trademark license vs assignment

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• Posted On January 23, 2023
• Posted By By Zarana Mehta
• Articles - Tradmark
• Trademark Assignment Vs Trademark Licensing
• Trademark License
• Trademark Registration in India

Trademark Assignment and Trademark Licensing – What is the Difference?

Table of Content

Introduction

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

Trademark Assignment:   

• 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.

Trademark License:   

• 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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Some FAQs on the Trademark Assignment in India Introduction Trademark assignment is an important process in India that involves the transfer of company ownership from one individual to another. It is essential for businesses and individuals to understand the trademark […]

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Navigating the world of intellectual property can be a complex endeavor for businesses selling goods or services. In this realm, understanding the differences between trademark assignment and licensing becomes crucial. This article will delve into these two concepts, providing a comprehensive understanding of what they entail, how they function, and why businesses might choose one over the other. Whether you're a seasoned business owner or a budding entrepreneur, this guide will equip you with the knowledge to make informed decisions about your trademark strategy.

Trademark Assignment vs. Licensing

At its core, a trademark assignment is a legal act of transferring rights and ownership from one party, known as the assignor, to another, referred to as the assignee. This transfer isn't limited to the trademark alone but extends to the goodwill linked with it. Goodwill is the perceived value or recognition that a trademark has garnered, making it a significant contributor to a company's overall brand.

The process of assignment typically unfolds in two stages. Initially, a written agreement is drawn up between the two parties, outlining the specifics of the transfer. This agreement usually includes the trademarks in question, any associated goodwill, payment terms, and other relevant details. Following this, the assignor must record the assignment with the United States Trademark Office (USTPO). This step is vital as it offers public notice of the transfer and shields the assignee from potential infringement claims or disputes in the future.

Companies may opt for trademark assignments for a myriad of reasons. Often, assignments take place during acquisitions or mergers when one company purchases another, including its intellectual property. Similarly, if a company is divesting a portion of its operations, it may assign any trademarks linked to that specific division to the buying company. Additionally, a company planning a strategic shift or rebranding might choose to assign their existing trademarks to pave the way for a fresh brand identity.

Trademark Assignment: A Closer Look

Trademark assignment is a process where ownership and rights associated with a trademark are transferred from one party (the assignor) to another (the assignee). Upon completion, the assignee becomes the new owner of the trademark, enjoying all the rights and benefits that come with it. Importantly, a trademark assignment also involves the transfer of the goodwill associated with the trademark. Goodwill is the commercial value that stems from the trademark's reputation. For instance, if a well-known brand assigns its trademark to a new owner, the goodwill – the brand's positive reputation and customer loyalty – is also transferred.

It's crucial to distinguish between a trademark assignment and a trademark license. While both pertain to trademark rights, they differ substantially in terms of ownership transfer. A trademark license allows another entity to use the trademark under specific conditions, with the original owner retaining ownership. In contrast, a trademark assignment involves a complete and permanent shift of ownership from the assignor to the assignee.

Trademark assignments are legally binding and require precise documentation to ensure enforceability. This documentation becomes critical if disputes arise over the trademark's usage in the future. Furthermore, to maintain transparency and provide public notice, the transfer of ownership must be recorded with the United States Patent and Trademark Office (USPTO).

Understanding the Process of Trademark Assignment

Executing a Trademark Assignment involves several important steps. The process begins with a formal Agreement of Assignment between the assignor, or current owner, and the assignee, who will become the new owner. This agreement is a legally binding contract outlining the terms of the trademark transfer. It should detail the specifics of the trademark, identify the assignor and assignee, disclose the financial consideration, and list any relevant warranties.

Following the agreement, the assignee applies to the appropriate intellectual property office to record the assignment. In the United States, this would be the United States Patent and Trademark Office (USPTO). The application process is conducted online and requires information about the assignor and assignee, the registration or application number, and a statement of reasons for the transfer. The process also involves a government fee for each class of goods or services being transferred.

Upon approval by the USPTO, the assignment is recorded in the public database, making the new ownership information available to anyone who searches for that trademark. The USPTO then issues a new registration certificate to the assignee, now the official owner. It's crucial for the assignee to keep this certificate as evidence of their ownership.

By recording the assignment with the USPTO, the assignee establishes public notice of their ownership, which is critical in case of future legal disputes over the trademark. It's important to note that the assignee must use the trademark in commerce to maintain its validity, or they risk losing the trademark rights.

The Appeal of Trademark Assignment for Businesses

Trademark assignment offers several advantages for businesses, making it an attractive option. One of the primary reasons businesses choose trademark assignment is for consolidation during acquisitions or mergers. When a business is taking over another, or when two businesses are merging, it's easier to manage all related trademarks under one owner. This approach reduces confusion and ensures all trademark rights are unified.

Financing is another reason businesses opt for trademark assignment. Businesses often leverage their assets, including intellectual property like trademarks, as collateral to secure loans. By assigning the trademark, a business can offer a lender legal and tangible security.

Strategic shifts in business focus can also lead to trademark assignments. For example, if a business decides to concentrate its resources on a different product line, it may assign the trademark related to the previous line to another entity that can make better use of it.

Finally, trademark assignment can provide an exit strategy for entrepreneurs. Those who create and register a trademark with a profitable business model but do not wish to manage the business operations often assign the trademark to another business or individual ready to take over. This allows the original trademark owner to step away while ensuring the trademark continues to be utilized.

Delving into Trademark Licensing

When it comes to managing intellectual property, businesses often consider two key strategies: trademark assignment and trademark licensing. While the former involves a complete transfer of ownership, the latter, trademark licensing, is a different ball game. In a licensing arrangement, the trademark owner, or licensor, grants a third party, known as the licensee, the right to use their trademark. This permission is usually encapsulated in a formal document called a trademark license agreement.

A distinguishing feature of trademark licensing is that the licensor retains the ownership of the trademark. This is in stark contrast to trademark assignment where the ownership rights are transferred. As a result, even as the licensor collects royalties from the licensee for the use of the trademark, they also bear the responsibility of ensuring the quality of goods or services associated with the licensed mark.

Trademark licensing serves as a strategic tool for businesses to broaden their brand's reach without directly venturing into new markets or segments. It not only amplifies brand recognition by making products or services accessible to a larger audience but also generates a steady flow of income through royalties.

Trademark Licensing Explained

At its core, trademark licensing is a contractual agreement where the licensor, the trademark owner, permits a licensee, a third party, to use their trademark for certain products or services over a defined period. This arrangement allows the licensee to capitalize on the goodwill and reputation of the trademark, while the licensor typically receives a royalty fee in return.

Unlike trademark assignment, a licensing agreement does not alter the ownership of the trademark. The licensor retains their ownership rights and continues to oversee the use of the trademark. This is achieved through quality control clauses in the licensing agreement, obligating the licensee to uphold certain standards related to the trademarked goods or services. These clauses are crucial in maintaining the trademark's value and reputation.

Trademark licensing offers a pathway for owners to extend their brand's reach to additional products, regions, or sectors without the need for substantial investment in operations and infrastructure. This mutually beneficial arrangement allows the licensor to earn from royalties, while the licensee gains from the brand value and recognition associated with the trademark.

Deciphering the Process of Trademark Licensing

Trademark licensing is a process that operates within a well-defined framework. It all starts when the owner of the trademark, known as the licensor, and a potential licensee see a promising business opportunity in a joint venture. To ensure clarity and mutual understanding, a licensing agreement is typically drawn up. This agreement outlines the specifics of the arrangement, such as the license's duration, the geographical regions where the licensee can use the trademark, the types of products or services the licensee can offer under the trademark, royalty fees, and quality control stipulations.

Throughout this process, the licensor retains control over the trademark and sets quality standards that the licensee must adhere to. This is crucial to prevent the market from being flooded with substandard products or services bearing the licensed mark, which could tarnish the trademark's reputation and value. Often, the licensing agreement will include a strategy for the licensor to monitor and enforce these quality standards.

The licensee's role is to manufacture and sell the products or services under the licensed trademark. They are also responsible for paying royalties as per the contract, which could be a flat fee or a percentage of net sales. To ensure honesty in reported sales, regular audits may be conducted.

For a licensing agreement to be successful, it's essential that both parties understand their rights and obligations and adhere to the agreement's terms. This understanding and respect can lead to a mutually beneficial arrangement and help avoid potential legal disputes.

Reasons Businesses Opt for Trademark Licensing

Businesses may choose to license their trademarks for several strategic reasons. One of the primary motivations is the potential to generate additional income. By licensing a trademark to another entity, a business can earn royalty fees without having to invest additional resources in creating, marketing, or distributing new products or services.

Another significant advantage of licensing is the potential for increased brand visibility and market penetration. Licensing can enable a brand to quickly enter new markets or sectors where it may lack the resources or expertise to venture alone. This can lead to a larger customer base and expanded brand influence.

Trademark licensing also allows businesses to capitalize on the licensee's skills, resources, and market knowledge. The licensee may have better access to, or a deeper understanding of, certain geographic areas or market segments, which can benefit the licensor. This can help the business reach markets that would otherwise be inaccessible.

Finally, licensing can serve as a strategic tool to prevent others from registering or using similar trademarks, which could lead to market confusion or competition. By licensing the trademark, a company can maintain control over its use and distribution in the market, ensuring the brand's integrity and reputation are upheld.

Trademark Assignment Versus Licensing: A Comparative Analysis

Trademark Assignment and Licensing are not interchangeable strategies, but rather two distinct approaches that businesses use to manage their intellectual property assets. The choice between the two is not a question of superiority, but rather a matter of selecting the most suitable strategy based on the specific circumstances and goals of the business.

The primary distinction between these two strategies lies in the concept of ownership. When a Trademark Assignment occurs, the assignor transfers all rights and control of the trademark to the assignee. This transfer of ownership grants the assignee the liberty to utilize, sell, or otherwise exploit the trademark as they see fit. Once the assignment is complete, the assignor forfeits all rights and has no say in how the trademark is used in the future.

Conversely, Trademark Licensing does not involve a transfer of ownership. Instead, the licensor grants the licensee the right to use the trademark under specific conditions, while maintaining ownership and control. The licensor can set usage terms, oversee quality control, and collect royalties. The licensee, in turn, can use the trademark for a set period, provided they adhere to the quality standards and rules established by the licensor.

Deciding between trademark assignment and licensing requires strategic thinking. Businesses must consider their long-term goals, market dynamics, risk tolerance, and revenue projections. Both strategies have their advantages and drawbacks, and the best choice depends on the unique needs and objectives of the business.

Key Distinctions Between Trademark Assignment and Licensing

Understanding the differences between trademark assignment and licensing is crucial for making an informed decision. These differences primarily revolve around three key factors: ownership, control, and financial implications.

Ownership is the most fundamental difference. In a trademark assignment, the assignor transfers all rights and interests in the trademark to the assignee. Conversely, in a licensing agreement, the licensor retains ownership of the trademark while granting the licensee the right to use it under certain conditions and for a specified duration.

Control is another major point of divergence. In a licensing agreement, the licensor retains control over the quality and usage of the trademark, as the agreement typically includes provisions for maintaining certain quality standards. In contrast, a trademark assignment gives the assignee full control over the trademark's use, with no involvement from the original assignor.

The financial outcomes of each approach also differ. In a licensing agreement, the licensor receives ongoing royalties, providing a steady income stream over time. On the other hand, a trademark assignment results in a one-time payment to the assignor, which could be substantial but does not provide any future income related to the trademark.

Grasping these differences is essential for aligning your decision with your business's strategic objectives and goals.

Deciding on Trademark Assignment or Licensing

Choosing between trademark assignment and licensing is a decision that hinges on a business's unique needs, objectives, and circumstances. This choice should be strategic, well-informed, and based on a comprehensive understanding of each option's implications.

For instance, if a company is looking to entirely divest from a trademark, possibly due to a shift in business direction or a misalignment with its current business model, assignment might be the way to go. This approach is similar to selling the trademark outright, resulting in a loss of control over its future use. However, it can generate a substantial one-time income.

Conversely, licensing could be a more suitable option for businesses aiming to secure long-term revenue without giving up ownership. If a business is looking to extend its brand into new markets or product lines without incurring the associated operational and marketing costs and risks, licensing could be the ideal solution. This strategy also allows businesses to leverage the licensee's specialized market knowledge or resources, while maintaining control over their trademark.

It's crucial to consult with a legal expert specializing in intellectual property rights when deciding between trademark assignment and licensing. These professionals can provide invaluable guidance throughout the decision-making process, ensuring all legal aspects and potential consequences are considered. This approach helps to establish a solution that best aligns with the business's objectives.

1. What distinguishes a Trademark Assignment from Licensing?

Trademark Assignment involves the transfer of ownership rights whereas licensing pertains to granting permissions to the trademark usage while retaining ownership rights.

2. Can one get back the rights of a trademark after assigning it?

In a Trademark Assignment, the rights move to the assignee permanently. Therefore, these rights cannot revert to the assignor later.

3. Is it possible for a licensee to transfer trademark rights to a third party?

No, a licensee doesn't have the authority to transfer the trademark rights to a third party as the licensee doesn't own the rights but merely possesses permission to use them.

4. What are the potential income implications in Trademark Assignment vs. Licensing?

In Trademark Assignment, assignors receive a lump sum whereas licensors receive royalties or other agreed-upon payments from the licensee over the contract duration.

5. Why might a company favor Licensing over Assignment?

Companies might prefer licensing as they retain the ownership rights over the trademark and even generate regular income through royalties or payments.

6. Can there be multiple licensees for a single trademark?

Yes, a trademark owner or licensor can grant a license to multiple parties, setting the scope of the usage as per their discretion.

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Trademark assignment—How-to guide

Find out more about business management

by   LegalZoom staff

Read more...

Updated on: February 15, 2024 · 10 min read

1. Overview

• 2. Do's & don’ts checklist

3. Trademark assignment instructions

A company’s ability to buy and sell property is essential to its long-term life and vitality. Although it does not take up physical space, an excess of intellectual property can burden a company, directing limited funds towards maintaining registrations, defending against third-party claims, or creating and marketing a final product. Selling unused or surplus intellectual property can have an immediate positive effect on a company’s finances, generating revenue and decreasing costs. When it does come time to grow a business, companies looking to purchase property (including trademarks or software) to support their growth must be sure that the seller does, in fact, have title to the desired items. A properly drafted trademark assignment can help in both circumstances. 

A trademark assignment is the transfer of an owner’s property rights in a given mark or marks. Such transfers may occur on their own or as parts of larger asset sales or purchases. Trademark assignment agreements both provide records of ownership and transfer and protect the rights of all parties.

If you follow the enclosed sample and guidelines, you will have a written acknowledgment of the rights and responsibilities being transferred as part of your sale. This will provide essential documentation of ownership and liability obligations, and you will be well on your way to establishing a clear record of title for all of your trademarks. 

2. Do's & don’ts checklist

• A trademark protects names, terms, or symbols used to identify the products of a certain manufacturer or company. This includes brand names like “Coca-Cola” and images like Nike’s famous “swoosh.” A trademark assignment is the transfer of ownership rights in a mark from one party to another. Both the trademark and the goodwill or business associated with it must be conveyed: a transfer without goodwill is considered invalid. Keep this in mind if you revise the language of the enclosed document.
• An assignment is different than a license, which is a grant of permission to use a trademark in some restricted way (e.g., a limited time, specific purpose, particular area, etc.). A transfer of partial rights is not a trademark assignment: do not revise the agreement to limit the reach of the rights being provided.
• A trademark transfer is typically accomplished through a contract, like the written agreement form that follows. However, after the parties have negotiated and signed their agreement, the transfer must be recorded with the U.S. Patent and Trademark Office (USPTO). The agreement will not be effective if this registration is not made.
• The advantage of selling your trademark outright (and not simply licensing or attempting to develop and market it yourself) is that you are guaranteed payment at the price you and the purchaser have negotiated. On the other hand, that one-time payment is all that you will ever receive for your property: you will no longer have the right to control anyone else’s use of your creation. By using it yourself or offering a temporary license, you retain the potential for future income. However, such income is by no means certain, and your opportunities are paralleled by risk. Before selling all of your rights in a trademark, make sure that this is the best (and most lucrative) approach for you and your company.
• Do not enter into an agreement without completing your due diligence. If you are purchasing a trademark, conduct searches with the USPTO, all 50 states, DBA filings, other government agencies, and online directories to make sure the seller actually has complete and unique rights in the offered property. Although your findings will not guarantee title, you may have protection as an “innocent purchaser” if disputes arise. You might also find critical information about the valuation and breadth of the mark. Consider hiring a professional to help in your investigation: comparing trademarks often requires a specialized understanding of what marks will be considered confusingly similar or deceptive. 
• If you are selling a trademark, make sure you own it. Although this may seem obvious, ownership of intellectual property is rarely clear-cut. For example, you may have a name that you think of as your trademark, but unless you have used it in business, you do not have rights in that mark. Even if you have been using a mark in your business, another company may have started using it before you and have priority rights in that mark. A thorough search of the relevant marketplace and registry office should be conducted before you attempt to sell your trademark.
• Both parties should review the assignment carefully to ensure that all relevant deal points have been included. It is better to be over-inclusive than under-inclusive. Do not assume that certain expectations or terms are agreed to if they are not stated expressly in the document.
• Sign two copies of the assignment, one for you and one for the other party.
• It’s a good idea to have your assignment notarized. This will limit later challenges to the validity of a party’s signature or of the transfer itself.
• If your agreement is complicated, do not use the enclosed form. Contact an attorney to help you draft an assignment that will meet your specific needs. 

The following provision-by-provision instructions will help you understand the terms of your assignment. The numbers and letters below (e.g., Section 1, Section 2, etc.) correspond to the provisions in the agreement. Please review the entire document before starting your step-by-step process. 

• Introduction of parties. Identifies the document as a trademark assignment. Write in the date on which the agreement is signed. Identify the parties and, if applicable, what type of organization(s) they are. Note that each party is given a name (e.g., “Assignor”) that will be used throughout the agreement. The Assignor is the party that is giving (“assigning”) its ownership interest, and the Assignee is the party receiving it.
• Recitals. The “whereas” clauses, referred to as recitals, define the world of the assignment and offer key background information about the parties. In this agreement, the recitals include a simple statement of the intent to transfer rights in the trademark.
• Section 1: Assignment of marks. The assignment and acceptance of the assignment of the trademarks and service marks. Note that the marks being assigned are not described in the agreement itself. The assignment references “Schedule 1,” and explains that the full description is located on that schedule. Be as complete and clear as possible in your description of the property being transferred.  Note too the emphasis placed on the goodwill being sold with the property. Goodwill can be defined as the intangible value of a piece of property (e.g., a brand’s reputation and recognizability). Remember that this is an essential element of a trademark transfer: assignments attempted without goodwill are considered invalid.
• Section 2: Consideration. In most agreements, each party is expected to do something. This obligation may be to perform a service, transfer ownership of property, or pay money. In this case, the Assignee is giving money (sometimes called “consideration”) to receive the Assignor’s property. Enter the amount to be paid, and indicate how long the Assignee has to make that payment after the agreement is signed.
• 3(a): it is the owner
• 3(b): it has not sold or transferred the marks to any third party.
• 3(c): it has the authority to enter the agreement.
• 3(d): it does not believe that the marks have been taken from any third party without authorization (e.g., a knowing copy of another company’s trademark).
• 3(e): it does not know of any permissions that have to be obtained in order for the assignment to be completed. In other words, once the agreement is signed, the assignment will be effective without anyone else’s input.
• 3(f): the marks weren’t created while the creator was employed by a third party. In many cases, if an individual was employed by a company and came up with a product, the company will own that product. This section offers assurance to the Assignee that there are no companies that will make that claim about the marks being sold. If you and the other party want to include additional representations and warranties, you can do so here. 
• 4(a): has the authority to enter the agreement.
• 4(b) has enough funds to pay for the assignment. 
• If you and the other party want to include additional representations and warranties, you can do so here. 
• Section 5: No early assignment. Prevents the Assignee from re-transferring the marks, or using them as collateral for loans, until it has made complete payment of the money due under the agreement. 
• Section 6: Documentation. The Assignor’s promise to help with any paperwork needed to complete an assignment (e.g., filing information about the assignment with the USPTO and transferring document titles). The bracketed phrases make the additional promise that the Assignor will help with transfer paperwork for filings outside of the country. If this is not relevant to your agreement, delete the bracketed phrases.
• Section 7: No further use of marks. Indicates that after the effective date of the agreement, the Assignor will stop using all of the trademarks being transferred and will not challenge the Assignee’s use of those marks.
• Section 8: Indemnification. A description of each party’s future obligations if the trademark is found to infringe on a third party’s rights. There are two options provided, and you should choose the one that best fits with your situation. In the first, the Assignor takes all responsibility for infringement, promising to pay all expenses and costs relating to the claim. In the second, the Assignor makes its responsibilities conditional, greatly limiting its obligations if a claim is brought. Select only one of these options, and delete the other.
• Section 9: Successors and assigns. States that the parties’ rights and obligations will be passed on to successor organizations (if any), or organizations to which rights and obligations have been permissibly assigned.
• Section 10: No implied waiver. Explains that even if one party allows the other to ignore or break an obligation under the agreement, it does not mean that the party waives any future rights to require the other to fulfill those (or any other) obligations.
• Section 11: Notice. Lists the addresses to which all official or legal correspondence should be delivered. Write a mailing address for both the Assignor and the Assignee.
• Section 12: Governing law. Allows the parties to choose the state laws that will be used to interpret the document. Note that this is not a venue provision. The included language will not impact where a potential claim can be brought. Write the applicable state law in the blank provided.
• Section 13: Counterparts/electronic signatures. The title of this provision sounds complicated, but it is simple to explain: it says that even if the parties sign the agreement in different locations, or use electronic devices to transmit signatures (e.g., fax machines or computers), all of the separate pieces will be considered part of the same agreement. In a modern world where signing parties are often not in the same city—much less the same room—this provision ensures that business can be transacted efficiently without sacrificing the validity of the agreement as a whole.
• Section 14: Severability. Protects the terms of the agreement as a whole, even if one part is later invalidated. For example, if a state law is passed prohibiting choice-of-law clauses, it will not undo the entire agreement. Instead, only the section dealing with the choice of law would be invalidated, leaving the remainder of the assignment enforceable.
• Section 15: Entire agreement. The parties’ agreement that the document they’re signing is “the agreement” about the issues involved. Unfortunately, the inclusion of this provision will not prevent a party from arguing that other enforceable promises exist, but it will provide you some protection from these claims.
• Section 16: Headings. Notes that the headings at the beginning of each section are meant to organize the document and should not be considered operational parts of the note.
• Schedule 1: List of trademarks and/or service marks. In order for a trademark assignment to be effective, the marks being transferred must be clearly identified. Be thorough in your description and attach any registrations or samples that you may have. If you do include samples, reference the inclusion of those samples in the schedule (e.g., “See attached drawing.”).

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Trademark Licensing: Everything You Need to Know

Trademark licensing is a type of merchandise agreement. The licensor receives a certain amount of money or royalties, in exchange for sharing the trademark. 13 min read updated on January 01, 2024

Updated October 27, 2020:

What Is Trademark Licensing?

Trademark licensing is the process by which a registered trademark owner, called a licensor or proprietor, allows another party, called a licensee, to make and distribute specific products or services under the licensor's trademark agreement. Trademark licensing is a type of merchandise agreement.

The licensor receives a certain amount of money or royalties, a percentage of all sales, in exchange for sharing the trademark. This compensation is also called consideration. Fashion and consumer products concerned with sports and entertainment are often sold under a trademark licensing agreement.

The licensee usually creates a trademark licensing agreement, but a licensor can also create this document. Both parties usually agree upon the terms before creating a trademark licensing agreement.

To be eligible for legal enforcement, a trademark license agreement doesn't need to appear in writing. However, legal cases about written trademark license agreements are easier to resolve, less time consuming, and costly. Legal experts strongly recommend that all trademark licensing agreements get documented in writing and become signed and dated by both the licensor and licensee.

Types of Trade Licenses

• Exclusive License: The licensee gains sole commercial rights to the trademark. The licensor has no commercial rights but gains a sum of money for entering the agreement. The licensee also receives future profits or incurs losses that come from commercialization. Exclusive licenses may have limits on the products and location.
• Sole license: The licensee and licensor can use the trademark. The licensor cannot license the trademark to a third party.
• Non-exclusive license: The licensee, licensor, and any outside individuals the licensor also assigns a license to can use the trademark.

Parts of a Trade License Agreement

While individual trade license agreements vary, they should always include:

• The legal names of the licensor and licensee
• The business structures of the licensor and licensee
• Type of license (exclusive, sole, or non-exclusive; see above)
• The trademark(s) included in the licensing agreement
• The products and services concerned with the agreement
• The geographic territory where the licensee may operate and sell the products or services
• Quality control provisions define clear standards about the nature and quality of the licensed products or services. This area is the most important part of a trademark licensing agreement for licensors. Promises, warranties, or both that the licensor makes are representations.
• Payment details , such as whether the licensor will get royalties or a lump sum, how much these payments amount to, and when the licensor will get paid
• The date the license will start and its expiration date , if known

Some added provisions can help improve the agreement for both parties. These include provisions that:

• The licensor will approve all advertising and promotional materials before any marketing content gets distributed.
• The license can be renewed.
• Specific conditions apply for renewal.
• The license will not be shared with an outside individual or sold to an assignee, either in the United States or internationally.
• The license will last for a set amount of time.
• The licensor and licensee have specific responsibilities when the license ends.
• Penalties will apply if either party breaches the license.
• Any breach must be remedied in a specific time frame

A trademark license can become a very complex and long document, easily reaching 100 pages, if it has multiple marks, products, geographic locations, and financial provisions. UpCounsel provides a sample trademark licensing agreement .

Why Is Trademark Licensing Important?

Trademarks must be protected. Under the Trade Marks Act 1995, licensors must keep control over the authorized use of their trademarks. If they don't maintain financial control over trading activities and quality control over the products and services associated with trademarks, they could lose the rights to them in the future. Being proactive is important; unfortunately, enforcing trademarks can be difficult.

Major brands can afford to pay lawyers to constantly look online and offline for people using branded trademarks in illegal ways. For example, MGM (Metro-Goldwyn-Mayer) would likely find and send a cease-and-desist letter to a community magazine using a logo that is like or copies MGM and the lion in a full-page advertisement for a Main Street jewelry store.

Small companies without these resources can find enforcing their trademark more challenging. While enforcement is vital for maintaining a trademark, small businesses can damage customer goodwill if they handle this issue carelessly. Proposing a trademark licensing agreement, rather than threatening to sue, is a good way to support goodwill.

Reasons to Consider Using Trademark Licensing

• Reach new markets. You can expand your business through your partner's marketing and distribution channels .
• Increase brand recognition. Licensing improves visibility among both brands by giving them a fresh look, putting them on new products and in new channels. As a result, licensing agreements can raise awareness among consumers.
• Distribute workload. When you sign a trademark licensing agreement, you gain a professional partner who can take some of the pressure off you. For example, when a licensor signs a trademark licensing agreement, the licensee becomes responsible for the quality of goods and services it creates using the trademark.
• Improve your business. Your licensing agreement forges a partnership that can benefit both parties in the long term. For example, licensees can leverage the emotions generated by the trademark, such as pride in a sports team's logo or the trust embodied by a well-known brand.

Requirements for Trademark Licensing

Businesses screen potential licensees to make sure they are financially secure and well run enough to use their trademark. That's why most licensors create requirements that new licensees must meet.

Harvard University is one example of an entity that regularly enters into trademark licensing agreements.

Harvard's Trademark Program governs licensing of the university's trademarks on products sold domestically. These products typically include apparel, stationery, bags, and novelty items. Harvard will not license the university's trademarks on the following products:

• Alcohol and tobacco products
• Drug equipment
• Certain adult forms of entertainment
• Guns and other weapons
• Products promoting gambling, betting, or lotteries

The program gets coordinated using in-house resources, with staff responsible for managing the process, from identifying prospective licensees to contract negotiations . Managing the program with in-house resources helps protect the university's name, values, and reputation.

Generally, companies must fulfill a stringent set of requirements to get a standard trademark license from another business entity :

• Produce products following the entity's licensing standards. Licensed products must meet certain classes and quality standards.
• Correctly represent the business entity's trademarks
• Provide product samples for quality assurance and correct trademark usage
• Keep commercial general liability insurance
• Support Fair Labor Association (FLA) membership and abide by the FLA Code of Conduct
• Provide artwork for review and approval before any material is produced
• Pay any licensing fees (such as administration fees)
• Submit royalty reports and, if necessary, royalty payments

Examples: What Could Happen When You Sell or License Your Trademark?

Example 1: Sally's registered mark "Sally's Samplers" for chocolate has boosted the sale of her boxed chocolates. When a large candy maker decides it wants to use the mark, the company offers to buy it from Sally. If Sally sells the mark to the candy maker, she can no longer use it and the candy maker can use her mark however it chooses to do so.

Example 2: After selling "Sally's Samplers" for a big sum, Sally decides to step away from her business to do some sewing and gardening. When she moves into her rustic mountain retreat, she discovers a heart-shaped hoe in the garden shed. Her Aunt Lucy had made the hoe many years ago. Sally begins selling "Aunt Lucy's Heart-Shaped Hoe" and uses the marketing experience she gained selling "Sally's Samplers." The Heart-Shaped Hoe skyrockets in popularity, and now a major garden tools manufacturer wants to buy the mark and mass-produce the hoe.

Sally has witnessed how this business situation works. "Sally's Samplers" is now used not only for candy but also on a chewing tobacco label. She wants to prevent her Aunt Lucy's good name from being treated in this way.

She agrees to sell the rights to the mark, but not the right to create derivative marks. Since Sally is not familiar with trademark law , she doesn't realize her decision won't protect her against others who want to use "Aunt Lucy" in connection with products or services that meet Sally's disapproval.

Example 3: After the heart-shaped hoe incident, Sally promises herself that she won't make the same decision again. She develops a new invention called "Cat Call," a device that allows a cat owner to call a cat-back indoors after it takes an outdoor bathroom break. The new invention skyrockets and Sally again gets offers from other brands.

She decides to license the mark to a manufacturer that specializes in items for pets. The license restricts the mark's use to the specific product. Drawings and diagrams attached as an appendix in the license agreement make the product itself clear. The agreement also limits the way the mark can be used to promote the product and the geographic area where the mark gets used.

The license agreement runs only five years. At this time, Sally and this manufacturer can decide whether to renew the license. This decision gives Sally the control she wants, but it also reduces the mark's value for the entity that buys the mark.

Frequently Asked Questions

• What is the trademark law's purpose?

Trademark law prevents unfair industry competition by making sure intellectual property remains distinctive so that consumers don't become confused among brands. This law makes sure customers know what they're buying when they choose their favorite products. They should feel confident that products and services with a familiar trademark are of expected quality.

Trademark law also gives trademark holders exclusive rights to their intellectual property and legal solutions if those rights get breached. Except when a license agreement is involved, other businesses should not be able to profit from someone else's trademark.

• What are the differences between copyrights and trademarks?

Trademarks protect the attributes that promote commercial goods or services, such as product names and logos. Copyrights protect individual and original artistic works, such as novels or songs. If a logo is artistic, the logo could be protected by a trademark and copyright.

Trademarks prevent businesses from creating the same or similar elements to promote their own goods and services that could confuse or mislead the public. A similar or even the same artistic work may be permitted under copyright law if the work created did not get influenced by original work.

The first person to use a mark in commerce owns the trademark. Copyrights don't rely on publication. The creator of the artistic work or a person or entity the creator names owns the copyright.

Trademarks can stay valid so long as they're used regularly in commerce and protected. Copyrights have a term of 50, 75, or 100 years, depending on who owns them.

People can enter copyright licensing agreements, just as they do trademark licensing agreements. These agreements allow paintings to appear on T-shirts. A copyright agreement isn't needed for many old paintings which are now in the public domain . Similarly, you don't need to record company permission or a copyright agreement to use music in merchandise if the music is not copied from the original recording. If lyrics are reproduced, a licensee would arrange that reproduction with the music publisher, not the record company.

• What do trademarks protect?

Trademark law offers the most protection to marks of distinction. These types of marks include:

• Distinctive logos
• Fictional words
• Fictional characters
• Decorative marks or words that suggest something from the imagination (for example, Neighaway for horse trailers)
• Arbitrary marks , or words that are surprising or unexpected (for example, Pineapple for a brand of virtual reality headsets)
• Suggestive marks , or words that describe a product or service's qualities (SureStick for poster putty)
• Slogans (for example, "There's Room for You," for a hotel chain)

Commonly used words receive less protection unless they have developed public recognition during a long market history. These types of marks hold a secondary meaning.

Generic marks are common words that describe a product. These words can't be protected by trademark laws. For example, the words gnocchi and tomato sauce could not be protected by a trademark for a food product cooked in the microwave.

• Could I create a family of trademarks?

Creating a family of trademarks, with common elements uniting the marks, can be to your advantage. The public should learn to recognize the common elements when they see them and link them back to you. This effort can give you a greater protection for future trademarks incorporating those familiar elements.

• How are trademarks protected?
• Federal and state registration. While trademark registration isn't required, registration provides greater protection and legal advantages (such as the recovery of damages and profits). A common law trademark is only protected within a business's local area. State registration offers statewide protection, while federal registration protects the mark across the United States. Registered trademarks feature in searchable trademark databases so other businesses can easily find them and avoid a breach.
• Notices. The recognized trademark symbols TM, SM, and registered trademark (®) tell the public of a trademark's status. It is illegal to use the registered trademark symbol before receiving registered trademark approval. You can use the TM and SM freely on any non-infringing trademark.
• Trademark licenses. This license formalizes an agreement between a licensor and licensee, protecting the way a trademark can be used.
• Enforcement of infringement. Stopping infringement prevents people from unlawfully using the trademark and diluting the brand. If trademark holders don't act against infringers, they can lose their trademark altogether.
• Could I license my trademark to a blogger or fan community infringing on my intellectual property?

Proposing a licensing agreement may be a better way to handle a blogger or fan community infringing on copyright than a cease-and-desist letter or lawsuit. The license can help you control the use of your trademark, create a revenue stream for you, and help you support good relationships with the people who are already supportive of your brand.

• Are licensed products simply promotional materials?

Licensed products are items that people would pay money for. Therefore, they must meet high-quality standards. Promotional materials are not held to this same standard as they're usually given away to promote a business or brand.

• Do I need to sell my licensed product at retail stores?

While retail stores can give licensed products great exposure, many businesses have found success online. You can sell directly to consumers using your own e-commerce website.

• How do royalties work?

The licensor usually receives an advance royalty and ongoing royalties as part of a licensing agreement.

The advance royalty is a flat sum paid at the start of the agreement. This money makes sure the licensor receives something for sharing trademark rights, even if the product doesn't sell.

Ongoing royalties earn the licensor a percentage of every sale. Typical royalty amounts vary depending on the product and trademark.

• Greeting cards and gift wrap: 2 to 5 percent
• Household items (cups, sheets, towels): 3 to 8 percent
• Fabrics, apparel (T-shirts, or caps) decals, bumper stickers: 5 to 10 percent
• Posters and prints: 10 percent or more

The licensor usually sets the royalty amounts but may be willing to negotiate. Once agreed upon, the royalty amounts and payment frequency should be detailed in the licensing agreement.

• Should I hire a licensing agent?

Licensing agents aren't necessary, but they can be helpful when entering a trademark licensing agreement. These professionals can manage everything from contract negotiations and product development to product packaging and merchandising. Research licensing agents carefully to make sure you pick a qualified professional. The International Licensing Industry Merchandiser's Association and License magazine are both resources you can use.

You should also learn as much as you can about your target market. Read newspapers, magazines, blogs, and websites. Observe people in your target demographic. Note what they're wearing, how they spend their leisure time, and what their purchase decisions involve.

Strike up conversations with them to get to know them better. When you understand your target market, you'll be better equipped to find a licensee and license agent that match your goals.

• I thought about becoming a licensee, but I'm not sure. Is there another alternative to licensing someone else's trademark?

You could hire someone to create your own materials under a work-for-hire agreement. Rather than using trademark logos, you could hire an artist or photographer to create images for your merchandise.

• Is trademark licensing the same as trademark assigning?

Trademark licensing should not be confused with trademark assigning, which sees a total change in a trademark's ownership. Trademark assigning is much simpler than trademark licensing. When a trademark is assigned, the licensor typically transfers all aspects of the trademark:

• The registration rights
• The right to create derivative works
• Income, royalties, and claims linked to the mark due or payable on or after the assignment's completion
• Goodwill linked to the mark. This goodwill is the strength of the association between a brand and its source (manufacturer, store, or source of sponsorship) and must be included in any valid trademark assignment.

A trademark's new owner must file paperwork with the United States Patent and Trademark Office (USPTO) within three months of the trademark assignment's completion.

Trademark licensing is riskier than trademark assigning for the licensor because this individual retains a stake in the trademarked goods or services. It also forms a continuing relationship between the licensor and licensee, which has the potential to sour.

• What dilutes a trademark?

A trademark is diluted when similar trademarks get used in any context. Similar trademarks leverage off the original trademark's reputation. They may confuse consumers who are unsure which brand is the one they prefer, blur the distinctiveness of the original mark, or tarnish the mark's reputation. Trademark holders should act quickly to stop dilution, which is a type of trademark infringement .

• Can you register a trademark license agreement?

Any trademark license agreement about a trademark registered with the USPTO can be registered. The license can be recorded with the USPTO's Assignment Services Division. This record makes the licensee's right to use the trademark public record.

Some licensors and licensees are reluctant to share the confidential information in their trademark license agreement with the public. In these cases, a redacted agreement or separate document referring to the license may be filed.

Steps to File

Below is a general outline of the steps for filing a trademark license agreement.

• Submit a written request to a business entity for review and evaluation of the trademark license requestor's product or service offerings.
• If invited, the trademark license requestor can apply for a license.
• Submit a license request proposal and license request application . The license request proposal should contain:
• An intention statement explaining the individual's reasons for pursuing the license
• A company background summary with a mission statement, business goals, and history
• A detailed list of any proposed products or services to be licensed
• A product catalog, if available
• A list of any business affiliations the requestor uses to maintain its licenses
• A product line history
• A detailed business plan outlining the proposed strategy for production, distribution, and sale products and identifying target audience

In addition, the proposal and application must be accompanied by:

• A copy of the certification of membership with the Fair Labor Association (FLA)
• Written confirmation of commercial general liability insurance
• Product samples

The business entity reviews all documents to determine whether the requestor meets the business's licensing criteria. If approval is granted, the company will be given a standard trademark license and documented license agreements.

• Complete and return the license agreements for the business entity's review.
• If everything is in order, the company will be granted a standard trademark license . The requestor will receive written notification and an executed original license agreement, a royalty reporting form, and digital files of the business entity's primary trademarks.

Contact a Trademark Attorney

A trademark licensing agreement can boost your business, but it shouldn't be entered into lightly or without legal representation. Post your legal need through UpCounsel and receive custom quotes from experienced trademark lawyers. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies such as Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• Trademark Quality Control
• Purpose of Trademark
• Trademark Law
• What Does a Trademark Protect
• What does Trademark Mean
• Trademark Requirements
• Are All Trademarks and Names Legally Protected
• Valuation of Trademarks
• How Much Does It Cost to Trademark a Name
• Benefits of Registering Trademark
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A quick overview of the differences between assignment and licensing of a trademark

• Categories: Trade Mark Registration
• Beyza Karakaya
• March 31, 2023

Trademark licensing is where the owner of the registered trademark allows others to use their mark. Once a licence is granted, this will allow the licensee (the person who is receiving the licence) the right to use the trademark owner’s mark, and in return the trademark owner will receive a sum of money, thus the trademark owner will be able to generate income.

On the other hand, there is trademark assignment. This is where the trademark owner hands over the proprietorship of their trademark to a third party, meaning that the assignor (the trademark owner who transfers their trademark) ceases to be proprietor of that trademark from that point on. This will also mean that the assignor will no longer be able to use that mark like its own, except where the assignee provides the assignor with a licence.

In summary, an assignment is where the ownership of a trademark has shifted to someone else, while licencing is where the trademark owner grants permission to a third party to use their trademark, while still remaining to be the owner of that registered mark.

What are the advantages of a licence?

• Licensing your trademark may promote your mark to be known to different industries;
• Licensing your trademark may allow you to receive financial income without giving up the ownership of your mark;
• Purchasing a licence may be cost effective as you may not need to incur expenses to promote and market your goods.

What are the advantages of an assignment?

• The assignee could benefit from the already recognised and developed trademark;
• If the assignment is registered it will make it easier for the assignee to use the mark and take legal action against those who use it without authorisation.

If you would like to discuss protection of your brand, please get in touch with the Trademarkroom team today.

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Related Practices & Jurisdictions

• Intellectual Property
• Litigation / Trial Practice
• Federal Circuit / U.S. Court of Spec. Jurisdiction

After a trademark achieves federal registration, ownership of the mark may change hands for a variety of reasons. When a trademark owner transfers their ownership in a particular mark to someone else, it is called an assignment. Generally, for an assignment of a trademark to be valid , the assignment must also include the ‘goodwill’ associated with the mark (goodwill is an intangible asset that refers to the reputation and recognition of the mark among consumers). If the assignment of a trademark includes the mark’s goodwill and is otherwise legal, the assignee gains whatever rights the assignor had in the mark. Importantly, this includes the mark’s priority date, which has implications for protecting the mark from potential infringers going forward.

In contrast, if an assignment of a trademark is made without the mark’s accompanying goodwill, then it is considered an assignment “in gross” — and the assignment is invalid under U.S. law. Courts have analyzed whether an assignment was made in gross in a few different ways, but, as is the case with much of trademark law, protecting customers from deception and confusion is the primary motivation behind any analysis for determining the validity of an assignment.

One way courts determine if an assignment was made in gross is through the substantial similarity test. This test essentially examines whether the assignee is making a product or providing a service that is “substantially similar” to that of the assignor, such that consumers would not be deceived by the assignee’s use of the mark. This analysis includes an assessment of the quality and nature of the goods and services provided under the mark post-assignment.  Thus, even if an assignee is using the mark on the same type of goods, but the goods are of lower quality than the goods previously offered by the assignor under the mark, the assignment could be invalid. However, slight or inconsequential changes to goods and services after an assignment are not likely to invalidate the assignment, as such changes are to be expected and would not thwart consumer expectations.

Decisions on the question of substantial similarity are only marginally instructive, as the  test calls for a fact specific inquiry into what the consuming public has come to expect from the goods or services offered under a given mark. For example, courts have noted that despite similarities in services and goods, “even minor differences can be enough to threaten customer deception.” [1] Instances of products or services that were deemed not substantially similar (and thus resulted in invalid assignments) include: an assignee offering phosphate baking powder instead of alum baking powder; [2] an assignee using the mark on a pepper type beverage instead of a cola type beverage; [3] an assignee producing men’s boots as opposed to women’s boots; [4] an assignee using the mark on beer instead of whiskey; [5] and an assignee selling hi-fidelity consoles instead of audio reproduction equipment. [6]

Conversely, case law has also shown that substantial similarity can be found even when products or services do differ in some aspects, if consumers aren’t likely to be confused. For example, the following product changes did not result in a finding of an invalid assignment: an assignee offering dry cleaning detergent made with a different formula; [7] an assignee using thinner cigarette paper; [8] and an assignee selling a different breed of baby chicks. [9]

Whether goods or services are substantially similar may seem like an easy test to apply, but, as case law demonstrates, this fact-intensive analysis can yield results that look strange in the abstract. Disputes involving the validity of a trademark assignment are decided on a case-by-case basis, using the specific facts at hand to determine if consumer expectations are being met under the new use. Thus, while trademarks acquired through assignment can have significant value (and grant the assignee important rights formerly held by the assignor), assignees should be wary of changes to goods or services under an acquired mark that could be seen as deceiving the public.

[1] Clark & Freeman Corp. v. Heartland Co. Ltd. , 811 F. Supp. 137 (S.D.N.Y. 1993).

[2] Independent Baking Powder Co. v. Boorman , 175 F. 448 (C.C.D.N.J.1910).

[3] Pepsico, Inc. v. Grapette Company , 416 F.2d 285 (8th Cir. 1969).

[4] Clark & Freeman Corp. v. Heartland Co. Ltd. , 811 F. Supp. 137 (S.D.N.Y. 1993).

[5] Atlas Beverage Co. v. Minneapolis Brewing Co. , 113 F.2d 672 (8 Cir. 1940).

[6] H. H. Scott, Inc. v. Annapolis Electroacoustic Corp. , 195 F.Supp. 208 (D.Md.1961).

[7] Glamorene Products Corp. v. Procter & Gamble Co. , 538 F.2d 894 (C.C.P.A. 1976).

[8] Bambu Sales, Inc. v. Sultana Crackers, Inc. , 683 F. Supp. 899 (1988).

[9] Hy-Cross Hatchery, Inc v. Osborne 303 F.2d 947, 950 (C.C.P.A. 1962)

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The Pros and Cons of Trademark Licensing

by Marks Gray | Apr 12, 2019 | Intellectual Property

With a trademark licensing agreement, a registered trademark owner (the licensor) receives a negotiated royalty in exchange for allowing another party (the licensee) to use the licensor’s trademark.

The licensor receives revenue for the use of their mark without the expenses and risks of product manufacturing, marketing, and sales. The licensee, in turn, has an opportunity to use the trademark without the expenses and risks of research and development.

When employed properly, a trademark license agreement can be a cost-effective way to reduce the price of entry into the marketplace for both parties. However, there are pros and cons to consider first.

The Advantages of Trademark Licensing

Pro: share instead of shoulder.

Running a business means a lot rests on your shoulders. If you are a small business owner, you are likely shouldering the brunt alone. With a trademark licensing agreement, you may gain a professional partner who can take some of that pressure off.

There are new pressures added, such as monitoring the use of your trademark and complianc with the agreement. But with someone in your corner with the same goals as you, it becomes easier to level the distribution of responsibility.

PRO: Access Experience

Owning a trademark does not necessarily mean you have the skills, capital, or commitment to commercially exploit it yourself. You may have expertise in a few areas, but chances are you are not an expert in all things.

Hopefully, this is part of the reason you select the appropriate licensee. This type of agreement can offer a partnership with experience in the areas that you still need to spend time with and learn from.

PRO: Reach New Markets

Consumers often base their purchasing decisions upon either

• brand reputation or
• personal experience with a brand.

Newer licensors have an opportunity to forge partnerships that can leverage an existing reputation.

Your business should expand through your licensee’s existing marketing and distribution channels, increasing awareness for you, and automatically boosting trust in your mark due to the association with the better-known brand. This can benefit both parties in the long term.

PRO: Collect (Relatively) Passive Revenue

Each of the previous advantages is ultimately an effort to increase financial returns for the trademark owner. Regardless of where you are in the branding process, a licensing agreement may allow you a relatively passive income without losing any ownership rights.

On one end, manufacturers are often willing to pay significant royalty rates for the right to identify their goods with an established and widely recognized trademark. On the other, increasing awareness of your brand by associating with another well-known brand brings additional revenue to you as well.

PRO: Effective Mitigation Tool

Seeing your trademark infringed upon can be a shock. Often, the first reaction is “lawsuit,” but for small companies without extensive legal resources, legal trademark enforcement can be a huge challenge.

Sometimes a better solution is to mitigate the damage – and quite possibly improve business greatly, too – by proposing a trademark licensing agreement to the infringer rather than threatening to sue. This approach is a great way to build relationships, support goodwill, and foster consumer confidence.

The Downsides of Trademark Licensing

Con: compromised quality..

Depending on the terms of your agreement, you may end up giving up control over any number of elements, including packaging, distribution, cost, sales, marketing, or even how the product is produced. All of these issues should be addressed in the licensing agreement to the satisfaction of both the licensor and licensee.

Your brand equity could take a huge hit should the licensee not meet the quality currently expected of your brand by your customer base. It is important to understand what rights you are giving up in your agreement.

CON: Liability Disputes

Part of agreeing to license your trademark is accepting the risk and responsibility of possible product liability disputes. Even when liability is carefully outlined within your agreement, ultimately you would want to be involved in all efforts to rectify any situation that arises.

Regardless of what the paperwork says you are never one hundred percent off the hook when you care about your trademark.

CON: Poor Sales

Decreased product quality, unsuccessful marketing efforts, or lack of trademark use are just a few issues that can lead to poor sales.

No sales equals no royalties. Depending on how you initially set up your licensing agreement, you may end up having to pay if or when a product is returned or damaged or goes on markdown. Many of these potential issues can be addressed in your agreement, but you need to make sure they are handled properly.

CON: Risking Trademark Loss

Trademark licensing is not something you just set and forget. You must be careful in

• selecting a trustworthy partner,
• outlining terms to protect yourself, and
• policing your licensee’s use of your trademark.

Otherwise,  you may be leaving yourself open to piracy or other situations in which your “partner” makes a profit they never pay royalties on.

CON: The Waiting Game

Even when you have chosen an excellent partner and all is going according to plan, often licensees pay out quarterly… and one quarter behind. This means it may be six months before the first royalty check is issued and that is only if the products sell.

The Bottom Line

As with every business decision you make, there are risks involved with licensing your trademark. However, there are also huge potential advantages if you do your due diligence in selecting a partner and have a strong trademark licensing agreement in place.

No matter who your partner is, you should work with an experienced trademark attorney to ensure your rights and interests are protected. If you have any questions or concerns regarding trademark licensing, you can reach out to the Marks Gray intellectual property law team at [email protected] or 904-807-2180.

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Home of the Litigation Quality Patent

The main difference between assigning your intellectual property rights to another person or entity vs. licensing them to use your intellectual property is that in an assignment, ownership does not stay with the original owner, but goes to the assignee. In a licensing agreement, the licensee is granted the use of the intellectual property, but the ownership stays with the original holder of the property rights, whether a copyright, a trademark, or a patent. Which arrangement is better for your particular situation can be complicated to figure out. Let one of our experienced patent attorneys at Thompson Patent Law help you make the decision and draw up the kind of agreement that will work best for you. Call our office today at (512) 649-1046.

What is an Assignment Agreement?

An assignment agreement is a legal contract that transfers the ownership of intellectual property rights—usually a copyright, patent, or trademark—to another person or entity. The original owner of the rights does not retain any interest in the intellectual property in question. Assignments must be registered with the United States Patent and Trademark Office (USPTO) in most cases. Assignments carry a one-time, lump-sum payment at the time the agreement is signed and recorded. The original owner does not get any ongoing income from the intellectual property that they have assigned to another party. Assignments agreements are enforceable in court if they have been executed and recorded properly.

What is a Licensing Agreement?

In a licensing agreement, the original owner of the intellectual property rights does retain an interest in the intellectual property in question. The agreement may include a time limit on the licensee’s use of the product or idea, and usually includes some kind of ongoing payments to the owner of the rights (the licensor). Profits are generally not guaranteed at any particular level but may be set out as a percentage of the recipient licensee’s profits. In some licensing agreements, the licensor retains the right to use the property simultaneously, and in other agreements, the licensee is granted exclusive rights for a period of time.

Am I Better Off with a Licensing Agreement or an Assignment?

Each situation, each business, and each intellectual property rights owner is different. The best way to determine what the right course for you might be is to talk with an experienced professional intellectual property attorney . The lead attorney at Thomson Patent Law, Craige Thompson, has over 20 years of experience dealing with intellectual property rights issues and can give you the solid legal advice you need to decide whether to license or assign your hard-won intellectual property rights. Call us today to get your questions answered at (512) 649-1046.

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Home > Trademark Blog > Trademark License > What is a Trademark License? Is Trademark Licensing Right for Me?

What is a Trademark License? Is Trademark Licensing Right for Me?

A trademark license (which is different than a trademark assignment ) is basically an agreement in which a trademark owner (the “licensor”) permits someone else (“the “licensee”) to use the licensor’s trademark in connection with specific products or services.  Although a trademark license agreement isn’t generally required to be in writing to be legally enforceable, it’s strongly recommended that all trademark licensing agreements be in writing and signed by both the licensor and licensee.

Trademark Licensing is Everywhere

Some common examples of trademark licensing you probably see every day are:

• A professional sports team permitting clothing manufactures to print team names and insignias on their merchandise
• Coca-Cola allowing independent bottlers of their soft drinks to label the finished product with the COCA-COLA trademark
• Subway authorizing its independent franchisees to use the SUBWAY trademark in connection with their sandwich shops

What Must a Trademark License Include?

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 its products/services
• Quality control provisions that set forth clear standards as to the nature and quality of the licensed products/services

Quality Control is Essential

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 prior to 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.

What Else Should Be In a License?

Of course, the five provisions listed above are not the only ones that the parties to a trademark license should consider.  Optimally, a trademark license should also explicitly state (1) whether the license is exclusive or non-exclusive, (2) the duration of the license, (3) whether the license may be renewed and under what conditions, (4) the amount of any royalty payments or other compensation due to the licensor and when those payments are to be made, (5) the responsibilities of both parties upon the termination or expiration of the license, and (6) the consequences of breaching the license and the time in which the breach must be remedied.

Recording a Trademark License

If the trademark being licensed is registered in the United States Patent and Trademark Office (USPTO), the trademark license may be recorded with the Assignment Services Division in order to give constructive notice to the world of the licensee’s rights to use the mark.  However, many licenses include confidential or commercially sensitive information that the parties may not want available to the public.  In those cases, it may be possible to record a redacted version of the license agreement or to file a separate document executed by the parties that makes reference to the existence of a license.

Learn More About Trademark License Agreements

In conclusion, trademark licensing can be an effective and relatively inexpensive way for a trademark owner to expand the use and public recognition of its trademark.  But, there are also many pitfalls of which licensors must be aware in order to avoid diminishing the value of their trademarks or, even worse, losing their trademark rights all together.

I’m experienced US trademark attorney Morris Turek.  If you would like to learn more about trademark licenses, or perhaps need some assistance with preparing a trademark license from a skilled trademark attorney, please feel free to contact me at (314) 749-4059 for your free legal consultation.  You can also request your consultation by emailing me at [email protected] or by completing my contact form (below).  I look forward to hearing from you soon.

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Intellectual Property Assignment Agreements & Licenses

Intellectual property (IP) can be just as valuable as—or even more valuable than—tangible property. Many companies make money exclusively through marketing products based on intellectual property rights. That’s why it is so important to protect your intellectual property through patents, trademarks, copyrights, and other legal devices that keep your intellectual property safe.

However, once you have secured your intellectual property rights, it is sometimes more convenient or valuable to let someone else use them in exchange for a fee, which is why intellectual property agreements and intellectual property contracts exist. These documents are complex agreements that determine the manner in which third parties can use your intellectual property. Intellectual property agreements and intellectual property contracts require careful negotiation, and owners of intellectual property should conduct these negotiations with the support of an experienced intellectual property lawyer. Through Priori, you can connect with a vetted a lawyer who can help you draft and negotiate an intellectual property agreement or an intellectual property contract.

Understanding Intellectual Property Agreements & Intellectual Property Contracts

Because you have the right to confer your intellectual property rights to other parties, intellectual property agreements can take one of two basic form: assignment agreements and IP license agreements.

About Assignment Agreements

Under an intellectual property assignment agreement, you permanently transfer some or all IP rights to the assignee in exchange for a specified sum. Essentially, you sell the rights to a third party the same way that you could sell physical property for a permanent transfer. Generally, you relinquish all control, involvement, and claim on the intellectual property rights transferred.

About Intellectual Property Licensing

Under an intellectual property licensing agreement (also known as an intellectual property license or an intellectual property license agreement), you retain ownership of your patent, copyright, or trademark, but you give another party permission to use some or all of your intellectual property rights for a specific amount of time for a fee or royalty. These intellectual property contracts typically specify termination dates and procedures.

There are several types of intellectual property licenses embodied in a typical intellectual property agreement. The following three are the most common:

• Exclusive License.  You agree not to grant any other licenses of the invention and rights concerned, as well as not to use the technology yourself.
• Sole License . You agree not to grant any other licenses of the invention and rights concerned, but you can use such rights yourself.
• Non-Exclusive License . You agree to give the licensee certain rights, but you also reserve the right to grant licenses of the invention and rights concerned to third parties or to use them yourself.

You can also combine elements of these three types of intellectual property agreements, such as by giving an intellectual property license for exclusive rights in certain geographic areas. You can review a sample patent license agreement in Priori's Document and Form Learning Center . You can also learn more about software licenses here . 

Intellectual Property Assignment Agreement vs. Intellectual Property License

Which is better, an intellectual property assignment agreement or an intellectual property license? The reality is that there are pros and cons to each choice, depending on your needs and interests. Most of the time, IP holders want to maintain control of their IP, and they choose intellectual property licensing. This is advantageous because you can determine the manner in which your IP is used and change partners if a partnership isn’t advantageous. Also, intellectual property licensing allows you to produce a steady income from your IP over a particular time period and possibly confer the same rights to multiple users.

Intellectual property assignment agreements can also have its advantages, however. If you assign intellectual property to a third party, you no longer have any responsibility towards the product. That means you cannot generally be sued for problems relating to your IP and you are not responsible for any maintenance fees. Intellectual property assignment is generally more appropriate when you are selling your business or leaving a field entirely.

Priori Pricing

Depending on the complexity of your needs, the cost of drafting intellectual property licensing or intellectual property assignment agreements may vary. Priori attorneys typically create flat-rate packages ranging from $400 to $1,500 for relatively straightforward intellectual property agreements. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and receive a free price quote from one of our lawyers.

How does an exclusive license differ from an assignment?

While both exclusive intellectual property licenses and intellectual property assignment agreements give exclusive exercise of that right to another person in exchange for monetary compensation, an exclusive license is much more limited than an assignment. If you assign an IP right to another person, you permanently transfer that right and would have to repurchase it in order to use it again.

An IP license is generally subject to a certain term and possible renewal. For that reason, you generally get more money upfront with an assignment. In addition, unless otherwise stated in the contract, an exclusive license cannot generally be handed off to a third party without your permission, but if you assign that right to someone else, they can then license or sell it as they see fit.

What is an implied license?

In certain circumstances, an implied IP license arises without the existence of a formal licensing agreement if the conduct of the parties indicates that the IP right holder intended to license certain rights to the other party. Often, courts grant implied licenses in cases where one party created a copyrighted work at the request of another under a contract that did not explicitly confer the copyright to the purchaser after payment and completion of the work.

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What is the difference between trademark licensing and trademark assignment?

Trademark Assignment is a change in the ownership of a registered trademark. Whereas, trademark licensing is transfer of certain rights (In a restricted manner) of a registered trademark while retaining the ownership over the trademark.

Let us have a detailed look at what these two terminologies mean and how they are different from each other.

Also Read: Understanding Trademark & its Registration Process in India

Trademark licensing

Trademarks are important business assets that offer protection to your brand. Licensing your trademark can benefit your business strategy by expanding the reach of your brand to new markets and territories. In licensing of trademark, owner of a particular trademark can give the right to use the trademark to a third party in a restricted manner and in return for a royalty, while retaining the ownership with himself/herself.

Benefits of trademark licensing

• It helps in expanding the brand reach of the said mark.
• It can have a positive impact on business life and operations.
• Through licensing, the mark tends to become more popular and well-known.
• The workload of the company reduces

How to register for trademark licensing?

• Have a License Agreement in writing;
• Apply jointly with the intended Licensee for License registration to the Registrar of trademarks (Section-49) in form TM-U ;
• Submit an Affidavit affirmed by the owner mentioning the following: the details of the License, the relationship between the parties, the period of use, the applicable good/services;
• Pay the government fee of Rs 4500 for each trademark to be licensed under each class;

Application for registration is required to be made within 6 months from the date of effective date of the Agreement signed between the parties.

Trademark Assignment

As per the Trade Mark Act, 1999, the person entered in the register of trademark, as the proprietor of a trademark, shall have the power to assign a trademark and to give an effectual receipt of for any consideration for such Assignment. Assignment is complete transfer of ownership by the owner of the trademark to a third party.

There are two types of trademark assignments:                              

1.       Assignment without goodwill – the assignor restricts the assignee with the condition that the assignee cannot use the trademark assigned with the goods and services already in use by the assignor.

For example, the brand “KL” relating to his stationery product sells his brand to X. He will not use the mark “KL” concerning stationery products but can use this brand for any other products being manufactured.

2.       Assignment with goodwill – the assignor assigns the rights and value of the trademark associated with the product is also transferred to the assignee.

For example, the brand “KL” relating to his stationery products sells his brand to X. He can use the brand concerning stationery products or any other products he wants to manufacture.

Benefits of Trademark Assignment

• Every Assignment of a trademark is entered in the registry records and acts as a proof of ownership of the trademark.
• It takes less time than registering a new brand name.
• Both parties are advantageous as the assignor gets a reasonable amount for the brand name. The assignee will enjoy the already established brand while known in the market.

How to register for Trademark Assignment

• The prospective assignee must apply for the registration of Assignment before the Trademark Registration Office.
• Once the Registrar is satisfied, he will enter the details of the assignee as the owner of the trademark of goods and services assigned to him.
• If the parties dispute the validity of the transfer, the Registrar may refuse to register the transfer until the competent authority determines the parties’ rights.
• The trademark registrar will process the trademark assignment registration application within three months from the date of receipt of the application.
• Where the trademark registry is not satisfied with the integrity of any statement or any documents provided by the applicant it may request the applicant to provide additional proof.
• When the Registrar is pleased with the documentation, it will officially transfer the trademark from the original to the new owner.

When the Registrar allows the registration, He will enter the following data into the registry.

Also Read: A simplified guide on process of trademark search

• Name and address of the assignee;
• Date of Assignment;
• Description of the right to be transferred (where Trademark Rights are involved);
• Basis of the Assignment;
• Date of registration.

Trademark Assignment vs. Trademark Licensing 

• Assignment of a trademark is a transfer in the ownership of the trademark registration . Whereas in licensing, the ownership and proprietary rights of the trademark continue to remain with the original owner, but only a few restricted rights to use the brand are given to the third party.
• The assignment deed must be compulsorily in writing. Licensing isn’t required to be in writing.
• An assignment is entirely or partly; a license gives the rights for a particular period of your time.
• An assignment isn’t time-sensitive; the ownership is gone. Licensing is barely for a limited period of your time.

Both Assignment and Licensing of trademarks are significant issues, and proper strategizing may open aspects of opportunities for all, a licensor, a licensee, an assignor, and an assignee. Trademark licensing and Trademark Assignment involves developing a brand and its use. All these exist in the hands of the proprietor and are effective methods to manage the same.

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Akansha Tripathi

Akansha is a 3rd-year B.A. L.L.B (H) student, pursuing her summer internship at LegalWiz.in with an aim to make an impactful career in the filed of business compliance and corporate law. The subject of law fascinates her extensively.

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IP Assignment and Licensing

IP rights have essentially transformed intangibles (knowledge, creativity) into valuable assets that you can put to strategic use in your business. You can do this by directly integrating the IP in the production or marketing of your products and services, thereby strengthening their competitiveness. With IP assignement and IP licensing, IP owners can also use your IP rights to create additional revenue streams by selling them out, giving others a permission to use them, and establishing joint ventures or other collaboration agreements with others who have complementary assets.

  Expert tip: Assignment, license and franchising agreements are flexible documents that can be adapted to the needs of the parties. Nevertheless, most countries establish specific requirements for these agreements, e.g. written form, registration with a national IP office or other authority, etc. For more information, consult your IP office .

IP rights assignment

You can sell your IP asset to another person or legal entity.

When all the exclusive rights to a patented invention, registered trademark, design or copyrighted work are transferred by the owner to another person or legal entity, it is said that an assignment of such rights has taken place.

Assignment is the sale of an IP asset. It means that you transfer ownership of an IP asset to another person or legal entity.

IP for Business Guides

Learn more about the commercialization of patents, trademarks, industrial designs, copyright.

Read IP for Business Guides

IP licensing

You can authorize someone else to use your IP, while maintaining your ownership, by granting a license in exchange for something of value, such as a monetary lump sum, recurrent payments (royalties), or a combination of these.

Licensing provides you with the valuable opportunity to expand into new markets, add revenue streams through royalties, develop partnerships etc.

If you own a patent, know-how, or other IP assets, but cannot or do not want to be involved in all the commercialization activities (e.g. technology development, manufacturing, market expansion, etc.) you can benefit from the licensing of your IP assets by relying on the capacity, know-how, and management expertise of your partner.

  Expert tip: Licensing can generally be sole, exclusive or non-exclusive, depending on whether the IP owner retains some rights, or on whether the IP rights can be licensed to one or multiple parties.

Technology licensing agreements

Trademark licensing agreements, copyright licensing agreements, franchising agreements, merchande licensing, joint venture agreements, find out more.

• Learn more about Technology Transfer .

Trademark Assignment: All You Need to Know

This article on ‘Assignment of Trademarks: All you need to know’ was written by Shashanki Kaushik , an intern at Legal Upanishad.

Introduction

This article provides a comprehensive overview of the assignment of trademarks in India, focusing on the legal framework, relevant legislation, landmark judgements, and practical considerations. Understanding the nuances of trademark assignment is vital for businesses seeking to protect their intellectual property rights. In India, this process is governed by various laws, including the Trade Marks Act of 1999 and the Trade Marks Rules of 2017. This article explores the intricacies of trademark assignment, touching upon key aspects, legal provisions, and notable case law.

Assignment of Trademarks : Concept and Laws

Trade Marks Act, 1999, Section 2(1)(b): Definition of Assignment: The Act defines ‘assignment’ as the transfer of ownership, either with or without the goodwill of the business.

Section 37: Requirements for Assignment: This section outlines the essential requirements for a valid trademark assignment, including the need for the assignment to be in writing and signed by both parties.

Trade Marks Rules, 2017, Rule 68: Application for Assignment: Rule 68 specifies the procedure for filing an application for the assignment of trademarks, along with the prescribed form and fees.

Types of Trademark Assignment

• Complete Assignment- A complete assignment involves the transfer of both the trademark and the associated goodwill.
• Partial Assignment- Partial assignment entails the transfer of the trademark without the goodwill of the business.
• Assignment with Goodwill- Assignments that include goodwill are more common and ensure the new owner can benefit from the established reputation and customer base.
• Assignment without Goodwill- Assigning a trademark without goodwill is less common and may occur when the assignor intends to retain the business’s reputation.

Legal Procedures for Trademark Assignment

• Application to Registrar: The assignor and assignee must file a joint application with the Registrar of Trademarks for the assignment’s approval.
• Advertisement and Opposition: After acceptance, the Registrar will advertise the assignment application. Interested parties have the opportunity to oppose the assignment within the stipulated period.
• Issuance of Certificate: Upon successful completion of the assignment process, the Registrar issues a certificate, signifying the new owner’s rights over the trademark.

Landmark Judgments

• Ravi Kamal Bali v. Kala Tech and Entertainment (P) Ltd.

This case reaffirmed that an assignment without goodwill does not affect the validity of the assignment.

• Indian Performing Right Society Ltd. v. Dalia

In this judgement, it was held that the assignee could enforce trademark rights against third parties, even without registering the assignment.

Practical Considerations

• Due Diligence : Both parties should conduct thorough due diligence before entering into an assignment agreement, ensuring the trademark’s validity and reputation.
• Clear Agreement : The assignment agreement must be clear and comprehensive, specifying the terms, conditions, and considerations involved.
• Record Keeping : Maintaining accurate records of the assignment is crucial for future reference and potential disputes.
• Post-Assignment Compliance : The assignee must ensure compliance with ongoing trademark maintenance , including renewals and protection against infringement.

Tax Implications of Trademark Assignment

Trademark assignment can have significant tax implications for both parties involved. The consideration received or paid for the assignment may be subject to capital gains tax or other taxes, depending on the specific circumstances and applicable tax laws. It is crucial for both parties to seek professional tax advice to ensure compliance with tax regulations.

Licensing vs. Assignment

While trademark assignment involves the complete transfer of ownership, licensing allows the owner (licensor) to grant permission to another party (licensee) to use the trademark under specific terms and conditions. Licensing gives more control to the trademark owner and allows for greater flexibility in terms of use, territory, and duration. Assignment, on the other hand, transfers all rights and responsibilities to the assignee, including the duty to protect and enforce the trademark.

Franchising and Trademark Assignment

Franchising often involves the assignment of trademarks to franchisees. This allows franchisees to operate under a recognized brand, benefiting from the established reputation and marketing efforts of the franchisor. Franchise agreements typically include detailed provisions regarding trademark usage, quality control, and territorial rights. Careful consideration of trademark assignment is essential in the franchising context to maintain brand consistency and protect the trademark’s value.

International Enforcement of Trademark Assignment

Enforcing trademark assignments across international borders can be challenging due to varying legal systems and regulations. Businesses engaging in cross-border trademark assignments should consider international treaties such as the Madrid Protocol and the Paris Convention, which provide mechanisms for protecting trademarks in multiple countries. Additionally, legal counsel with expertise in international trademark law is essential to navigate the complexities of enforcing trademark assignments globally.

International Perspective

Paris Convention for the Protection of Industrial Property (1883): India, as a signatory to the Paris Convention, recognizes the principle of national treatment for foreign trademark owners, providing a basis for international trademark assignment.

TRIPS Agreement (1994): The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, part of the World Trade Organization (WTO), sets minimum standards for the protection of trademarks and includes provisions related to trademark assignment.

International Trademark Assignment

Madrid Protocol : Under the Madrid Protocol, businesses can efficiently protect their trademarks in multiple countries by filing a single international application. India became a member of the Madrid Protocol in 2013, facilitating international trademark assignments for Indian businesses.

International Trademark Assignment Case Study: Coca-Cola : Coca-Cola’s global presence is a prime example of an effective international trademark assignment. Through careful planning and legal strategies, the company has maintained consistent branding worldwide.

Trademark assignment is a vital aspect of intellectual property management in India. It provides opportunities for businesses to monetize their assets or expand their market presence. However, navigating the legal framework, complying with procedures, and safeguarding interests require careful consideration. As demonstrated through relevant legislation and case law, understanding the intricacies of trademark assignment is indispensable for both assignors and assignees in India.

List of References

• Mayashree Acharaya, ‘Assignment of Trademark’, CLear Tax, 22 February 2022, available at: https://cleartax.in/s/ass i gnment-of-trademark
• ‘Assignment and Transmission of Rights’, Selvam & Selvam, available at: https://selvams.com/kb/in/trademarks/assignment/
• ‘Trademark Assignment’, Corpbiz, available at: https://corpbiz.io/trademark-assignment

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Learn how to start a trademark request in Assignment Center. Assignment Center is a publicly available USPTO system for recording assignments and other documents relating to interests in patents and trademarks.

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Assignment and Transmission of Trademark

• Intellectual Property Rights Subject-wise Law Notes
• Aishwarya Agrawal
• May 23, 2023

Assignment and transmission of trademarks involve transferring ownership rights from one party to another. The Trademark Act provides guidelines and conditions for such assignments and transmissions, distinguishing between assignments with or without the goodwill and specifying requirements for registration and documentation.

Meaning of Assignment and Transmission of Trademark

Assignment and transmission of a trademark refer to the legal process by which the ownership rights of a trademark are transferred from one person or entity to another. This process involves the transfer of the exclusive rights associated with the trademark, which can include the right to use, license, sell or enforce the trademark.

The assignment of a trademark involves the complete transfer of ownership from one party to another. In this case, the assignee (the party receiving the trademark rights) assumes full control and responsibility over the trademark, including the right to use it exclusively for their own commercial purposes. The assignor (the party transferring the trademark rights) relinquishes all rights and interests in the trademark.

On the other hand, the transmission of a trademark typically refers to the transfer of ownership rights in situations where the original owner passes away or there is a change in the ownership due to legal proceedings, inheritance or other circumstances. Transmission may occur through the distribution of assets in a will, the settlement of an estate or a court order.

Both registered and unregistered trademarks can be assigned or transmitted. A registered trademark is one that has been officially registered with the relevant trademark office, providing the owner with statutory rights and protection. An unregistered trademark refers to a mark that has not been formally registered but may still possess some degree of protection based on common law or other legal principles.

Types of Assignment and Transmission of Trademark

Complete assignment and transmission.

Complete Assignment refers to the transfer of all rights associated with a trademark from one individual to another. This includes the rights to further transfer the trademark, receive royalties and exercise full control over its usage. For instance, if proprietor ‘X’ sells all rights of a trademark to proprietor ‘Y’, ‘Y’ becomes the exclusive owner with the freedom to use the trademark as desired, transfer it to others, set guidelines for its usage and receive royalties. No approval from ‘X’ is required in this case.

Partial Assignment

Partial Assignment involves the transfer of ownership restricted to specific services or products. For example, if proprietor ‘X’ has a trademark (♛) related to men’s lifestyle products but only wants to assign it to shoes, ‘X’ can transfer the trademark to ‘Z’ with the condition that ‘Z’ can only use it for shoes. ‘X’ retains the right to use the trademark for all other products. This type of transfer is known as a partial assignment.

Assignment with Goodwill

Assignment with Goodwill refers to the transfer of a trademark along with all the associated rights and values from one person to another. For instance, if ‘X’ assigns and transfers their trademark (♛) to ‘Z’ with all rights and values intact, ‘Z’ gains full rights to use the trademark for men’s lifestyle products or any other future products they manufacture.

Assignment without Goodwill

Assignment without goodwill involves the transfer of a trademark in a way that allows its use for purposes other than the original one. For example, if ‘X’, who deals with men’s lifestyle products, assigns and transfers their trademark (♛) to ‘Z’ with the condition that ‘Z’ can use it for any product except men’s lifestyle products.

Conditions for assignment and transmission as given in section 42

Section 42 of the Trademark Act outlines the conditions for the assignment and transmission of a trademark, specifically when it is not associated with the goodwill of a business. According to this section, the assignment or transmission of a trademark without goodwill will only be effective if the assignee applies to the registrar for directions regarding the advertisement of the assignment. 

The assignee must advertise the assignment within the timeframe specified by the Registrar, which should not exceed six months from the date of the assignment or an extended period of three months if permitted by the Registrar.

However, if the trademark is assigned along with the goodwill of the business for specific goods and services, it will not be considered an assignment without goodwill. Additionally, if the assignment includes goods for export or services used outside of India along with the assignment of goodwill, it is permissible.

Restrictions on Assignment of Trademarks

The Trademark Act imposes certain restrictions on the assignment and transmission of trademarks to prevent confusion among users or the general public. These restrictions include

• Restriction on assignment or transmission that would create multiple exclusive rights.
• Restriction on assignment or transmission that would create exclusive rights in different parts of India.

Process of Assignment and Transmission of Trademark (Section 45)

The process for the assignment and transmission of a trademark, as described in Section 45 of the Trademark Act, involves the following steps:

• Application to the Registrar of Trademarks using Form TM-P, along with duly certified original documents.
• The Registrar will review the application and provide a decision within three months. The decision may include informing the applicant about the assignment or requesting additional proof if there are doubts.
• If the assignment is approved, the Registrar will make an entry in the Register, including details such as the name and address of the assignee, the date of the assignment, a description of the rights assigned (if applicable), the basis of the assignment and the date of entry in the register.
• In case of a dispute between the parties regarding the validity of the assignment or transmission, the registrar may refuse to register it until the rights of the parties have been determined.

Assignment and Transmission of Registered Trademark (Section 38)

Section 38 of the Trademark Act states that a registered trademark can be assigned and transmitted, with or without the goodwill of the business associated with it. This can apply to all the goods or services covered by the registered trademark or only to a specific subset of goods or services.

Assignment and Transmission of Unregistered Trademarks (Section 39)

According to Section 39 of the Trademark Act, an unregistered trademark can also be assigned or transmitted, with or without the goodwill of the business concerned.

Benefits of Assignment and Transmission of Trademark

Expansion of business: By assigning and transmitting a trademark, the owner can expand their business by using the same trademark in multiple locations simultaneously. Additionally, partial authority can be given to assign the trademark to more than one person.

Leveraging an established brand : Assigning and transmitting a trademark allows the assignee to benefit from an already established brand in the market, saving them the effort and resources required to create a new brand.

Legal proof: The assignment and transmission of a trademark serve as legal proof in case of any disputes related to trademark usage. The rights and liabilities associated with the trademark are clearly outlined in a legal document.

Monetary benefits: The owner of the trademark can enjoy monetary benefits through the assignment and transmission process, including any financial gains resulting from the assignment or transmission. Furthermore, operating with the same trademark in multiple locations can increase the value of the brand.

Structural Waterproofing and ORS v. Amit Gupta ORS [93 (2001) DLT 496]

In this case, a dispute arose regarding the assignment and transmission of a trademark. The court highlighted that the registrar has the authority to refuse the registration of the assignment and transmission until a decision is made by the competent court. The plaintiff claimed ownership of the trademark based on a Memorandum of Understanding (MoU) between the parties. 

However, the court rejected the plaintiff’s request for an injunction against the defendant. The court emphasised that a change in the name of the registered proprietor does not automatically render the trademark unsuitable.

Cinni Foundation v. Raj Kumar Shah and Sons [2009 (41) PTC 320 (Del)]

In this case, the trademark “CINNI” was being used by the owner. A deed of assignment had been executed and signed between the parties. However, it was later discovered that the trademark was not registered. The defendant attempted to claim rights over the trademark. The court ruled that according to the law, the assignee acquires no title to the trademark without the registration of the assignment deed. Consequently, the defendant’s claim to the trademark was dismissed.

These cases illustrate the importance of registration and proper documentation in the assignment and transmission of trademarks. Registration provides legal protection and establishes ownership rights, while adherence to the legal requirements ensures the validity and enforceability of the assignment or transmission of the trademark.

Difference between the Assignment and Transmission of the Trademark

Assignment and transmission are two terms often used interchangeably, but they are distinct concepts according to Section 2 of the Trademark Act. In the case of trademark assignment, there is a transfer of ownership of the registered trademark to another party. On the other hand, in the case of trademark transmission, the original owner retains the rights to the trademark but grants limited rights to a third party for its use.

For instance, let’s consider the example of X, the current owner of the trademark “œ,” who decides to assign the trademark to Y. In this scenario, X relinquishes ownership of the trademark and after a proper assignment process, Y becomes the registered owner with full rights to the trademark.

However, if X chooses to transmit the trademark instead, it means that X remains the original owner of the trademark, but grants limited rights and responsibilities to Y for its use.

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