Trade mark ownership: Who should own your trade mark?

Trade mark ownership is an overlooked yet important aspect of brand protection. For many companies, trade marks represent a significant portion of their value and, for that reason alone, demand careful consideration and strategic planning.

In this article, our trade mark solicitors explain the concept of trade mark ownership, who can own a trade mark, and the various factors to consider when deciding on the most appropriate ownership structure for your business.

Who can own a trademark?

Anyone with a legal identity can own a trade mark. This could be an individual or a corporate entity. There are important consequences to each choice of ownership which are not always obvious at the time of registration and pitfalls which could have been avoided with appropriate legal advice.

Individuals and sole traders

To register a trade mark in the UK, the individual does not need to be a citizen or resident of the country. You will simply need a postal address in the UK or to appoint a UK based representative to act as your address for service.

There is no age limit for owning a trade mark in the UK. A trade mark must be used in the course of a business so it is easier for an adult to hold a registered trade mark.

Partnerships

Limited Liability Partnerships (LLP’s) have legal entity status and they can own property in their own right. A partnership is a business owned by two or more persons who carry on a business in common with a view to a profit. You can also have a limited partnership which is a partnership in which there are two categories of partner, general partners who manage the daily business and limited partners who have limited liability and are not involved in day to day management of the business.

For both general and limited partnerships, the individual partners will need to be listed as the joint owners of the trade mark. So, a trade mark can be registered in the name of the LLP. A partnership is not a legal entity in itself. This means that the individual partners will need to be listed as the joint owners of the trade mark.

Since a limited partnership is deemed to have dissolved whenever a partner leaves or joins, the registered trade mark will need to be assigned from ownership of the old list of partners to the new list of partners, whenever this occurs. The assignment must be filed at the Intellectual Property Office to record the change of ownership.

Limited companies

Companies limited by shares or by guarantee can own trade marks in their own name as they are legal entities. This is often beneficial since the trade mark will be the property of the company and can be dealt with as any other asset of the company. If ownership of the company is transferred or there are changes in its membership or directorship, the trade mark can stay with the company, ensuring continuity of the brand and any associated goodwill.

If the company goes insolvent and is liquidated, the trade mark will be considered an asset of the company in the liquidation. It may be sold by the liquidators to a third party or it may pass to the Crown as bona vacantia if no-one purchases it. The Bona Vacantia department can sell it at its discretion and at its open market value, which could make it more difficult to resurrect the brand later.

A solution may be to appoint a shell company or holding company to own the registered trade mark and license its use to the group’s trading companies. This can ringfence the trade mark and protect it in the event of one or more of the group’s trading companies going into liquidation. Another benefit is the centralised management of the group’s trade marks, with the holding company being responsible for registering and maintaining them and dealing with any third party licensing or other contractual arrangements.

A downside will be increased administration and cost in running multiple companies and putting into place comprehensive licences between the group members to govern the usage of the trade mark.

Individual ownership of a trade mark

Sometimes a director of a company may decide to own a trade mark in their own name and license its use to the company. In this case, the trade mark will not be a company asset. This could create problems if the individual owner leaves the company on bad terms or dies. In the first case, the company may need to bring a costly passing off action against the registered owner, if the individual starts to trade under the mark themselves or through a new organisation and possibly an action to have the existing trade mark registration cancelled so that the company can re-register it in its own name.

If an individual trade mark owner dies, ownership of the registered mark will pass to a third party designated in their will or to their residual estate and the company will need to secure an assignment from the executors, who may demand payment in return.

Joint ownership of a trade mark

Joint ownership of a trade mark can be useful if an unincorporated organisation wants to own a trade mark or where a group of individuals are working collaboratively in a joint venture or start-up project. The joint owners can be individuals or legal entities or a mixture of both. A company or individual may also want to assign rights in their trade mark to a third party for them to exploit but also to retain ownership of it themselves. Instead of granting a licence to the third party, an assignment could make it easier for a third party, such as a distributor, to enforce and deal with the mark itself, if the original owner does not want to be involved in the assigned side of the business.

What are the benefits of joint ownership of a trade mark?

Joint ownership means that each of the owners has an equal, undivided share in the trade mark and is entitled to use it and exploit it individually. However, the individual owners are not entitled to assign or licence the registered mark without the consent of all the co-owners.

What are the risks of joint ownership of a trade mark?

There are risks involved in joint ownership, particularly if the owners fall out and are no longer working together cohesively. This could result in dilution of the brand or the trade mark becoming misleading, if the owners are not maintaining any centralised brand image. In a worst-case scenario, one or more of the co-owners could go off alone and start to use the trade mark for their own separate enterprise. They may refuse to transfer their ownership of the trade mark to the remaining group members and effectively hold them to ransom. In this case, if the rogue member(s) cannot be bought out or will not agree to an alternative coexistence arrangement, the group would need to rely on its collective goodwill to try to hold the rogue member(s) liable for passing off or infringement, if they have taken any action in respect of the trade mark without the consent of the remaining members, such as granting a licence to a third party or assigning their ownership to someone else.

For large unincorporated associations or partnerships, having to execute an assignment of the registered trade mark each time a member leaves or joins can place a large administrative burden on the organisation.

How is joint ownership of a trade mark typically structured?

If you are considering joint ownership then it is important to have an agreement in place setting out exactly what rights and responsibilities each owner has in respect of the trade mark and what is to happen when a member leaves the project or acts contrary to the principles set out in the agreement. Such an agreement should be carefully drafted by a legal professional to ensure that it is watertight and legally binding.

An alternative to joint ownership could be to set up a joint venture company or vehicle to own the trade mark and license its use to the individual members. A joint venture agreement should be drawn up to regulate how the members can use and exploit the trade mark and to define the scope of their rights to ensure there is adequate control over the trade mark and how it is used. Alternatively, individual licences could be drawn up with each member, provided that there is a centralised quality control procedure in place to ensure that the brand is used consistently and is not diluted through multiple different uses.

Can trade mark ownership be transferred?

Provided that all current owners of a trade mark consent, the registration can be assigned to a new owner. This could be a total transfer of the entire registered mark or a partial assignment for some or all the goods and services covered, resulting in joint ownership of the registered mark.

How to transfer a trade mark

A registered trade mark must be transferred by way of a formal assignment, in writing. The assignment agreement should clearly specify the names of the parties to the transfer and the rights that are being transferred. If the document is signed as a deed there is no need for any consideration. Otherwise, the consideration must be set out in the agreement.

Goodwill can be transferred separately from the registered trade mark so the assignment should specify that the goodwill associated with the trade mark is to be included in the assignment, in order to ensure that any accrued goodwill passes along with the trade mark.

How should trade mark ownership be recorded and documented?

A trade mark assignment needs to be recorded at the Intellectual Property Office in order to change the name of the owner on the register. This is achieved by filing a form together with a copy of the signed assignment agreement and the requisite fee (currently £50) at the IPO. Recordal of the assignment at the IPO puts third parties on notice of the transfer of ownership so that the mark cannot subsequently be transferred behind the new owner’s back, since an assignment is void against any subsequent purchaser for value of a trade mark without notice of the assignment. If the assignment is not recorded within six months of the assignment date, the new owner will not be able to claim costs in any infringement proceedings for the period from the assignment to the date of its recordal.

Does the choice of trade mark owner impact international protection?

Further consideration as to who should be the legal owner of the trade mark will be necessary if you intend to use the mark abroad. If you want to apply for an international trade mark registration designating one or more foreign countries through the World International Property Office (WIPO), you need to have a ‘base’ application or registration in your country of origin or establishment. This base registration must be owned by the same individual or entity that will own the international trade mark. If you want your international mark to be owned by a different entity, you may need to assign ownership of the base registration first or register a new ‘base’ mark in the name of the new entity. Or you could instead apply for separate national applications directly in your countries of interest, rather than through the WIPO.

If you want to claim ‘priority’ from a first filing of your trade mark when you apply for the same mark elsewhere within six months from the first filing, this will also only be possible if the subsequent application is made in the same name as the first filed application. Priority means that your subsequent application will be backdated to the date of the first filing for the purposes of opposition by third parties.

Does ownership impact enforcement of your trade mark right?

It is important that you make sure that ownership of the registered mark and the goodwill that is generated by the mark are connected and owned by the same entity. The value of a trade mark lies in the goodwill that it has generated. If the goodwill cannot be traced to the legal owner of the trade mark, that owner may not be able to bring a claim for passing off against a third party or to rely on a defence of passing off if their registered trade mark is challenged by someone claiming to have prior goodwill in the same or a similar mark.

Special care should be taken when licensing the use of a registered trade mark or partially assigning it so that the goodwill associated with it is not diluted or damaged through poor quality control.

Summary

Having clearly defined ownership of a trade mark is important for many reasons, both for the owner themselves to be able to assert and enforce their rights and for third parties who need to know whether they are infringing anybody else’s rights.

Although the owner recorded on the Register is the legal owner of a registered trade mark, the actual situation can often be more complicated and the Register may not show the true picture, particularly if it has not been updated and contains inaccurate or out of date information.

If there is any doubt as to who should be the registered owner of your trade mark you should seek professional legal advice.