Joint Trademark Ownership
In the U.S. joint ownership of a trademark is legal. However, it is contrary to the fundamental trademark policy that a mark should identify and distinguish a single source's goods and/or services. Joint ownership is viable only if the owners have joint control over the nature and the quality of the goods and/or services. The overriding concern is for consumer protection and this can lead to a Court enjoining the independent use of a joint mark. The majority of time, state contract law will govern joint trademark rights. The freedom to contract, will generally determine the scope of the co-owners' rights, subject to the concerns of consumer protection. If no agreement exists, then the law presumes that each owner is entitled to an equal and undivided share. If necessary, an action for an accounting with respect to a trademark can be brought under state law.
Joint ownership of a trademark can raise difficult problems, especially when the co-owners no longer wish to cooperate in the joint venture. If the owners are not able to collaborate and coordinate with respect to the quality of the goods, a decision maker could find that the mark is abandoned. Other times, the court may award exclusive rights to the party most responsible for the quality of the goods and/or services. According to McCarthy, joint ownership of one mark should not be the solution when parties are involved in a trademark dispute.
Regarding licensing and assignments, generally speaking, a sole owner of a trademark may assign its mark, may assign a portion of its mark (for example 50% interest) or can assign a separate portion of a business (See Trademark Manual of Examining Procedure §501.06). However, the case law is unsettled with respect to whether a co-owner of a trademark can license or assign the rights of the mark to a third party without the other co-owner's consent. For all of the reasons cited on this page, co-ownership of a trademark is discouraged.
Keep in mind an owner cannot use assignment to impose geographical restrictions. This must be accomplished through a concurrent use proceeding before the Trademark Trial and Appeal Board or according to a final determination of a federal court. If you have questions regarding how to record an assignment with the United States Patent & Trademark Office ("USPTO"), see our webpage entitled Recording Trademark Assignments And The Specific Rules That Govern.
Courts are resolving trademark ownership questions inconsistently and unpredictably. Some courts resolve the matter as a simple contract dispute. Other courts seek to use the likelihood of confusion framework, while others decide who first used the mark and resolve the matter on the basis of priority. One common scenario involving joint ownership is the manufacturer and distributor relationship.
Under this scenario, if the mark is unregistered and there is no contract between the parties, there is a rebuttable presumption that the manufacturer is the trademark owner. See Covertech Fabricating, Inc. v. TVM Building Products, Inc., Case No. 15-3893 (3d Cir. April 18, 2017). Covertech applied the McCarthy test and weighed six factors to see if the presumption is rebutted: (1) which party invented or created the mark; (2) which party first affixed the mark to the goods sold; (3) which party's name appears on packaging and promotional material in conjunction with the mark; (4) which party exercises control over the nature and quality of the goods; (5) who do consumers believe stand behind the goods (who receives complaints or comments regarding the goods); and (6) which party pays for advertising or promotion of the goods.
An alternative to joint trademark ownership is forming an entity with the joint owners and allowing the entity to hold the trademarks and to license the rights accordingly. The mark should be registered at the USPTO in the entity's name. If applicants choose this course of action, then quality control will be a critical element of the licensing model. If there is inadequate control over the quality of the goods or services, there is risk of dilution of trademark rights, risk of successful challenges to cancel the mark, etc. In other words, failure to assert sufficient quality control can result in inadvertent abandonment of the trademark under a licensing scenario. For general information regarding the pros and cons of licensing, see our web page entitled Trademark Licensing. If you still need additional information on trademarks or licensing, please feel free to contact our office for a courtesy consultation.