Do I Need to Assign or Licence My Trade Mark to My Company?
It’s not uncommon for confusion to arise over who should own the trade mark – the person behind the business, or the company itself. It usually comes into question when a small to medium-sized business chooses to change their legal status from that of a sole trader to a company.
When a business is first established, it’s often run by an individual, who applies for the intellectual property rights or marks in their personal name. When they later decide to set up the company formally, they often don’t think there’s a problem with keeping the trade mark in their own name, even if it is actually the company that controls the use of the trade mark now. They may not bother to contact a trade mark attorney because they’re not aware of the implications. Too often, as trade mark attorneys, we see these situations arise in litigation.
The Risks of Not Assigning a Trade Mark
When a sole trader formalises a business as a company, there are more things to consider than tax implications of the change in legal status. One cannot assume intellectual property rights are still protected. All trade marks should usually be assigned over to the company. It’s not as simple as being able say that you kept your trade mark in your personal name because you’re the sole director of your company.
There can be a lot of confusion around the distinction between the individual and their company when there is a sole director, it’s true. The fact is legally they’re different entities. When you set up a company structure as your business expands, this is the time to review your trade marks.
If your company is controlling your mark’s use, but it is still registered in your name as a sole trader, your mark can be vulnerable to removal. You could lose the trade mark, it could be removed from the system completely.. A trade mark needs to be used by the person that is named as the registrant. If this is you, personally, then you need to be able to prove that use by your company (being a separate legal entity) is authorised use within the meaning of the Trade Marks Act 1995, which can be difficult to do at times. In some instances it becomes necessary to file a new application in the correct name, but if there’s a conflicting mark filed by another party , then it won’t be a smooth path to registration. It’s usually simpler to assign the trade mark to the company once it is incorporated to prevent the costs and hassle.
Determining Who Controls the Trade Mark
For business owners that find themselves in this situation, the most crucial consideration is to ask who controls the trade mark. When we talk about ‘control’, we’re talking about one of two kinds of control. The first is ‘financial control’, which defines who is exercising monetary control over the provision of the goods or the services under the trade mark. The other relates to who is responsible for ‘quality control’. Who is making decisions about the standard of the goods or the services that the trademark is used in relation to.
To determine who is controlling the quality or the finances, we need to look at how decisions are made and who’s signing off on them. For example, in the context of the procurement of products or marketing materials, you would ask who is giving approval and who is making the payments.
If it’s the owner of the company in their personal capacity, they would probably still be considered the ‘controlling force’ behind the use of the mark. In this instance, you may be looking at preparing a licensing agreement. Licensing the use of the trade marks to your company can help ensure that you have an appropriate legal licence in place so that the company is using the trade mark with the owner’s authority and be seen as an authorised user to remove vulnerability of the trade mark being removed for non use.
Alternatively, if the approvals and sign-offs are clearly occurring on a company letterhead or require corporate sign-off, this would indicate that it’s the company that’s controlling the use of the trade mark now, not the individual. And if this is the case, it would be crucial to arrange for an assignment of the trade mark registration from the previous sole trader over to the company that is now effectively controlling the use of the mark, and, should be the registered owner.
In both cases, what is most important is that the owner who is registered should be the one that has the ultimate control over the use of the mark. If they don’t control the use of a mark, the trade mark becomes vulnerable to cancellation for non-use. That’s because if the registered owner isn’t using the mark in the sense of actual use, or controlled use of the mark, then as far as the Trade Marks Act is concerned, they are not ‘using it’.
Mark My Words can help you determine if you need to assign your trade mark to a company and manage the registration process on your behalf.
