An owner may assign a trademark to another party without issue—so long as it is handled properly.
Trademark assignment is common, in fact.
Nearly every going concern will own both physical and intellectual property. Intellectual property—patent, copyright, and trademark ownership—are often the most valuable assets of a business.
Trademark and copyright ownership, in particular, govern the owner’s ability to leverage the company’s brand. This power influences marketing, advertising, customer loyalty, new customer attraction, and, of course, sales.
Therefore, when a company is purchased by another, its intellectual property assets are often the most essential ingredients of the deal.
An assignment of the trademark or trademarks owned by the entity undergoing a change in ownership will be required.
You can assign a trademark in such circumstances—so long as the good will associated with the business’ use of the trademark is included.
How to Assign a Trademark: 2 Essential Requirements
The US Trademark (Lanham) Act allows trademark assignment so long as:
The trademark assignment must also be recorded with the US Patent & Trademark Office (USPTO) within 3 months of the date of the assignment, or prior to the subsequent purchase.
If the assignment is not recorded with the USPTO within that timeframe, it is void against any subsequent purchaser.
However, the recording of the assignment with the USPTO does not automatically update ownership information or the owner’s correspondence address. This must still be done manually.
If the assignment is conditional upon the occurrence of some future event, the USPTO will deem the event to have occurred once the assignment is recorded.
What Is Good Will?
Good will is the recognizability of the trademark by consumers, as well as the earning power that arises from that recognition.
Good will is difficult to measure, especially in smaller or mid-size businesses without national name-recognition.
Nevertheless, the written transfer agreement and any related purchase agreement must explicitly account for the transfer of the good will along with the trademark itself.
However, merely stating in the agreement that good will is transferred is not enough, in and of itself.
The good will must actually be transferred. If it is not, this is called an “assignment in gross,” and it invalidates the transfer.
Thus, the function of the business with which the trademark is associated (i.e., the production and sale of the product or service that the trademark identifies to consumers) must actually be transferred along with the trademark—and at the same level of quality expected by consumers.
Transfers of trademarks have been ruled invalid assignments in gross where, for example, the assignee began to manufacture the product identified by the trademark with sub-par ingredients or with sub-par quality.
Intent-to-Use Trademark Applications
Intent-to-use trademark applications cannot be assigned before the required Statement of Use is filed.
A portion of a business may be transferred and the trademark registration associated with that portion only may then be assigned, along with that portion’s good will.
Both owners are required to renew and maintain their now-separate marks.
Trademark Assignment: The Bottom Line
When you assign a trademark, the bottom line is that it must be done correctly. You should retain expert legal guidance not only with regard to the trademark assignment but with regard to the business or function sale as well.
Improper transfers (or mere recitations of transfers) of good will will lead to invalidation of the assignment.
Noble Path Trademark Law is a boutique US law practice located in Metro Detroit and assisting enterprises in every industry with trademark registration, trademark renewal, trademark monitoring, and Office Action refusal response matters.
We offer virtual consultations, premium customer service, and the expertise you need to maximize your odds of trademark registration success.