At first glance, this might seem like a completely pointless question. Of course I should be the owner of my trademark! But is it that simple?
At iGERENT, we not only provide our clients with information regarding the registration process in specific countries, we also help them define a global trademark strategy, and among the subjects that come up most often is the owner of trademark and who it should be. There are different aspects of this subject that future trademark owners must concern themselves with.
MY COMPANY VS. ME AS AN INDIVIDUAL
Quite a few of our clients are sole proprietorship companies, and one of their first questions when the time comes to register their trademark is whether to apply in their name as an individual or in the name of their company. While there might not seem to be a huge difference between the two options, since the individual will be the owner of the trademark in any case, either directly or through ownership of the company that holds the trademark, there are some important factors to consider when making the choice.
First of all, it is worth pointing out that the nature of the trademark applicant does not have any impact on the chances of successful registration of a trademark. Therefore, this will not be a factor in deciding who the owner should be.
So, which factors do come into account?
The first factor to consider is control of the trademark. If an individual eventually loses control of the company that is the owner of the trademark, through sale, the incorporation of other partners, bankruptcy or any similar events, then they will perforce lose their rights over the trademark, which they might otherwise have been able to keep. For instance, in the case of bankruptcy, the IP rights of a company may be seized and sold off as company assets.
In most countries, the trademarks office publishes pending trademark applications for oppositions in the Trademarks Journal. In many cases, the details of trademark applications are also available to the general public through online databases. Since this information generally involves the applicant’s address, this means that individuals choosing to file applications in their own names must be prepared to see personal information published online.
In case an individual who owns a trademark should pass away, their IP rights will be inherited by their heirs in the same way as any the rest of their estate. However, the process of getting the transfer of ownership recorded by the relevant trademarks office might be complex, especially if the trademark is registered abroad, as the documents accrediting the inheritance might require expensive and time-consuming translations and legalizations in order to be recognized.
Like all IP rights, registered trademarks represent intangible assets for the company that owns them. As such, they can help raise the value of a company, or be used as tools to negotiate business agreements. They can also, in some countries, be used as security interests.
While having a registered trademark allows its owner to sue a third party for infringement, the reverse is also true. It means that trademark owners are liable for potential unlawful use of the trademark. In the case of an individual, they would be directly and personally liable, while owning the trademark through a company would protect the individual according to the legal status of the company.
One very important aspect to take into account when registering the trademark is the ability to demonstrate its use in the territory in which protection is sought. While only a few countries require that a trademark is being used in order for it to register (such as in the United States), in almost every country the trademark has to be used within a certain period after registration. Otherwise it becomes vulnerable to cancellation actions for non-use.
If such actions are filed against a registered trademark, then its owner will need to be able to offer proof that it is in use, such as invoices, advertising, etc.… Such proof of use will not be accepted if they are not in the name of the trademark owner. If, for instance, the trademark is owned by an individual but the products are commercialized by the company this individual owns, invoices will be in the name of the company and are therefore likely to be rejected as proof of use. The only way for them to be accepted would be to provide a valid contract or license agreement between the trademark owner and the company commercializing it.
Therefore, if the entity in charge of commercializing the products or services registered under the trademark is different from the one owning the trademark, a license agreement is essential.
DISTRIBUTORS AND LICENSEES
This leads us to one of the other common questions that our client struggle with, which is whether a company should own their trademark outright in all the countries where they work, or whether they should let their local distributors register it.
Their main reasons for considering letting their local distributors register the trademark are two-fold. The first one is financial; trademark registration has a non-negligible cost, especially in some countries, and letting the local distributor bear the burden of trademark registration might be a way to speed up their growth and international presence for smaller companies. The second reason is convenience, since it is often easier for local distributor to find intellectual property attorneys in their own country and their own language, easing up the registration process. For our clients, this is clearly less of an issue, since we already have our extensive network of local agents and our Trademark Consultants are the ones to take care of communicating with them and ensuring that the application process is as painless as possible.
The biggest issue with having the trademark registered by a local distributor is quite simply the almost total loss of control of the trademark. Once the local distributor has registered the trademark in their name locally, they are the holders of all the proprietary rights to it in their country, and can use it in ways that the product provider did not intend, as well as transfer its ownership to a third party. Of course, many of our clients have enjoyed a long, trustworthy and fruitful relationship with distributors who registered the trademark locally, but this is unfortunately not always the case, and several of our clients have also contacted us after the working relationship with their distributors has deteriorated or ended, looking for ways to recover ownership of their own trademarks. While in some cases this is possible, it is always a time-consuming and expensive process, and it is vastly better to protect one’s rights from the start.
If one is planning to have their products commercialized by a local distributor in a specific country, they are advised to file the local trademark application in their own name, and then grant a license agreement authorizing the local distributors to use the trademark. This has several advantages; the first one is obviously not losing ownership of the trademark if the distributor is not trustworthy. Additionally, the license agreement can specify when, where and under which conditions the distributor can use the trademark, and specify a monetary compensation that the distributor has to pay the trademark owner for use of the trademark. Incidentally, this might be the solution to the above-mentioned financial issues that would lead to letting the local distributor register the trademark.
Licenses agreements should be drafted by attorneys specialized in intellectual property and, in some countries, they have to registered with the local trademarks office in order to be valid and enforceable.
PARENT COMPANY VS. SUBSIDIARIES
What If my local distributor is a local branch of my company? Should the trademark be registered in the name of the parent company or the subsidiary?
Most of the factors to consider in this case are similar to the ones already mentioned, that is to say, control over the trademark, its value as a company asset, and demonstrating use of the mark.
Control and Ownership
In this case, the issue of control is not as critical since the subsidiary is in fact controlled by the parent company, and therefore control of the trademark would ultimately belong to the parent company regardless of which company is registered as its owner with the trademarks office.
However, if the trademark is registered in the name of the subsidiary, should the parent company decide to sell its subsidiary, then the registered trademark would automatically be part of the sale unless its assignment to the parent company were specifically negotiated beforehand.
The registered trademarks will be considered assets for the company that registered them. When registering the trademark, this must be taken into account from the point of view of the company’s global strategy for business development.
As explained above, demonstrating use can be crucial if a trademark registration is challenged in any way. This can be even more critical in countries where ownership of a trademark is granted to the first party to use it, not the first to file for registration – such as the USA, Canada, Hong Kong, the United Arab Emirates or Australia, to name but a few.
If it is required to demonstrate use of the trademark, documents such as invoices, orders or ads will be necessary. If they are in the name of the subsidiary, which logically is going to be in charge of commercializing the products or services locally, while the trademark is registered in the name of the parent company, it will then be necessary to prove the relationship between the parent company and its subsidiary. While in some countries this might not be such a challenge, others will require the provision of notarized and legalized documents, translated into the local language, which might be a time-consuming and expensive endeavor.
While in some cases it is a no-brainer, for quite a few of our customers choosing the applicant for their trademark registration is not so clear cut. As with most of the decisions related to trademark registration, they are a lot of factors to consider and the variables also depend on which specific country they are considering.
While what has been mentioned above should help as a general guideline, you should always remember that each country may have some specific regulations that would factor into the choice.
Links of interest
In case you have any doubts, you should not hesitate to contact us so that our team can offer you advice tailored to your own situation.
Author: Victoire Bauvin Trademark Consultant @ iGERENT