Assignment and Licensing of Trademarks

Introduction to Assignment and Licensing of Trademarks

Understanding the process of assignment and licensing of trademarks in India is a paramount issue. The process of marketing and strategic management would surely open a plethora of broadening horizons in this domain, for the licensor and licensee likewise. It all depends upon the development of a brand, and the use of the brand, which collectively form a factor to boost marketing in various sectors.

The Trademarks Act of 1999 was updated to reflect modern business processes and do away with unfair brand rivalry. The Act is intended to protect the rights of a proprietor who devotes time, effort, and money to his trademark and to establishing its reputation in the market. The Act also aims to protect consumers from being duped into purchasing a product of inferior quality simply because it bears the same mark as the proprietor’s or an authorised user’s mark, or a mark that is confusingly similar to the proprietor’s mark.

A registered owner may assign or licence the use of his trademark in accordance with the Act. The goodwill of the involved business may or may not be used in the assignment and licencing. It is not necessary to register a trademark in order to assign or licence it.

Every owner of a brand or trademark has the right of selling, transfering, assignment and licensing of trademarks, etc. their respective brand or trademarkin line with legal procedures, much like in the case of tangible property like land. An owner of a brand or trademark may assign or licence his or her rights in relation to that trademark. The Trade Marks Act, 1999 in India covers both trademark licencing and trademark assignment.

Assignment and Licensing of trademarks helps the proprietor to generate more revenue, enact broader and easier territorial expansion, enjoy protection from illegal use of one’s marks, develop easy advertisement across different places, increase consumer recognition and popularity among other benefits.

What is Assignment of a Trademark?

Meaning of Assignment of a Trademark: – Assignment of a trademark means to transfer the owner’s right in a trademark to another person. The transferring party is called the assignor, and the receiving party is called the assignee. A written assignment made by the parties involved is what the Trade Marks Act of 1999 defines as “assignment” under Section 2(b).

Basically, Transferring ownership rights to another person is known as assignment. Ownership rights to a select number of goods or services, or to all the goods or services that the proprietor has registered, may be assigned, unless there is an accompanying trade mark. If they work in various nations, it might potentially benefit more than one person.

Thus, where legal rights are transferred, an assignment should be made in writing; however, a trademark cannot be assigned or transmitted if doing so would give rise to several owners having competing rights, as doing so would mislead or confuse the general public.

Who can Assign a Trademark?

Section 37 of the Trademark Act of 1999 defines the phrase “trademark assignment.” According to the definition, a trademark assignment is giving up ownership of a trademark and a brand mark. According to Section 37 of the Trademarks Act of 1999, the person listed as the trademark’s proprietor in the register of trademarks has the authority to assign a trademark and receive consideration for such assignment for doing so. So, the owner of a trademark has the option to transfer ownership to another party.

What are the different kinds of Trademark Assignment?

The different kinds of trademark assignments are as follows: –

1. Complete Assignment: – The owner of the trademark assigns all rights in the trademark to a new owner, including the ability to receive royalties and make additional transfers.
   For instance, X is the owner of the brand “ABC.” By way of a contract, X totally transfers to Y his trademark “ABC.” After that, X will not have any legal claim to the “ABC” brand.

2. Partial Assignment: – Regarding only particular services or items, the trademark owner assigns the trademark to a different party with respect to only specific services or goods. The sale of the trademark’s ownership is limited to certain services or goods.
   For instance, X is the owner of the sauce and dairy product brand ABC. X transfers to Y the rights to the brand “ABC” regarding exclusively dairy goods while keeping the rights regarding sauces.

3. Assignment with Goodwill of Business: – The owner of a trademark transfers to another person the privileges, rights, values, entitlements and values associated with a trademark. Here, the absolute ownership over the rights and value of a trademark associated with the product is transferred from one entity to another. When a trademark is assigned along with goodwill, the assignee is permitted to use it for any category of products or services, including those that the assignor was already using.
   For instance, X is the owner of the “Sherry” hair product brand. X assigns the goodwill of the “Sherry” brand to Y. Y will be permitted to use the “Sherry” name in relation to food goods and any other products they produce.

4. Assignment without the Goodwill of Business: – The trademark owner assigns to the assignee all rights and entitlements in the trademark regarding goods or services that are not in use. The assignment without goodwill is also known as “gross assignment”. In the event of an assignment without goodwill, the assignor places restrictions on the transfer of trademark rights. The assignor transfers the trademark with the caveat that the assignee is not permitted to use it in connection with any products or services that the assignor is currently using.
   For instance, “A” is the owner of a brand and uses his trademark for selling computers. “A” sells his brand to “B” such that “B” will have no rights to use the brand trademark for selling his computer products. However, “B” can use the brand trademark in the chain of businesses other than a computer.

Pre-Requisites for Assignment of Trademark

The pre-requisites for assignment of a trademark are as follows: –

1. The trademark assignment should be in writing.
2. The assignment should be between two identifying parties, i.e. assignor (owner of the trademark) and the assignee (buyer of the trademark).
3. The assignor should have the intent and must consent for the trademark assignment.
4. The trademark assignment should be for a proper and adequate consideration (amount).

Assignment Agreement of Trademark

Through a properly drafted trademark assignment agreement, the owner of a trademark often assigns it to the assignee.

The following considerations should be taken when drafting the trademark assignment agreement: –

1. The duties outlined in the agreement should not adversely affect the trademark’s rights.
2. The choice and requirement of whether the business’s goodwill is included in the assignment or not must be made plainly known.
3. The aim of the transaction or assignment should be made explicit in the agreement.
4. It is necessary to specify the geographic area in which the assignee has the values and rights to the trademark.
5. It is necessary to notice the transfer of the ability to claim damages and file lawsuits for current and previous infractions.
6. The contract must be properly executed, which means it must be notarized and stamped in accordance with the relevant Stamp Act.
7. It is necessary to mention the witnesses and signatures.
8. It is necessary to state the location and date of agreement execution.
9. The assignment’s day and date, as well as the parties involved, must be noted.
10. The agreement should specify whether or not the legal successors of the assignor and assignee are subject to its obligations.

What is the process of Assignment of Trademark?

The following steps are included in the trademark assignment process in India: –

1. Through a trademark assignment agreement, the trademark owner (assignor) transfers his or her ownership of the mark to the assignee;
2. By submitting an application of a trademark assignment in Form TM-P to the register of trademarks, the assignor, assignee, or both, may make a combined request to register the assignment;
3. Within six months of the assignment date, Form TM-P must be submitted to the trademark registrar. After six months of assignment, the application can be submitted, however the fee may change appropriately;
4. The assignment must be publicised in the manner and for the duration specified by the trademark registrar;
5. The trademark registrar’s office should receive a copy of the advertisement and the registrar’s instructions; and
6. The trademark registrar will register the assignee as the proprietor of the trademark and record the specifications of the assignment in the register upon receipt of the trademark assignment application (form TM-P) and necessary documents;

Documents Required for Assignment of Trademark

Along with form TM-P, the following papers must be delivered to the trademark registrar: –

1. Agreement for a trademark assignment;
2. Certificate for a trademark;
3. The assignor’s NOC; and
4. Documentation proving the assignor’s and assignee’s identities.

What are the restrictions on Assignment of Trademark?

According to the Trademarks Act of 1999, trademark assignment is subject to the following limitations: –

1. Restriction on Parallel Use: – When a trademark assignment leads in the formation of exclusive rights in various people in respect to the same or comparable goods or services, and it is likely to mislead or cause confusion, the assignor is not permitted to assign the trademark. Multiple exclusive rights pertaining to the same/similar items or services in the hands of various people are therefore not permitted. It forbids several parties from using a trademark in connection with identical or similar goods or services in a simultaneous manner.

2. Restriction on Multiple Territorial Use: – When a trademark assignment leads in the development of an exclusive right for several individuals in different regions of India in relation to the same or similar goods or services, the assignor is not permitted to assign the trademark. When an assignment leads in the development of an exclusive right in multiple individuals throughout India for the same or comparable goods or services that are sold or provided outside of India, the assignor is not permitted to assign the trademark. As a result, it is prohibited to grant rights to same or similar goods or services in various parts of India.

What are the benefits of Assignment of Trademark?

The benefits of Trademark Assignment are as follows: –

1. The trademark assignment enables the trademark proprietor to encash the value of his/her brand.
2. The assignee obtains the rights of an already established brand due to trademark assignment.
3. The trademark assignment supports the assignor and the assignee to expand their respective businesses.
4. The trademark assignment agreement enables the assignor and the assignee to establish their legal rights in case of any dispute.

What is Licensing of Trademarks?

Meaning of Licensing of Trademarks: – Licensing of Trademarks simply means the permission granted by the owner of the trademark to a third person. Such a license is granted in consideration of a Royalty. For Example: – Where an owner of a brand authorizes and allows a third party to use its brand/mark in the course of trade for goods/services. The most important thing to remember is that ‘licensing’ is not sale of the mark or absolute transfer. The ownership to the mark is retained by the owner/holder and only a limited right to use, sell products under the mark etc are given to the third party.

Through the process of trademark licencing, a registered trademark owner authorises a third party to use the trademark or logo without giving up ownership of the mark. Simply said, trademark licencing enables the registered owner to permit other parties to use the trademark or brand name without transferring ownership of the trademark. The conditions of the Trademark Licensing Agreement allow the trademark owner to impose additional limitations on the use of a registered trademark. For the agreed-upon commercial uses of the registered trademark, the registered trademark owner may receive royalties from the licensee.

It should be emphasised that only a limited number of rights relating to a registered trademark are granted to the licensee, and that the registered trademark owner retains sole ownership of the licenced trademark as well as all other relevant rights.

The licencing of service marks and trademarks in India is covered by Section 49 of the Trademark Act, 1999. Trademark licencing typically depends on some agreed-upon terms and circumstances relating to the proposed product’s quality level, the preservation of the established status of the product and Trademark, exclusivity for the same, the various ways the Trademark may be used, etc. An agreed-upon period is used for trademark licencing. There are no specified legal conditions or time limits for trademark licencing in India according to the Indian Trademarks Act.

Who can grant a Trademark License?

The trademark licence can only be given by the registered trademark’s owner or holder. It would be appropriate to mention that both registered and unregistered property can be transferred under Indian law. A trade mark may be transferred by an assignment or a licence.

In India, there are two types of licences for trademarks that are registered: a simple licence agreement that pertains to permissive use and a registered user, where the licence agreement is registered with the Registrar of trademark. The licensee is granted specific legal rights under this licence.

Why is a Trademark License Granted?

To formally allow a third party to utilise the registered brand, a trademark licence is provided. It is typical for foreign businesses, particularly IT businesses, to offer trademark Licenses in other nations so that their trademarks can be used there. For instance, a brand owner may authorise another individual to use his trademark in connection with goods and services during commerce.

The Trademark License is not being sold; it is being granted. Licencing simply gives the right to use it.

A person other than the registered proprietor of a trademark may be registered as a registered user, according to statutory language in Section 48 of the Trademark Act. Therefore, the rules of this act may permit the use of a registered trademark, but only if both parties comply with the relevant requirements.

Process for Registration of a Trademark License

A Registered User is currently registered under Section 49 of the Trademarks Act of 1999. In this case, the Licensee is the Registered User.

Permitted use of a trademark is defined under Section 2(1)(r) of the Trademarks Act. It refers to the following:

1. By a registered user of the trademark in relation to goods or services: –
   • With which he is connected during trade;
   • In respect of which in the trademark remains registered for the time being;
   • For which he is registered as a registered user;
   • Which complies with any conditions or limitation to which the registration of the registered user is subject;
2. By a person other than the registered proprietor and registered user in relation to goods or services: –
   • With which he is connected during trade;
   • In respect of which the trademark remains registered for the time being;
   • By consent of such registered proprietor in a written agreement; and
   • Which complies with any conditions or limitation to which such user is subject and to which the registration of the trademark is subject”.

The registration of a trademark license agreement is not mandatory under the law. But registration always comes to the rescue as it forms a record/ evidence in possible future disputes.  In the case of Himalaya Drug Co. Pvt. Ltd., Bangalore vs. Arya Aushadhi Pharmaceutical Works, Indore, AIR 1999 MP 110 the Court ruled that if a company fails to prove that it is a registered user then the suit is liable to be dismissed. It is therefore always good to register the Trademark License with the Trademark Office. Only a Registered owner/ Proprietor of the Trade Mark is competent to launch proceedings for the trademark infringement as per the Trademarks Act, 1999. If a User is not registered under the act then he cannot maintain the suit under the Act.

Therefore, to register the trademark license: –

1. The agreement must be in writing;
2. The trademark owner and the intended user should apply for registration (section 49) with the Trademark Registrar jointly;
3. The form to use for the application is TM-U;
4. An affidavit signed by the owner of the trademark and authenticated by him or her, detailing the license’s terms and specifying the following: –
   • Relationship between the parties
   • Duration of the use
   • Goods/services for which it is applicable
5. The government fee of Rs. 4500 for each mark shall be paid.

According to the Act’s provisions, a registered user may be granted permission to use a registered trademark, but in order to do so, the registered owner of the Trade Mark must enter into a contract with the prospective registered user.

Within six months of the date the parties’ agreement was formed, an application for registration must be submitted. If everything is acceptable, the Trademark Office (TMO) will subsequently register the user. Following that, the user will be a “Registered User” of the trademark.

The Trademark Office will notify the trademark owner and any other registered users of the same trademark and publish it in the Journal.

What are the benefits of a Trademark License?

The benefits of Licensing of a Trademark: –

1. Financial Gain: – The trademark is widely used for commercial gain, and the owner receives royalties as a result. This financial gain benefits both parties. By granting the licence to the licensee, the licensor, who previously could not capitalise on his trademark due to lack of resources or exposure, can now use those resources to his advantage and benefit more. A portion of the income are also given to the licensee.

2. Expansion of the Trademark Owner’s Business: – The Trademark owner’s business grows and expands its reach into new regions. Since the licensee(s) can leverage their distribution abilities for business expansion, the company is no longer restricted to a specific geographic area.

3. Expanding the Brand Recognition of a Trademark: – The Trademark becomes well-known in areas where it was previously unknown. The licensee is allowed to widely publicise using his resources.

4. Increase in Trademark Popularity: – As the Trademark is recognised to more individuals and consumers, it gains popularity. By boosting sales, this increases revenue and facilitates the trademark’s continued licencing.

5. Workload Redistribution/Reduction: – In a sense, the Licensee joins the Licensor as a partner. Because the licensee is equally responsible for upholding the quality of the goods, he produces using the trademark, the licensee’s workload is lessened and he need not worry about the quality of the products.

Under what conditions can a Trademark License be cancelled?

Cancellation is possible in the following situations: –

1. If the provisions of the agreement are broken or violated;
2. If the mark is used in a manner not permitted under the agreement;
3. If the mark is utilised to trick consumers or the public by creating confusion;
4. If any party withholds information that is important and necessary to the agreement;
5. If one of the parties makes false statements or cheats.

The Trademark Office notifies the Trademark owner as well as any additional registered users who might be impacted by the cancellation of the Trademark License. The official cancellation cost is Rs. 4500 for each mark.