Many companies will make changes to their corporate structure, which may include incorporating in a state that has favorable tax or legal benefits. If you own a business and have registered your trademarks with the United States Patent and Trademark Office (USPTO), make sure you follow the steps below to avoid the abandonment of your registration.
In many ways, trademarks (along with copyrights and patents) are treated similarly to your other business assets. They can be sold, transferred, even used as collateral for debts. However, when it comes to transferring trademark rights from one entity to another, it is simply not enough to transfer the registration, or transfer the trademark itself. Instead, a trademark must be “assigned” through an Assignment of Rights. That Assignment must transfer not only the trademark and the registration, but must also transfer the goodwill behind the trademark to be valid.
A trademark ownership transfer must include a transfer of the “goodwill” of the trademark.
In basic terms, a trademark’s purpose is to represent aspects of the company using it. A trademark can represent a company’s quality, customer service, style, etc. It represents the company’s ethos, its connection with its customers, and its mission statement. All of these elements are considered “goodwill” that a company builds in its trademark through use, advertising, and marketing over time.
Therefore, a trademark is more than just a piece of paper filed with the USPTO. A trademark’s value is the recognition and goodwill that it has to consumers (however big or small that might be). When a trademark is assigned to a new company, the goodwill must be transferred with the trademark, or it will not be valid.
What could happen if I do not properly assign my trademark to my new company?
If a trademark is not properly assigned, then rights in the trademark are terminated and the new company cannot claim the rights dating back to the original company’s first use of the trademark. Any registration for the trademark would be cancelled and the new company would need to reapply as if it was a brand-new trademark (because, without the goodwill, it is).
Is an “asset purchase agreement” sufficient to transfer trademark rights?
For trademarks, assets transferred through an Assets Purchase Agreement will not typically be enough, on its face, to support the proper transfer of a trademark to a new company. An Assets Purchase Agreement will not be accepted by the USPTO to transfer a registration to a new company. Only a proper Trademark Assignment will be accepted to “record” the transfer of a registration from one company to the other.
Trademark assignments are complicated and involve dozens of legal decisions to decide when and if a trademark was properly transferred. Most issues are not discovered until a party seeks to enforce or defend its rights. At that point, however, it could be too late. An experienced trademark attorney can help identify red-flags and counsel clients to attempt to avoid errors that could cost the trademark owner dearly, at the worst possible time. Make sure you know the risks before you change business entities.