There is exponential perception of trade marks as items of commerce. A successful trader may find that it is no longer the product but rather the brand that has the most impact on his bottom line. Fashion houses invest in couture shows and elaborate advertising campaigns, just to see the majority of their profits come from their accessory lines. It is the brand perception symbolised by the trade mark that drives sales. Trade mark assignments thereby enable owners to transact freely with the goodwill they’ve acquired.

Statement of Assignment

In a standard transaction the Assignor, the original owner, transfers his rights, title and interest to the Asignee, the new owner, in what amounts to a written statement of assignment. Therein identified are the parties to the assignment, the mark in question, the type of assignment, whether it be partial or in full. Once the parties’ consideration for entering an agreement is clear, the most important element to transfer alongside the trade mark is the goodwill (reputation) that goes with it. The elements of an assignment, however, may vary across different jurisdictions.

Goodwill

Goodwill is made of not only the reputation of the brand but also its customers and immediate trading intent. In the UK, the Trade Marks Act 1994, s.24, unequivocally states that a trade mark can be assigned independently from its goodwill.[1] A position very different from that in the US where a trade mark is said to be have “no independent significance apart from the goodwill that it symbolizes”.[2] There, a trade mark assignment without goodwill is known as an assignment ‘in gross’ and is an invalid transfer.

In theory, a trade mark’s inherent nature as a badge of origin is arguably conflicting with the essence of an assignment which is to facilitate a change of origin by changing the owner. In practice, however it is rare that contractually sound transactions involving trade marks would mislead consumer because it is in the interest of all parties involved to maintain the reputation of a trade mark. Nonetheless, as a protective measure, the 1994 Act, s.46, provides for the revocation of any trade mark that appears to have become deceptive in its use. Thereby it is the role of practitioners to ensure that trade marks are not assigned under terms that would be harmful to their market value and consumer perception.

Partial Assignment & Joint Ownership of Trade Marks 

An assignment of a trade mark can be partial in that it can be limited to some but not all of the goods or services for which the trade mark is registered or to specified geographical locations and means of use. This can in fact result in dual ownership, where the same trade mark is used on identical or similar goods but within different regions. More interestingly, there may be two or more owners of the same trade mark but with rights in respect of different and unrelated goods. The latter is where extra sensitivity is exercised, often by way of devising a coexistence agreement, to avoid consumer confusion as to product origin. A good example of trade mark ownership coexistence at work can be in respect of the word POLO, used for confectionaries by Nestle, clothing by Ralph Lauren and cars by Volkswagen.

Recordal of an Assignment

Recording an assignment on the relevant trade mark register is a significant step in enabling the new owner to effectively exercise their proprietary rights. Notably, a transaction that is not recorded is ineffective against third parties who, without notice of the assignment, have (in good faith) acquired a conflicting right in the respective mark. If an assignment was not recorded within the first six months of its existence, UK courts may also withhold any damages in infringement proceedings.

Lack of registration would also mean that the Assignee will not be privy to notifications by the Registrar as to renewal dates, applications for the registration of conflicting marks and applications for the revocation of the Asignee’s trade mark.

Closing Thoughts

 Trade marks as an intangible asset in a global dynamic market have a volatile value. They are only profitable if consistently monitored and maintained. An assignment thereby is not merely a commercial transaction but an undertaking. An undertaking to comply with the brand and consumer expectations associated with the mark.

 

Footnotes:

[1] Emanuel v Continental Shelf 129 Ltd, [2006] E.C.R.I. – 3089, Case C – 259/04. On the point of consumer misrepresentation, the House of Lords makes a distinction between a mistaken understanding by the consumer and actual deceit. This distinction calls for a balance between a freedom to trade and a real risk of public deceit.

[2] Sugar Busters LLC V. Brennan, 177 F. 2d 258 (5th Cir. 1999)