Assignment and Licensing of Trademarks
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Introduction to Assignment and Licensing of Trademarks
Understanding the process of assignment and licensing of trademarks in India is a paramount issue. The process of marketing and strategic management would surely open a plethora of broadening horizons in this domain, for the licensor and licensee likewise. It all depends upon the development of a brand, and the use of the brand, which collectively form a factor to boost marketing in various sectors.
The Trademarks Act of 1999 was updated to reflect modern business processes and do away with unfair brand rivalry. The Act is intended to protect the rights of a proprietor who devotes time, effort, and money to his trademark and to establishing its reputation in the market. The Act also aims to protect consumers from being duped into purchasing a product of inferior quality simply because it bears the same mark as the proprietor’s or an authorised user’s mark, or a mark that is confusingly similar to the proprietor’s mark.
A registered owner may assign or licence the use of his trademark in accordance with the Act. The goodwill of the involved business may or may not be used in the assignment and licencing. It is not necessary to register a trademark in order to assign or licence it.
Every owner of a brand or trademark has the right of selling, transfering, assignment and licensing of trademarks, etc. their respective brand or trademarkin line with legal procedures, much like in the case of tangible property like land. An owner of a brand or trademark may assign or licence his or her rights in relation to that trademark. The Trade Marks Act, 1999 in India covers both trademark licencing and trademark assignment.
Assignment and Licensing of trademarks helps the proprietor to generate more revenue, enact broader and easier territorial expansion, enjoy protection from illegal use of one’s marks, develop easy advertisement across different places, increase consumer recognition and popularity among other benefits.
What is Assignment of a Trademark?
Meaning of Assignment of a Trademark : – Assignment of a trademark means to transfer the owner’s right in a trademark to another person . The transferring party is called the assignor, and the receiving party is called the assignee. A written assignment made by the parties involved is what the Trade Marks Act of 1999 defines as “ assignment ” under Section 2(b).
Basically, Transferring ownership rights to another person is known as assignment . Ownership rights to a select number of goods or services, or to all the goods or services that the proprietor has registered, may be assigned, unless there is an accompanying trade mark. If they work in various nations, it might potentially benefit more than one person.
Thus, where legal rights are transferred, an assignment should be made in writing; however, a trademark cannot be assigned or transmitted if doing so would give rise to several owners having competing rights, as doing so would mislead or confuse the general public.
Who can Assign a Trademark?
Section 37 of the Trademark Act of 1999 defines the phrase “trademark assignment.” According to the definition, a trademark assignment is giving up ownership of a trademark and a brand mark. According to Section 37 of the Trademarks Act of 1999 , the person listed as the trademark’s proprietor in the register of trademarks has the authority to assign a trademark and receive consideration for such assignment for doing so. So, the owner of a trademark has the option to transfer ownership to another party.
What are the different kinds of Trademark Assignment ?
The different kinds of trademark assignments are as follows : –
- Complete Assignment : – The owner of the trademark assigns all rights in the trademark to a new owner, including the ability to receive royalties and make additional transfers. For instance, X is the owner of the brand “ABC.” By way of a contract, X totally transfers to Y his trademark “ABC.” After that, X will not have any legal claim to the “ABC” brand.
- Partial Assignment : – Regarding only particular services or items, the trademark owner assigns the trademark to a different party with respect to only specific services or goods. The sale of the trademark’s ownership is limited to certain services or goods. For instance, X is the owner of the sauce and dairy product brand ABC. X transfers to Y the rights to the brand “ABC” regarding exclusively dairy goods while keeping the rights regarding sauces.
- Assignment with Goodwill of Business : – The owner of a trademark transfers to another person the privileges, rights, values, entitlements and values associated with a trademark. Here, the absolute ownership over the rights and value of a trademark associated with the product is transferred from one entity to another. When a trademark is assigned along with goodwill, the assignee is permitted to use it for any category of products or services, including those that the assignor was already using. For instance, X is the owner of the “Sherry” hair product brand. X assigns the goodwill of the “Sherry” brand to Y. Y will be permitted to use the “Sherry” name in relation to food goods and any other products they produce.
- Assignment without the Goodwill of Business : – The trademark owner assigns to the assignee all rights and entitlements in the trademark regarding goods or services that are not in use. The assignment without goodwill is also known as “gross assignment”. In the event of an assignment without goodwill, the assignor places restrictions on the transfer of trademark rights. The assignor transfers the trademark with the caveat that the assignee is not permitted to use it in connection with any products or services that the assignor is currently using. For instance, “A” is the owner of a brand and uses his trademark for selling computers. “A” sells his brand to “B” such that “B” will have no rights to use the brand trademark for selling his computer products. However, “B” can use the brand trademark in the chain of businesses other than a computer.
Pre-Requisites for Assignment of Trademark
The pre-requisites for assignment of a trademark are as follows : –
- The trademark assignment should be in writing.
- The assignment should be between two identifying parties, i.e. assignor (owner of the trademark) and the assignee (buyer of the trademark).
- The assignor should have the intent and must consent for the trademark assignment.
- The trademark assignment should be for a proper and adequate consideration (amount).
Assignment Agreement of Trademark
Through a properly drafted trademark assignment agreement, the owner of a trademark often assigns it to the assignee.
The following considerations should be taken when drafting the trademark assignment agreement : –
- The duties outlined in the agreement should not adversely affect the trademark’s rights.
- The choice and requirement of whether the business’s goodwill is included in the assignment or not must be made plainly known.
- The aim of the transaction or assignment should be made explicit in the agreement.
- It is necessary to specify the geographic area in which the assignee has the values and rights to the trademark.
- It is necessary to notice the transfer of the ability to claim damages and file lawsuits for current and previous infractions.
- The contract must be properly executed, which means it must be notarized and stamped in accordance with the relevant Stamp Act.
- It is necessary to mention the witnesses and signatures.
- It is necessary to state the location and date of agreement execution.
- The assignment’s day and date, as well as the parties involved, must be noted.
- The agreement should specify whether or not the legal successors of the assignor and assignee are subject to its obligations.
What is the process of Assignment of Trademark?
The following steps are included in the trademark assignment process in India : –
- Through a trademark assignment agreement, the trademark owner (assignor) transfers his or her ownership of the mark to the assignee;
- By submitting an application of a trademark assignment in Form TM-P to the register of trademarks, the assignor, assignee, or both, may make a combined request to register the assignment;
- Within six months of the assignment date, Form TM-P must be submitted to the trademark registrar. After six months of assignment, the application can be submitted, however the fee may change appropriately;
- The assignment must be publicised in the manner and for the duration specified by the trademark registrar;
- The trademark registrar’s office should receive a copy of the advertisement and the registrar’s instructions; and
- The trademark registrar will register the assignee as the proprietor of the trademark and record the specifications of the assignment in the register upon receipt of the trademark assignment application (form TM-P) and necessary documents;
Documents Required for Assignment of Trademark
Along with form TM-P, the following papers must be delivered to the trademark registrar : –
- Agreement for a trademark assignment;
- Certificate for a trademark;
- The assignor’s NOC; and
- Documentation proving the assignor’s and assignee’s identities.
What are the restrictions on Assignment of Trademark?
According to the Trademarks Act of 1999, trademark assignment is subject to the following limitations : –
- Restriction on Parallel Use : – When a trademark assignment leads in the formation of exclusive rights in various people in respect to the same or comparable goods or services, and it is likely to mislead or cause confusion, the assignor is not permitted to assign the trademark. Multiple exclusive rights pertaining to the same/similar items or services in the hands of various people are therefore not permitted. It forbids several parties from using a trademark in connection with identical or similar goods or services in a simultaneous manner.
- Restriction on Multiple Territorial Use : – When a trademark assignment leads in the development of an exclusive right for several individuals in different regions of India in relation to the same or similar goods or services, the assignor is not permitted to assign the trademark. When an assignment leads in the development of an exclusive right in multiple individuals throughout India for the same or comparable goods or services that are sold or provided outside of India, the assignor is not permitted to assign the trademark. As a result, it is prohibited to grant rights to same or similar goods or services in various parts of India.
What are the benefits of Assignment of Trademark?
The benefits of Trademark Assignment are as follows : –
- The trademark assignment enables the trademark proprietor to encash the value of his/her brand.
- The assignee obtains the rights of an already established brand due to trademark assignment.
- The trademark assignment supports the assignor and the assignee to expand their respective businesses.
- The trademark assignment agreement enables the assignor and the assignee to establish their legal rights in case of any dispute.
What is Licensing of Trademarks?
Meaning of Licensing of Trademarks : – Licensing of Trademarks simply means the permission granted by the owner of the trademark to a third person. Such a license is granted in consideration of a Royalty. For Example: – Where an owner of a brand authorizes and allows a third party to use its brand/mark in the course of trade for goods/services. The most important thing to remember is that ‘licensing’ is not sale of the mark or absolute transfer . The ownership to the mark is retained by the owner/holder and only a limited right to use, sell products under the mark etc are given to the third party.
Through the process of trademark licencing, a registered trademark owner authorises a third party to use the trademark or logo without giving up ownership of the mark . Simply said, trademark licencing enables the registered owner to permit other parties to use the trademark or brand name without transferring ownership of the trademark. The conditions of the Trademark Licensing Agreement allow the trademark owner to impose additional limitations on the use of a registered trademark. For the agreed-upon commercial uses of the registered trademark, the registered trademark owner may receive royalties from the licensee.
It should be emphasised that only a limited number of rights relating to a registered trademark are granted to the licensee, and that the registered trademark owner retains sole ownership of the licenced trademark as well as all other relevant rights.
The licencing of service marks and trademarks in India is covered by Section 49 of the Trademark Act, 1999 . Trademark licencing typically depends on some agreed-upon terms and circumstances relating to the proposed product’s quality level, the preservation of the established status of the product and Trademark, exclusivity for the same, the various ways the Trademark may be used, etc. An agreed-upon period is used for trademark licencing. There are no specified legal conditions or time limits for trademark licencing in India according to the Indian Trademarks Act.
Who can grant a Trademark License?
The trademark licence can only be given by the registered trademark’s owner or holder . It would be appropriate to mention that both registered and unregistered property can be transferred under Indian law. A trade mark may be transferred by an assignment or a licence.
In India, there are two types of licences for trademarks that are registered: a simple licence agreement that pertains to permissive use and a registered user, where the licence agreement is registered with the Registrar of trademark. The licensee is granted specific legal rights under this licence.
Why is a Trademark License Granted?
To formally allow a third party to utilise the registered brand, a trademark licence is provided. It is typical for foreign businesses, particularly IT businesses, to offer trademark Licenses in other nations so that their trademarks can be used there. For instance, a brand owner may authorise another individual to use his trademark in connection with goods and services during commerce.
The Trademark License is not being sold; it is being granted. Licencing simply gives the right to use it.
A person other than the registered proprietor of a trademark may be registered as a registered user, according to statutory language in Section 48 of the Trademark Act. Therefore, the rules of this act may permit the use of a registered trademark, but only if both parties comply with the relevant requirements.
Process for Registration of a Trademark License
A Registered User is currently registered under Section 49 of the Trademarks Act of 1999. In this case, the Licensee is the Registered User.
Permitted use of a trademark is defined under Section 2(1)(r) of the Trademarks Act. It refers to the following :
- With which he is connected during trade;
- In respect of which in the trademark remains registered for the time being;
- For which he is registered as a registered user;
- Which complies with any conditions or limitation to which the registration of the registered user is subject;
- In respect of which the trademark remains registered for the time being;
- By consent of such registered proprietor in a written agreement; and
- Which complies with any conditions or limitation to which such user is subject and to which the registration of the trademark is subject”.
The registration of a trademark license agreement is not mandatory under the law. But registration always comes to the rescue as it forms a record/ evidence in possible future disputes. In the case of Himalaya Drug Co. Pvt. Ltd., Bangalore vs. Arya Aushadhi Pharmaceutical Works, Indore , AIR 1999 MP 110 the Court ruled that if a company fails to prove that it is a registered user then the suit is liable to be dismissed. It is therefore always good to register the Trademark License with the Trademark Office. Only a Registered owner/ Proprietor of the Trade Mark is competent to launch proceedings for the trademark infringement as per the Trademarks Act, 1999. If a User is not registered under the act then he cannot maintain the suit under the Act.
Therefore, to register the trademark license : –
- The agreement must be in writing;
- The trademark owner and the intended user should apply for registration (section 49) with the Trademark Registrar jointly;
- The form to use for the application is TM-U;
- Relationship between the parties
- Duration of the use
- Goods/services for which it is applicable
- The government fee of Rs. 4500 for each mark shall be paid.
According to the Act’s provisions, a registered user may be granted permission to use a registered trademark, but in order to do so, the registered owner of the Trade Mark must enter into a contract with the prospective registered user.
Within six months of the date the parties’ agreement was formed, an application for registration must be submitted. If everything is acceptable, the Trademark Office (TMO) will subsequently register the user. Following that, the user will be a “Registered User” of the trademark.
The Trademark Office will notify the trademark owner and any other registered users of the same trademark and publish it in the Journal.
What are the benefits of a Trademark License?
The benefits of Licensing of a Trademark : –
- Financial Gain : – The trademark is widely used for commercial gain, and the owner receives royalties as a result. This financial gain benefits both parties. By granting the licence to the licensee, the licensor, who previously could not capitalise on his trademark due to lack of resources or exposure, can now use those resources to his advantage and benefit more. A portion of the income are also given to the licensee.
- Expansion of the Trademark Owner’s Business : – The Trademark owner’s business grows and expands its reach into new regions. Since the licensee(s) can leverage their distribution abilities for business expansion, the company is no longer restricted to a specific geographic area.
- Expanding the Brand Recognition of a Trademark : – The Trademark becomes well-known in areas where it was previously unknown. The licensee is allowed to widely publicise using his resources.
- Increase in Trademark Popularity : – As the Trademark is recognised to more individuals and consumers, it gains popularity. By boosting sales, this increases revenue and facilitates the trademark’s continued licencing.
- Workload Redistribution/Reduction : – In a sense, the Licensee joins the Licensor as a partner. Because the licensee is equally responsible for upholding the quality of the goods, he produces using the trademark, the licensee’s workload is lessened and he need not worry about the quality of the products.
Under what conditions can a Trademark License be cancelled?
Cancellation is possible in the following situations : –
- If the provisions of the agreement are broken or violated;
- If the mark is used in a manner not permitted under the agreement;
- If the mark is utilised to trick consumers or the public by creating confusion;
- If any party withholds information that is important and necessary to the agreement;
- If one of the parties makes false statements or cheats.
The Trademark Office notifies the Trademark owner as well as any additional registered users who might be impacted by the cancellation of the Trademark License. The official cancellation cost is Rs. 4500 for each mark.
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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
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.
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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Assignment & Licensing of Trademark in India
by Bhavya Choudhary · 4 min read
Imagine a situation where you want to buy the “Café Coffee Day”. You go and tell the owner of the “Café Coffee Day” that you are interested in buying the same. He reverts back, saying that he is ready to sell his brand. This is called an Assignment.
Now imagine a new situation where you want the franchise of “Café Coffee Day,” and you are ready to pay the royalty for the same. This is termed as Licensing of a trademark.
To summarize it, it can be said that in case of an assignment of a trademark, there is a change in the ownership of the registered brand, and in case of licensing of trademark, the ownership of the trademark continues to vest with the original owner, but few limited rights are given to the third party. Trademark registration is compulsory for the Assignment and licensing of trademarks.
Assignment of a Trademark
When the ownership of a trademark is transferred from one party to another either with or without goodwill, it is called an assignment of the trademark. Such Assignment must be recorded in the register of trademark if the trademark is registered. Trademark registration is necessary in such cases. The Assignment is different from licensing of trademark.
Trademark can be assigned or transferred to another in any of the following manners:
● Complete Assignment of the trademark to another entity
The owner of the trademark transfers all its rights with respect to a mark to another entity, including the right of transfer of the rights such as to further transfer, to earn royalties, etc.
● Assignment of the trademark to another entity but concerning only some of the goods or services
The transfer of ownership, which is limited only to specific products or services, is termed as a partial assignment.
● A ssignment of the trademark with goodwill
Where the rights and value of a trademark associated with the product are also transferred along with the main product, it can be said to be an assignment of the trademark with goodwill.
● Assignment of the trademark without goodwill
Where the owner of the trademark limits the right of the buyer and does not allow him to use the brand for the products that are being used by the original owner, it is said to be the Assignment of a trademark without goodwill. Therefore, it can be said that the goodwill of the product is not transferred to the buyer. It is also notable that in other countries like the United States, the Assignment of the trademark without goodwill is not allowed. However, in India, assignment of the trademark without goodwill is allowed.
In the case of the registered trademark, the trademark act of 1999 itself puts certain limits on the Assignment of trademark where there is a possibility of creating confusion in the minds of the general public. The restrictions are:
- Assignment of a trademark that leads to the creation of exclusive rights in more than one person concerning certain goods and services or their description for the same
- Assignment of the trademark that leads to different people using the trademark in various parts of the country at the same time.
Licensing of Trademark
The licensing of a trademark allows others to use the mark without transferring the ownership, and it can be done for all or some of the goods and services covered. It is to be noted that the Trademark act of 1999 does not use the term ‘License’ or ‘Licensing of Trademark’. It is mentioned as ‘Registered User.’
The licensing of trademark is beneficial to both parties. The Licensor gets the right to enjoy the benefit of the brand which he got after paying the royalty, while the licensee can develop the brand reputation and expand the market operation of the brand in licensing of the trademark.
In the case of Licensing of trademark, the Licensor is free to license the rights over the registered trademark in the manner he may like. The Licensor can limit the rights of the licensee in a trademark or brand in respect of certain products or services wherein the licensee can use the brand by following certain terms and conditions of the Licensor. This is the benefit of licensing of trademark.
Agreements for Transmission
By way of a properly executed Trademark assignment agreement, a trademark is generally assigned. The agreement is related to the transfer of a trademark from the person who is the owner to another person. Therefore, while drafting the agreement, the following must be kept in mind:
- Due to obligations defined in the agreement, the right of the owner of the brand should not be affected adversely.
- It should be mentioned and determined in the agreement whether the Assignment should be with or without the goodwill of the business.
- The purpose of the transaction must be kept in mind while drafting the agreement.
Licensing of trademark is done by way of a license agreement. Licensing of the trademark may take place by way of a License Agreement. The trademark act of 1999 makes it clear that the registration of license agreement with the Trademark Registrar is voluntary and compulsory in respect of licensing of the trademark. However, it is better to get the agreement registered in case of licensing of trademark. It should also be kept in mind while drafting the license agreement that the rights and duties of the licensee and Licensor must be determined and defined. This must be done to protect the right of both parties. Registration of licensing of a trademark is also important to secure the brand and protect against any misuse of it. This is necessary in the case of licensing of trademark.
Assignment and Licensing of trademark are two important concepts. While assigning and Licensing of trademark, the Licensor and licensee must come together and define the rights and obligations in an agreement. It would be correct to take expert legal advice while preparing the agreement to protect oneself.
Trademark registration helps create an intangible asset, and the person gets the exclusive right for selling, franchising, assigning, and commercially contracting innovation. Talk to a Lawyer to understand the Trademark requirements and the Registration process.
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Trademark Assignment and Licensing
The owner of a brand or trademark has the ability to transfer his rights with regard to his trademark either via the process of assignment or through the process of licencing. The Trade Marks Act, 1999 of India addresses both the transfer and licencing of trademarks in its provisions.
To put it succinctly, when a trademark is assigned to a new owner, there is a change in the ownership of the registered brand. On the other hand, when a trademark is licenced, the right in the trade mark continues to vest with the original owner, but the licenced party is only granted a limited number of restricted rights to use the brand or mark.
A trademark is said to have been assigned when the legal ownership of the mark itself is passed from one party to another, with or without the transfer of the goodwill associated with the company. In the event of a Trademark that has been registered, the assignment has to be documented in the Register of Trademarks.
Ways in which Trademark can be Assigned or Transferred
It includes −
Complete Assignment to Another Entity
The owner transfers all of its rights with regard to a mark to another entity, including the transfer of rights such as the right to future transfer, the right to receive royalties, and so on. (For example, X, the owner of a brand, enters into an arrangement with Y in which he sells Y his whole brand.) Following this point, X will no longer have any rights with regard to the brand.
Assignment to another entity, but only with regard to certain of the goods or services
The transfer of ownership is only allowed with regard to certain products or services. (For example, P is the owner of a brand that is utilised for jams and jellies as well as dairy goods. P will continue to own the rights to the brand in regards to jams and jellies, while Q will take over ownership of the brand's rights in relation to dairy products alone. This method is known as partial assignment.
Assignment with goodwill
A kind of assignment that occurs when the rights and value of a trademark as linked with the product are also transferred to another business. This type of assignment is known as a "assignment with goodwill."
(For example, P, the owner of a brand called "Shudh" that is associated with dairy goods, sells his brand to Q in such a way that Q will be able to use the name "Shudh" in relation to dairy products as well as any other items that it creates.)
Assignment without goodwill
A type of assignment that is also known as a gross assignment. This type of assignment occurs when the owner of the brand places restrictions on the buyer's rights and does not permit the buyer to use the brand for the same products that are being used by the original owner. Therefore, the buyer does not get the benefit of the goodwill that is already associated with that brand in relation to the product that is currently being sold under that name. (For example, P, the owner of the brand "Shudh" that is associated with dairy goods, sells his brand to Q in such a way that Q will not be able to use the mark "Shudh" in connection with dairy products but will be able to use this brand for any other items that are created by it.)
In this scenario, the goodwill that is associated with the brand "Shudh" for dairy products is not transferred to Q, and instead, Q will be required to create its own distinct goodwill for the brand "Shudh" in order to use it for any other product or service (such as a restaurant, which is one of the scenarios in which Q proposes to use this brand). In many countries, including the United States, it is not at all permissible to transfer a mark without first acquiring goodwill. On the other hand, assignment without goodwill is permissible in India.
Restriction on Assignment or Transfer of Trademark
The Trade Mark Act of 1999 places specific limits on the assignment of a registered trade mark in situations where there is a possibility that users and members of the public would be confused by the assignment. These constraints include things like −
Restriction on assignment that results in the creation of exclusive rights in more than one person with respect to the same goods or services, or for the same description of goods or services, or such goods or services as associated with each other. Associated goods and services refer to those that are sold together.
Restriction on assignment that would result in many persons using the trademark concurrently in various regions of the nation.
Protecting your brand is a crucial corporate asset that may be achieved via the use of trademarks. The granting of a trademark licence may be beneficial to your company plan since it will allow your brand to penetrate other markets and regions. Through the process of trademark licencing, the owner of a specific trademark has the ability to provide a third party the right to use the trademark in a restricted manner and in exchange for a royalty, all while maintaining ownership of the property for oneself or herself.
Advantages to Obtaining a Trademark Licence
Major advantages are −
It contributes to extending the market potential of the aforementioned mark.
It has the potential to make a beneficial influence on the daily operations of a corporation.
The mark often ends up being more well-known and famous as a result of licencing agreements.
The amount of work that the corporation must do decreases.
How does one go about registering for a trademark licence?
Make sure you have a written License Agreement.
Submit a joint application with the prospective licensee to the Registrar of Trademarks using form TM-U for the purpose of obtaining a licence registration.
Send in an affidavit that has been signed and dated by the owner, and make sure to state the following information in it: the particulars of the License, the nature of the connection between the parties, the length of time for usage, and the applicable goods or services.
Make a payment to the government in the amount of Rs 4500 for each trademark that has to be licenced under each class.
It is mandatory to submit an application for registration no later than six months after the date when the parties Agreement entered into force, which was signed by both parties.
Trademark Assignment vs. Trademark Licensing
Following are the major points that distinguish both the terms from each other −
A transfer of ownership of a trademark registration can take place through the process of assigning a trademark. In contrast, when a trademark is licenced, the ownership of the trademark as well as the property rights associated with it continue to be held by the original owner, but the third party is only granted a limited number of rights to use the brand.
Writing is required for the assignment deed regardless of the circumstances. There is no need that licences be issued in written form.
A licence grants the rights for a predetermined amount of time, but an assignment may just involve a portion of those rights.
Since the ownership has been transferred, an assignment is not time-sensitive. A licence is often only valid for a predetermined amount of time.
Both the assignment and licencing of trademarks are important concerns; nevertheless, with the right planning, possibilities may be opened up for all parties involved in the transaction, including the licensor, the licensee, the assignor, and the assignee. The process of building a brand and putting it to use is included in both trademark licencing and trademark assignment. All of them are at the control of the proprietor, and they constitute efficient management strategies for the same.
Q1. What kind of impact does the assignment have on the duration of the registration period for the mark?
Ans. Transferring ownership of a mark does not result in an extension of the registration period for the mark. The assignee shall be held responsible for renewing the mark within the period of time that begins six months before the mark is set to expire. If you don't pay the renewal fee, your registration will be cancelled.
Q2. What are the key distinctions between a Registered trademark and Unregistered trademark?
Ans. A registered trademark is one that has been investigated, validated as distinctive, and granted legal protection in accordance with the Trademarks Act. When it comes to proving ownership of a trademark in court, this piece of proof is both direct and decisive. A trademark that has not been registered falls under the jurisdiction of common law and is only valid in the geographic region in which it has been used. The proprietor needs to provide evidence that his brand has garnered a sufficient amount of goodwill.
Q3. How do I go about transferring trademark rights to an individual or corporate entity that has only recently changed its name to one that is different from the one that was previously registered to hold the trademark?
Ans. If a person or business entity has changed its name but continues to own the same rights in and to a mark, then it is possible for that person or business entity to file an assignment in the same manner as if it were a distinct person or business entity that was being granted those rights.
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- 1. Assignment and licensing of trade marks
- 2. Commercial considerations
- 3. Formalities for assignments
- 4. Formalities for licences
Assignment and licensing of trade marks
UK registered trade marks may be assigned for some or all of the goods or services covered by the registration, or in relation to use of the mark in a particular manner or locality.
EUTMs can be assigned in relation to some or all of the goods or services for which they are registered, but cannot be the subject of a partial assignment in respect of specific territories within the EU, as an EUTM as an object of property must be dealt with in its entirety.
A UK registered mark can be licensed in relation to all, or just some, of the goods or services for which it is registered. The licence can be limited to use of the mark in a particular manner or a particular locality. Similarly, an EUTM can be licensed for some or all of the goods or services for which it is registered, and for either the whole or part of the EU.
A contractual obligation to transfer a business is to be taken to include an obligation to transfer any registered trade mark, except where there is agreement to the contrary or it is clear in all the circumstances that this presumption should not apply.
Where, e.g., a business does not have the facility to manufacture and distribute products itself, has insufficient resources to meet the necessary costs of an advertising programme for a particular product or service, or does not have an overseas presence in a particular territory, it can make good commercial sense to allow further exploitation by way of licensing to third parties with the relevant expertise or resources.
On the other hand, an owner who no longer wishes to retain its rights in a trade mark may decide to sell the mark. For example, a business which intends to withdraw from a specific product market may wish to free itself of the ongoing costs of maintaining registration of the trade marks which relate solely to the discontinued products, while recouping the costs of acquiring and maintaining the registrations. In addition, a company which intends to sell part of its business where certain trade marks are integral to the value of the business will either have to accept a significantly decreased price or include the marks in the assets sold.
An outright sale will realise an immediate lump sum and will eliminate the administrative burden and expense of maintaining the marks. By contrast, a licence is more likely to mean that the financial return is spread over the duration of the licence in the form of royalties, with the owner retaining primary responsibility for maintaining the registrations and the integrity of the brand. In particular, the owner must protect the goodwill in, and reputation and value of its mark by controlling the licensee's use of the mark. It will need to impose conditions limiting and regulating that use: for example, by specifying the quality of the products on which the mark is used, and retaining the right to approve the products and their promotion and distribution. If the marks have not been well managed during the licence period, this will significantly reduce the value of those marks to the owner, either for their own use or as assets to be licensed once more.
Formalities for assignments
To be effective, an assignment of a UK registered trade mark (or application) must be in writing and signed by the assignor. An assignment of an EUTM registration or application must be signed by the assignor and the assignee.
In transactions which involve the transfer of trade marks in a number of countries, it is possible either for the parties to execute a global assignment which covers all the trade marks being transferred or to execute individual assignments for each. Where a global assignment is used, this will frequently need to be supplemented by further confirmatory documents in forms prescribed by (and, therefore, acceptable to) the registries in the countries in which the marks are registered.
In the UK, assignments are registrable transactions, but there is no statutory requirement to register them. However, it is desirable for an assignee to ensure that the transaction is recorded, since it will otherwise be ineffective against a third party acquiring a conflicting interest in the mark. In addition, if an assignment is not registered within six months of the date of the transaction, the assignee has no right to its costs relating to any infringements occurring in the period from the date of the transaction to the date of registration of the assignment.
It is also possible to register the assignment of an EUTM.
Formalities for licences
To be legally effective, a licence of a UK-registered mark must be in writing and signed by the licensor. There are no such required formalities for the licence of an EUTM.
Although licences, like assignments, are registrable transactions, there is no statutory requirement that they must be registered. As with trade mark assignments, there are drawbacks to not doing so, and these mirror those for assignments. For licensees, registration provides a statutory right (in the absence of any contrary agreement) to bring infringement proceedings in default of an action by the registered owner.
Similar provisions are in place for EUTMs.
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Pakistan: Trademarks in SAARC Countries
- Assignment of a Trademark
- Assignment is of two kinds. In a complete assignment , the owner of the trademark handovers all the rights pertaining to the trademark (including the right to further transfer and earn royalties to and from another entity). In a partial assignment, the transfer of ownership is restricted to specific product or service only. In case of partial assignment assignor & assignee can both use the same trademark but for dissimilar goods or services.
- The name, address, and citizenship of the assignor and the assignee.
- Specifications and details of the mark
- Deed of assignment
- The effective date of assignment
- Signatures of the assignor and the assignee
- Notarization of legal documents
- The license to a mark is granted to allow others to use the mark without assigning the ownership of the mark per se and a license can be facilitated for all or some of the goods and services covered under the registered mark.
- Trademark licensing is advantageous to both, the licensor and the licensee. While the licensor enjoys its rights to the mark by getting the royalties for its use, the licensee is able to expand its market operations by using the brand and developing its reputation.
- A registered Trademark can be licensed subject to the control of the owner of the mark over the manufacture and use of the products and services made and sold by the licensee. A registered Trademark can be licensed in Pakistan and the licensing can be made for a portion of the territory covered by the registered Trademark for some or all goods or services vested in the registered Trademark.
- The name, address, and citizenship of the licensor and the licensee.
- License agreement
- The effective date of license
- Signatures of the licensor and the licensee
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Trademark Licensing & Assignment Agreements
Because a trademark is property, it may be conveyed in several of ways. Basically, a mark owner may:
- Assign all rights in the mark to another entity (outright sale).
- Assign some rights in the mark to another entity (partial assignment).
- Grant another entity the right to use the mark for certain purposes for a certain period of time (license).
EXAMPLE (1) : Johnny’s registered mark “Blue-Breath” for candy has done wonders for the sale of his breath mints. When a major candy manufacturer decides it would like to use the mark, it offers to buy the mark from Johnny. If Johnny sells the mark to the manufacturer, he will no longer be able to use it, and the manufacturer can use it as it sees fit.
Example (2) : after selling blue-breath for an extraordinary sum, johnny takes a few years off work to relax and fish. while moving into his new mansion he discovers a fishing lure in his attic. the lure had been made by his uncle tony, and johnny has only the fondest memories of the man. he begins selling “uncle tony’s trout teaser,” making use of the marketing knowledge he gained selling blue-breath. the trout teaser takes off, and soon, a major sports equipment company wants to buy the mark and make the lure on a grand scale. johnny has seen how big business works (blue-breath is now used not only on candy but on a product which helps drunk drivers avoid breathalyzer detection, something which johnny is very upset about) and wants to prevent his uncle tony’s good name from being attached to anything unseemly. he therefore agrees to sell the rights in the mark, but not the right to prepare derivative marks. (unfortunately, being inadequately educated in trademark law, johnny doesn’t realize that this won’t really protect him against others who want to use the name “uncle tony” in connection with products or services of which johnny does not approve)., example (3) : perhaps learning his lesson with the fishing lures, johnny swears never to sell a mark again. when his newest idea, “cool dog crumbler” takes off (a training aid which quickly, and painlessly, forces a dog to submit to his owner’s will), he decides that he will only license the mark to the major pet products manufacturer which has approached him. the license limits the mark’s use to the specific product (drawings and diagrams of which are attached to the license agreement as appendix a), and further constrains the way in which the mark may be used in marketing the product. the license agreement limits the geographic area in which the mark may be used, and lasts only 5 years, at which point johnny has the right not to renew the license. while this gives johnny a great deal of control, it also diminishes the mark’s value to the buyer., trademark assignment.
The outright assignment (sale) of all of the rights in a mark is a relatively simple thing compared to partial assignments and licenses. When a mark owner allows others to exercise rights over the mark yet keeps some rights to himself, he exposes himself to significant risks.
Recall that rights in a trademark can be lost in several ways, as discussed earlier in this chapter. The loss of these rights significantly diminishes the value of the mark (something a mark owner obviously wants to avoid). A mark can become generic, as we saw in the Bayer case, or it can be abandoned. We also covered the concepts of naked licensing and the failure to police – ideas which now fall into place in our discussion of trademark licenses.
When a mark owner assigns all rights in a mark, the original owner need not be concerned with how (or even if) the buyer uses the mark. If, following the transfer, the mark becomes generic or is abandoned, the original owner is not harmed. Further, because the owner retains no rights in the property, she need not concern herself with oversight or policing of any future uses of the mark.
This does not mean that genericism, abandonment, and other loss of trademark issues do not play a role in the contracts for sale of a mark. As with any party to a contract, the seller will likely be asked to make certain representations and warranties. For example, the buyer will want to be assured that the prior use of the mark by the owner has not infringed on the rights of any other mark owner. A representation as to the owner’s good faith effort to prevent genericism might be requested (although everyone understands that genericism can occur regardless of the mark owner’s effort to prevent it). Similarly, the buyer will want to know that the mark has been used (and the appropriate filings maintained) so that its status on the primary register is not at risk through abandonment.
The outright assignment of a mark usually means the assignment of four separate rights or interests:
- The registration rights.
- The right to prepare derivative works.
- The income, royalties, and claims related to the mark, which are due or payable on or after the date of the assignment.
- The goodwill related to the mark.
§1060 (“Assignment”) places a number of constraints on the assignment of marks, including the fourth requirement listed above. Under this section,
“The good will of the business in which the mark is used, or…that part of the good will of the business connected with the use of and symbolized by the mark”
must be included in the assignment. Subsection (2) makes clear that the goodwill of the business associated with other marks used by the seller can remain separate.
A sale of a trademark without the goodwill associated with the mark is an “assignment in gross.” This sale is unenforceable and invalid, and if such a sale occurs the trademark is deemed abandoned.
What, then, is this goodwill which is so important in the sale of a mark? The goodwill of a mark is really at the heart of the mark’s value. If someone sells merely the mark itself (words, logo, etc.), it is essentially worthless without “all the goodwill he had built up associated with the mark.” Greelon, Inc. of Cincinnati v. Greenlawn, Inc. , 542 F. Supp 890, 895 (S.D. Ohio 1982) .
A precise definition of goodwill is difficult to come by. In the West Hornbook by Roger Schechter and John Thomas referred to earlier in these materials, we are provided with the following definition (at 772):
[Goodwill] is usually defined as the reputation a business has established over time, and its consequent expectation of continued business in the future based on past success.
Although Schechter and Thomas are not thrilled with this, or other formulations of the term, it is somewhat helpful. You might also think of goodwill as the meaning attached to the symbol or mark – the idea conveyed to consumers by that mark.
When you see certain brand names, certain images come to mind. Manufacturers launch pricey advertising campaigns to instill these images in the consumer’s mind. For example, the picture of Betty Crocker is carefully tailored to give rise to certain images in our minds, which hopefully will help us feel good about those products and lead us to purchase them. This is the goodwill associated with the mark.
For the buyer of a mark, one vital step following the assignment is prescribed by §1060(4) . Under that section, a buyer should make the appropriate filing with the PTO within three months of the purchase. Otherwise, the new mark owner is open to risk of use of the mark by a
“subsequent purchaser for valuable consideration without notice.”
This concept is not unusual in property law, and is meant to protect an innocent third party who believes he is buying a mark from its lawful owner.
EXAMPLE: Abbott owns the registered mark “First Base Beef,” for a theme restaurant. On January 1st he sells the mark to Blockhead. On February 1st, he offers to sell the mark to Costello. Costello does not know of the prior sale. He does his due diligence and checks with the PTO, and the records there indicate that Abbott owns the registered mark. He pays a fair price for the mark and opens his own restaurant. Blockhead cannot prevent this use of the mark by a subsequent purchaser for valuable consideration, as Blockhead failed to file with the PTO (meaning there is no constructive notice here) and Costello did not have actual notice of the prior sale.
Of course, as the stakes are raised and more valuable property is conveyed, the intricacy of these issues and how they play out on paper is tremendously increased.
Licensing a mark involves a host of issues which do not exist in the sale of marks. Except insofar as she makes certain representations and warranties, the status of a mark (genericism, abandonment, infringement on other marks, etc.) is of no concern to a mark owner selling the full bundle of rights in a mark. With licensing agreements, the owner must be aware of these issues and how the licensee’s use of the mark will affect the owner's property.
Naked licensing, or failure to police a licensed mark, can result in a finding that the owner has abandoned the mark. Obviously, a total loss of the mark’s value is not the goal when someone sets out to permit another to use his mark. Fortunately, it is easily avoidable.
Maintaining a licensed mark’s value comes in two stages. First, it requires a strong licensing agreement which clearly sets out the mark owner’s rights, the licensee’s obligations, and the limits of the licensed use. Second, it requires continued vigilance by the owner to ensure that the licensee is using the mark in accordance with the terms of the license agreement. Simply having the contract is inadequate; mark owners must police the use of their marks to prevent improper uses.
EXAMPLE: Myra grants Martha permission to use the mark “Wonder Mop,” and the two sign an iron-clad license agreement which strongly protects Myra. Because Myra has a number of business interests, she fails to notice when Martha begins using the mark in violation of the agreement. The best contract in the world does Myra no good if she “sleeps on her rights” (i.e., fails to enforce her rights).
As with an assignment, the owner will usually be asked to make certain representations and warranties, generally the same as those involved in an assignment. Additional clauses in a license agreement will include:
- The term of the license.
- Geographic limitations on the licensee’s use of the mark.
- Provisions for the mark owner’s oversight of mark usage.
- Details as to the type and quality of product with which the mark may be used.
- Provisions for the mark owner’s inspection of product quality.
- Other limitations on the licensee’s rights (such as a limitation on the right to convey the license to a third party).
- A schedule of payments due and the method for calculating payment.
Unlike a sale, a license creates a continuing relationship between the mark owner and the licensee. As with any business relationship, things may go sour before the originally agreed upon end date, so clauses concerning breach, termination, damages, and other issues related to the early termination of the license are required.
Licenses can become very complex, involving multiple marks, products, geographies, etc. While a simple sample license agreement may be under 10 pages, you should know that license agreements can easily reach 100 pages or more when major marks and long-term, big-dollar uses are involved.
Other §1060 constraints include the prohibition against selling the rights in a registration application, except under certain circumstances, and limitations on the sale of marks to assignees not domiciled in the United States.