Who Should Be the Owner of a Trademark?
The party who controls the nature and quality of the goods and services used in connection with the brand should be the trademark owner. This is an important decision and naming the proper owner for purposes of registration is critical to maintaining a valid trademark. A trademark owner can include but is not limited to individuals, partnerships, corporations, limited liability companies, sole proprietorships, trusts, estates etc. U.S. law recognizes use by a "related" company or a licensee as use that inures to the owner of the trademark, as long as the mark is not used in a manner to deceive the public. Typically, in a group of affiliated business entities, one company will own all of the trademarks that are used by the affiliates or subsidiaries (sometimes called the holding company).
Trademark law defines a related company as any person or entity whose use of a mark is controlled by the owner of the trademark with respect to the nature and quality of the goods and services. Reliance on related company use requires that the related company use the mark for the same goods or services identified in the trademark application or registration. Therefore, as a trademark owner you must use caution if you are forming another business entity or if you are joining another company and the new company will be using the trademark. As the trademark owner, you must ensure that you control use of the mark and specifically control the quality of the goods or services. If appropriate, you should have license agreements between the trademark owner and other persons or entities using the mark. See our web page entitled, Trademark Licensing, to learn more about the benefits of licensing your trademark to third parties and how licensing can affect a trademark registration.
Businesses and individuals are distinct legal entities. A trademark registration can be invalidated if the person or entity claiming ownership is not the one controlling the nature and quality of the goods or services under the mark. Keep in mind that only a legal owner of a trademark has standing to enforce the intellectual property rights of that mark. A common mistake made by business entities is to have an executive of the company file for a trademark in their own personal name. This can restrain the company from enforcing its trademark rights against competitors and it can risk invalidating the trademark registration. In addition, this hurts the company financially as it deprives the company of one of its most valuable assets.
Once a business entity is formed, typically it will be the registered trademark owner. There are several advantages to the company owning the trademark registration: (1) the business entity will be able to license or assign the mark; (2) since trademarks are quantifiable assets, the mark can add great value to the business; (3) trademarks can be used as security interests in financial transactions; (4) successful registered marks can be exploited in business negotiations; and (5) the company will have standing to enforce its trademark rights.
Under U.S. law joint ownership of a trademark is legal. However, practically speaking it can be challenging to jointly own a mark. Case law is unsettled regarding a number of important issues, such as whether one co-owner would be able to license the mark without the consent of the other co-owner and whether one co-owner could file for trademark infringement without the participation of the other co-owner in the litigation. For this reason, it is more common for the parties to create a jointly owned single entity to own the trademark.
That being said, if you choose to jointly own a trademark you should know that the law permits co-owners to freely enter into contracts to agree upon any type of arrangement for ownership. Contract law will form the basis for joint trademark ownership rather than trademark law. However, in the absence of an agreement the law presumes that each co-owner is entitled to an equal and undivided share. Determining the proper trademark owner can require some analysis, if several entities are using a trademark. We would be happy to provide you with a courtesy consultation to assist you in identifying the proper legal trademark owner. Kindly contact one of our trademark attorneys and schedule a telephone conference.