Whether accompanied by or without the goodwill of the business, a trademark is assigned when its ownership is transferred from one party to another. Such assignment must be recorded in the Register of Trademarks in case it is a registered assignment of trademark agreement.
Any of the following methods can be used to assign or transfer a mark:
- The owner of a mark transfers all of its rights, including the right to further transfer, the right to earn royalties, etc., to another entity. (For example, X sells his brand completely to Y through an agreement.
- In the case of an assignment to another entity, ownership of certain goods or services is only transferred to certain products or services (E.g. P, a brand proprietor for jams, jellies and dairy products. P assigns to Q only the rights for dairy products and retains the rights for jams and jellies.) This is called partial assignment.
- A trademark with goodwill is an assignment in which the rights and value of the trademark associated with the product are also transferred to another entity. A brand relating to dairy products, “Shudh”, is owned by P and sold to Q so that Q can use it to manufacture dairy products and other products).
- This is a type of assignment where the original owner restricts the buyer’s rights and prevents him from using the brand the same way. The buyer is therefore not entitled to the goodwill associated with the brand. In many jurisdictions, such as the United States, it is not allowed to assign marks without goodwill. On the other hand, India allows it.
As well, the Trade Mark Act 1999 also restricts the assignment of registered trade marks where there is a possibility of creating confusion among the public or users. These restrictions are as follows:
- It is forbidden to assign rights that create exclusive rights in more than one person over the same goods or services, or for similar goods or services as associated together.
- The trademark can only be used by one person in one part of the country simultaneously due to restrictions on assignment.
Licensing of Trademark Assignment
Licensing a mark means allowing others to use the mark without assigning ownership; this can be done for all or some of the goods and services covered by the mark. Under the Trademarks Act, the concept of a ‘Registered User’ is mentioned, not that of a ‘License’.
In trademark licensing, both parties benefit. The licensor gains rights to the mark while getting royalties for its use; meanwhile, the licensee builds its brand and expands its market operations.
Licensing lets the licensor license the trademark rights in any way it desires. Licensees can be limited in their rights to use a trademark or brand based on the product or service they can use it on, the duration for which that trademark or brand can be used, the geographical area in which the trademark can be used, etc.
AGREEMENTS FOR TRANSMISSION
Trademarks are generally assigned through properly drafted Trademark Assignment Agreements, which pertain to the transfer of ownership of a mark from one owner to another. It is important to ensure when drafting such agreements that:
- Due to the obligations contained in the agreement, the owner of the brand is not adversely affected.
- Business goodwill is explicitly mentioned and negotiated as a requirement for the assignment
- A transaction agreement should consider the transaction’s purpose when drafting
It is through a License Agreement that a mark is licensed. Contrary to the requirement for Assignments, registration of license agreements with the Trademark Registrar of a mark is voluntary and not compulsory. Similarly to an Assignment Agreement, it is very important to clearly define and predetermine the licensee’s rights and duties while drafting a License Agreement. In addition to protecting the Licensor’s rights in its own brand (from misuse) and securing the licensee’s rights, such protection is also important for the licensee.