Assignment & Licensing of Trademarks in India : IPR

Our Classroom series (Read All Articles Here) has educated its readers about several topics including the basics of trademarks, their attributes, types and classes, infringement conditions and rights of a trademark owner.

Keeping in pace with the effort to spread knowledge, we herein present a note on the Assignment and Licensing aspects of a Trade Mark.

ASSIGNMENT AND LICENSING OF TRADEMARKS

Trademarks are an intangible form of property by which an entity creates and establishes its brand. Just as in the case of physical property such as land, every owner of a Brand or Trademark has the right to sell, license, transfer, etc. its respective brand or trademark in accordance with legal procedures. A brand or Trademark owner can transfer his rights with respect to his trademark either by way of assignment or by licensing. The Trade Marks Act, 1999 deals with the assignment as well licensing with respect to a trademark.

In case of an assignment of a trademark, there is a change in the ownership of the registered brand and in case of licensing, the right in the trade mark continues to vest with the original owner but only few restricted rights to use the brand/mark are given to the third party.

Assignment of a Trademark or Brand

An assignment of a brand occurs when the ownership of such brand is transferred from one party to another whether along with or without the goodwill of the business. In case of a registered Trademark, such assignment is required to be recorded in the Register of Trade Marks.

A mark may be assigned or transferred to another entity in following manners:

• Complete Assignment to another entity: Herein, the owner transfers all its rights with respect to a brand/mark to another entity including the transfer of the rights such as right to further transfer, earn royalties, etc. (E.g. X, the proprietor of a brand, sells his mark completely through an agreement to Y. After this X does not retain any rights with respect to the brand)
• Assignment to another entity but with respect to only some of the goods/ services: Herein, the transfer of ownership is restricted to specific product or service only. (E.g. P, the proprietor of a brand used for jams and jellies and dairy products. P assigns the rights in the brand with respect to only dairy products and retains the rights in the brand with respect to jams and jellies. This is partial assignment)
• Assignment with goodwill: Such assignment is, where the rights and value of a trademark as associated with the product is also transferred to another entity.(E.g. P, the proprietor of a brand “Shudh” relating to dairy products, sells his brand to Q such that Q will be able to use the brand “Shudh” with respect to dairy products as well as any other products it manufactures.)
• Assigned without goodwill: Such assignment also referred as gross assignment, is where the owner of the brand restricts the right of the buyer and does not allow him to use such brand for the products being used by the original owner. Thus the goodwill attached to such brand with respect to the product already being sold under such brand is not transferred to the buyer. (E.g. P, the proprietor of a brand “Shudh” relating to dairy products, sells his brand to Q such that Q will not be able to use the mark “Shudh” with respect to dairy products but can use this brand for any other products being manufactured by it. In such case the goodwill which is associated with brand “Shudh” for dairy products is not transferred to Q and Q will be required to create distinct goodwill of brand “Shudh” for any other product or service like Restaurant wherein Q proposes to use this brand.). In many jurisdictions like United States, assignment of mark without goodwill is not allowed at all. India on the other hand allows assignment without goodwill.

Further, in case of registered Trademarks, the Trade Mark Act 1999 also puts certain restrictions on the assignment of a registered trade mark wherein there exist possibilities of creating confusion in the mind of public/ users. Such restrictions are:

• Restriction on assignment that results in the creation of exclusive rights in more than one persons with respect to the same goods or services, or for same description of goods or services or such goods or services as associated with each other.
• Restriction on assignment that results in different people using the trademark in different parts of the country simultaneously.

A trade mark is generally assigned by way of a properly executed TRADEMARK ASSIGNMENT AGREEMENT which pertains to the transfer of the mark from one person or entity who is the owner to another. It is to be ensured when drafting such agreement that:

• the rights of the owner of the brand are not detrimentally affected due to the obligations contained.
• the requirement and decision regarding whether the assignment should be with or without the goodwill of the business is explicitly mentioned and negotiated
• the agreement should be drafted keeping in mind the purpose of the transaction in question

Trademark Licensing 

The licensing of a brand is to allow others to use the brand without assigning the ownership and the same may be done for all or some of the goods and services covered. The Trademarks Act does not mention the term ‘License’, the concept under the Act is mentioned as that of a ‘Registered User’.

Trademark licensing is advantageous to both the parties. While the licensor enjoys its rights to the mark by getting the royalties for its use, the licensee is able to expand its market operations by using the brand and developing its reputation.

In case of Licensing, the licensor is open to license the rights over the trademark in manner it may like. The Licensor can restrict the rights of the licensee in a trademark or brand with respect to the products or services wherein the licensee can use such brand with respect to time for which it can use such brand, with respect to area within which it can use such brand etc.

A brand is licensed by way of a LICENSE AGREEMENT As per the Trade Marks Act, 1999, contrary to the requirement in case of Assignment, the registration of license agreement with the Registrar of Trade Marks of a mark is voluntary and not compulsory, but it is advisable. Further, like in an Assignment agreement, it is again very important that while drafting a License Agreement, the rights and duties of licensee are to be distinctively pre determined and defined. This is important not only to protect the rights of the Licensor in its own brand and to protect any misuse thereof, but also to secure the licensee's rights to use such brand.

To SUM UP…

Assignment and Licensing of brands are considerable issues and proper strategizing may open vistas of opportunities for all, a licensor, a licensee, an assignor and an assignee. Both concepts involve a degree of planning for the future of the parties involved and the brand in question. The development of a brand, its propagation and its use, all lie in the hands of the proprietor of the brand and trademark and assignment and licensing are effective methods to manage the same.

For more, please contact-

Ms. Deepika Vijay Sawhney
+911140622229, +919971673336,
Email:-deepika@indiacp.com

Ms Stuti Bansal
+911140622240, +919810203315,
Email:-stuti@indiacp.com