One of the most frequently asked questions in our law practice is who should be the legal owner of a trademark. It is hard to believe that the “name section” of the trademark application is the section most frequently incorrectly completed of all the sections of the trademark application. If the wrong entity is named as the trademark owner, the application and registration may be void. In other words, a trademark registration may be invalid if the owner is not the person or entity that controls the nature and quality of the goods or services provided under the mark. If there is no business entity formed and you as an individual control the nature and quality of the goods and services, then the proper owner is you the “individual”. You will need to indicate your legal name and an address, in addition to recording your citizenship on the trademark application.
The general principal of trademark law is that the individual or legal entity that uses the mark owns the mark, unless use is by a related company or licensee. U.S. law recognizes use by a related company or licensee if the use inures to the benefit of the trademark owner. Often the reason for having another entity use the mark and another entity own the trademark is to protect a trademark or trademark portfolio from being forfeited in litigation, should there be a money judgment against the legal entity using the trademark. It should be noted, that in any license agreement it must be clear that the owner of the trademark will control the nature and quality of the goods or services and the license agreement should explicitly state how the control is exercised.
In addition, to an individual, a corporation, partnership, sole proprietorship, LLC, trust, estate, joint venture or joint applicants may be the proper legal owner of a trademark. When recording information on a trademark application, with respect to a business entity that is formed you must indicate the state where it is formed and the name and address of the business entity. For a sole proprietorship you must name the name of the sole proprietorship, provide the address, the state where it was formed and the name and citizenship of the sole proprietor.
Here are some of the facts to keep in mind if you name an individual as the trademark owner. An individual will be able to assign or license the registered trademark. In the event of an individual’s death, trademark ownership passes to the individual’s estate. If the company goes bankrupt the individual maintains the trademark rights, but if the individual goes bankrupt the trademark could be sold off in accordance with the proceedings. Only the individual would be able to enforce intellectual property rights under the trademark. The individual could be named in litigation for trademark infringement and held personally liable. If a business exists, it is likely that such entity would not have standing in court to enforce the trademark rights. See, Inflatable Zoo Inc. v. About to Bounce, No. 12 CV 1709 (E.D. La. April 11, 2013), where the district court held that a company does not have standing to assert infringement of a registered trademark where the registration is in the name of an individual even if the same individual is the sole shareholder of the corporation. In that case, if the sole shareholder is controlling the quality of the goods or services, they could be named the legal trademark owner, but then the restrictions of individual ownership applies and only the individual has standing to sue in court.
If a business entity owns the trademark, the company can assign or license the rights to third parties. If the company is sold, the trademark rights are generally transferred to the purchaser. If the company goes bankrupt, the trademark can be sold off as an asset of the company. On the other hand, one big advantage of company ownership, is the company’s value significantly increases. In addition, registered trademarks can serve as security interests in various financial matters. Moreover, the company can sue to enforce its trademark rights. However, if the company is found to have illegally used the mark it can be held liable, but it will protect any individual associated with the company from personal liability.
For more information on this topic, please read our webpage on our firm site entitled, Who Should Be The Owner Of A Trademark? After reviewing the content on this page, if you have any further inquiries, kindly contact our office for a courtesy consultation.