Trademark rights are transferrable through assignment agreements. When a trademark is assigned by an owner to another party, its ownership is conferred upon the other party, either completely (with goodwill) or for a limited number of products or services (without goodwill). It usually involves a one-time payment. Such an agreement (often called an assignment deed) can be signed even if the trademark is unregistered; creative designers, for example, are often asked to assign ownership of the work to the entity that commissioned it. Registered trademarks can also be assigned, of course. In both cases, the assignee must apply to the Registrar within six months.
Licensing of a Trademark
The assignment of a trademark occurs when ownership of such the mark as such, is transferred from one party to another with or without the goodwill of the business. In case of a registered Trademark, such assignment is needed to be recorded in the Register of trademarks. A mark can be assigned or transferred to another entity in any of the following manners:
Complete assignment to another entity: The owner can transfer all its rights with respect to a mark to another entity, this includes the transfer of rights such as the right to further transfer, to earn royalties, etc. (Example: the proprietor of a brand X, sells his mark completely through an agreement to Y. After this sale, X doesn’t retain any rights with respect to the brand)
Assignment to another individual but only with respect to some of the goods/ services: The transfer of the ownership is only restricted to specific products or services. (Example: AB, the proprietor of a brand used for pickles and sauces and dairy products .AB assigns the rights in the brand with respect to only the dairy products to YZ and retains the rights in the brand with respect to pickles and sauces.) This is called partial assignment.
Assignment with goodwill: Such assignment where the rights and the value of a trademark as associated with the product is also transferred to another entity. (Example. Ab, the proprietor of a brand “Pure” relating to dairy products, sells his brand to YZ such that YZ will be able to use the brand “Pure” with respect to the dairy products as well as any other products it manufactures.)
Assignment without the goodwill: Such assignment are also referred to as gross assignment, where owner of the brand restricts the right of the buyer and doesn’t allow him to use such brand for products that are being used by the original owner. Therefore, the goodwill attached to such brands with respect to the product that has already been sold under such brand, is not transferred to the buyer. (Example: AB, the proprietor of a brand “Pure” relating to the dairy products, sells his brand to YZ such that will not be able to use the mark “Pure” with respect to the dairy products but can use this brand for any other product being manufactured by it. In such scenario, the goodwill which is associated with brand “Pure” for the dairy products is not transferred to YZ and YZ will be required to create a distinct goodwill of the brand “Pure” for any other product or service like wherein YZ proposes to use this brand.). In many jurisdictions like the United States, the assignment of mark without a goodwill is not allowed. Whereas India on the other hand allows the assignment without goodwill.
In addition to that, in case of the registered Trademarks, the Trade Mark Act 1999 also puts certain restrictions on the assignment of a registered trademark where there exist a possibilities of creating confusion in the mind of users/public. These restrictions are:
The restrictions on the assignment that results in the creation of an exclusive right in more than one person with respect to the same goods or services, or for the same description of goods or services or for such goods or services as associated with each other.
The restriction on the assignment that result in different people using the trademark in different parts of the country at the same time.
Trademark licensing is beneficial to both the parties. Despite the fact that the licensor enjoys its rights to the mark by receiving the royalties for its use, the licensee is able to expand the market operations by using the brand and developing its reputation.
In case of Licensing, the licensor is open to license the rights over trademark in manner it may prefer. The Licensor may restrict the rights of the licensee in a trademark or a brand with respect to the products or the services where the licensee can use such a brand, with respect to time for which it can use such a mark, with respect to the area within which it can use such mark etc.
Agreements for Transmission
Trademarks are usually assigned by way of a properly executed Trademark Assignment Agreement which refers to to the transfer of the mark from one person or an entity who is the owner to another. It is to be ensured that when drafting such an agreement that:
1. Rights of the owner of the brand are not adversely affected due to the obligations contained.
2. Requirement and the decision regarding whether the assignment should be with or without goodwill of the business is clearly mentioned and negotiated
3. Agreement should be drafted keeping in mind the purpose of transaction in question
A mark is licensed by way of a License Agreement. According to the Trade Mark Act, 1999, contrary to the requirement in case of an Assignment, the registration of a license agreement with the Trademark Registrar of a mark is voluntary, not compulsory, and it is advisable. Moreover, like in an Assignment agreement, it is again important that while drafting a License Agreement, the rights and the duties of the licensee are distinctively pre-determined and defined. This is very important not only to protect rights of the Licensor in its own brand and to protect any misuse thereof, but also to secure the licensee with his rights to use such a brand.
Advantages of a Trademark Assignment
Through an assignment agreement, the brand owner is able to unlock the value of the brand, which, until this point, only had value on paper. The assignee, on the other hand, could be significantly better off entering a market with an already well-known brand, rather than building a new one entirely.
In case of a dispute related to the trademark, legal rights would easily be established through the deed. The Registrar ensures that all the checks are in place by examining the validity of all the clauses in the agreement and publishing the assignment in the Trade Marks Journal.