime as the transaction irrespectively will lead to the same concurrent tax. Entry 5(c) to schedule II of section 7 of the CGST act, temporary transfer or permitting the use or enjoyment of the IPR has been regarded as ‘supply of services and is levied to GST at the rate of 12% provided such IPR is not in respect of Information Technology(IT) software, in terms of IPR related to IT the tax is 18%. Permanent transfer of trademark is treated as supply of goods as it is leviable to tax at the rate of 12%
An unregistered trademark is exempted from tax. Various products like raw grains, pulses, cereals, etc. sold loosely without any brand name are exempt from GST but the same commodities sold in a packaged form under a registered brand name attract GST. 
The situs of an intangible capital asset, such as intellectual property, is deemed to be the same situs as that of its owner, and therefore, the trademarks owned by the Australian company, although registered and used in India will not be taxable in India under Section 9 of the IT Act. 
The Prominence of valuation and intricacy with regard to taxation of trademarks follows proportionality. The valuation of tax on the transfer of the ‘rights of use of Trademark or intangible assets has remained a matter of persistent hassle in PRE GST Regime. After the enactment of GST, the ambiguity has lessened but there are still many inadequacies to address as the fast digitalization of the IP economy comes along with its own issues to deal with.
Author: Surabhi Maheshwari, a final year student at faculty of law, University of Delhi, in case of any queries please contact/write back to us via email to [email protected] or at IIPRD .
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India: Assignment & Licensing Of Trademarks In India
Just as in the case of physical property such as land, every owner of a Brand or Trademark has the right to sell, license, transfer, etc. its respective brand or trademark in accordance with legal procedures. A brand or Trademark owner can transfer his rights with respect to his trademark either by way of assignment or by licensing. In India, The Trade Marks Act, 1999 deals with assignment as well licensing of trademarks.
To put it summarily, in case of an assignment of a trademark, there is a change in the ownership of the registered brand and in case of licensing, the right in the trade mark continues to vest with the original owner but only few restricted rights to use the brand/mark are given to the third party.
ASSIGNMENT OF A TRADEMARK
Assignment of a trademark occurs when the ownership of such mark as such, is transferred from one party to another whether along with or without the goodwill of the business. In case of a registered Trademark, such assignment is required to be recorded in the Register of trade marks.
A mark may be assigned or transferred to another entity in any of the following manners:
- Complete Assignment to another entity- The owner transfers all its rights with respect to a mark to another entity, including the transfer of the rights such as right to further transfer, to earn royalties, etc. (E.g. X, the proprietor of a brand, sells his mark completely through an agreement to Y. After this X does not retain any rights with respect to the brand)
- Assignment to another entity but with respect to only some of the goods/ services- The transfer of ownership is restricted to specific products or services only. (E.g. P, the proprietor of a brand used for jams and jellies and dairy products. P assigns the rights in the brand with respect to only dairy products to Q and retains the rights in the brand with respect to jams and jellies.) This is called partial assignment.
- Assignment with goodwill- Such assignment is where the rights and value of a trademark as associated with the product is also transferred to another entity.(E.g. P, the proprietor of a brand "Shudh" relating to dairy products, sells his brand to Q such that Q will be able to use the brand "Shudh" with respect to dairy products as well as any other products it manufactures.)
- Assignment without goodwill- Such assignment also referred to as gross assignment, is where the owner of the brand restricts the right of the buyer and does not allow him to use such brand for the products being used by the original owner. Thus, the goodwill attached to such brand with respect to the product already being sold under such brand, is not transferred to the buyer. (E.g. P, the proprietor of a brand "Shudh" relating to dairy products, sells his brand to Q such that Q will not be able to use the mark "Shudh" with respect to dairy products but can use this brand for any other products being manufactured by it. In such case the goodwill which is associated with brand "Shudh" for dairy products is not transferred to Q and Q will be required to create distinct goodwill of brand "Shudh" for any other product or service like Restaurant wherein Q proposes to use this brand.). In many jurisdictions like United States, assignment of mark without goodwill is not allowed at all. India on the other hand allows assignment without goodwill.
Further, in case of registered Trademarks, the Trade Mark Act 1999 also puts certain restrictions on the assignment of a registered trade mark wherein there exist possibilities of creating confusion in the mind of public/users. Such restrictions are:
- Restriction on assignment that results in the creation of exclusive rights in more than one persons with respect to the same goods or services, or for same description of goods or services or such goods or services as associated with each other.
- Restriction on assignment that results in different people using the trademark in different parts of the country simultaneously.
The licensing of a mark is to allow others to use the mark without assigning the ownership and the same may be done for all or some of the goods and services covered. The Trademarks Act does not mention the term 'License', the concept under the Act is mentioned as that of a 'Registered User'.
Trademark licensing is advantageous to both the parties. While the licensor enjoys its rights to the mark by getting the royalties for its use, the licensee is able to expand its market operations by using the brand and developing its reputation.
In case of Licensing, the licensor is open to license the rights over the trademark in manner it may like. The Licensor can restrict the rights of the licensee in a trademark or brand with respect to the products or services wherein the licensee can use such brand, with respect to time for which it can use such mark, with respect to area within which it can use such mark etc.
AGREEMENTS FOR TRANSMISSION
A trade mark is generally assigned by way of a properly executed Trademark Assignment Agreement which pertains to the transfer of the mark from one person or entity who is the owner to another. It is to be ensured when drafting such agreement that:
- the rights of the owner of the brand are not detrimentally affected due to the obligations contained.
- the requirement and decision regarding whether the assignment should be with or without the goodwill of the business is explicitly mentioned and negotiated
- the agreement should be drafted keeping in mind the purpose of the transaction in question
A mark is licensed by way of aLicense Agreement. As per the Trade Mark Act, 1999, contrary to the requirement in case of Assignment, the registration of license agreement with the Trademark Registrar of a mark is voluntary and not compulsory, but it is advisable. Further, like in an Assignment agreement, it is again very important that while drafting a License Agreement, the rights and duties of licensee are distinctively pre determined and defined. This is important not only to protect the rights of the Licensor in its own brand and to protect any misuse thereof, but also to secure licensee with his rights to use such brand.
TO SUM UP..
Assignment and Licensing of brands are considerable issues and proper strategizing may open vistas of opportunities for all, a licensor, a licensee, an assignor and an assignee. Both concepts involve a degree of planning for the future of the parties involved and the brand in question. The development of a brand, its propagation and its use, all lie in the hands of the proprietor of the brand and trademark and assignment and licensing are effective methods to manage the same.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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