The Acquisition of Trademark Rights From Third Parties

December 5, 2016
CLARK.LAW

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The most common way of acquiring trademark rights is to create them. Businesses create trademarks every day in the form of words, logos, taglines, etc. Registration of a mark is not required to acquire rights in it. Rather, using the mark as the lawful owner establishes certain legal rights. It is advisable to seek registration of your trademarks to secure substantial additional legal benefits, however, the key to securing trademark rights is the use in commerce of the mark to identify the source of goods or services.

Trademarks can, however, come into your possession in other ways. Below is an overview of some common considerations for individuals or businesses that acquire trademarks from third parties.

Trademarks as an Asset in a Business Purchase

If you are purchasing substantially all of the assets of a business, make sure you’re getting the complete bundle of trademark rights associated with the enterprise. A well-crafted asset purchase agreement is, of course, essential to any such transaction, but even experienced corporate attorneys sometimes omit language necessary to ensure the transfer of all trademark rights.  For example, it is common in an asset purchase transaction to list the trademarks being assigned on an exhibit or addendum.  But what about unregistered (or even unapplied-for) marks?  Your asset purchase agreement should include language that ensures the transfer of trademark rights that haven’t been registered or applied-for or even formally identified yet.

Make Sure Registrations are Valid and Current

When acquiring registered trademarks from third parties, you should check the United States Patent and Trademark Office (USPTO) database to make sure the USPTO records align with your expectations.  Specifically, the name of the trademark owner should match the name of the party from which you are acquiring the marks.  You should also ensure that the mark is being used and will continue to be used with the goods and/or services recited in the registration.  Most importantly, you need to make sure no renewal deadlines have been missed and that the mark is not “Dead,” “Cancelled” or “Abandoned.”  Assuming the registrations are valid and current, make sure you record the transfer of ownership with the USPTO once the transaction has been completed.

Goodwill

Marks can be bought and sold, but they are not like buying or selling any other product or service. It is essential that when you are acquiring existing trademarks from a third party, you are also acquiring the “goodwill” associated with the mark.  In this context, “goodwill” means the reputation that has been developed through the use of the mark over time.  Don’t make the mistake of accepting an assignment of a trademark without the goodwill associated with it. Continuous use in commerce is essential to maintaining valid trademark rights, and if you separate ownership of a mark from the goodwill associated with it, you risk having the mark declared abandoned or legally unenforceable.

Words, Phrases or Logos Created by Vendors

The points above apply in situations where you’re acquiring trademarks from a party who is already using the marks. Another type of third party that sometimes plays a role in the earliest stage of a trademark’s life is a creative professional or agency that helps in the choice and creation of brand names, logos and/or taglines.  Just like acquiring an existing mark, it is essential that the written agreement between you and the third party vendor accurately documents the transfer of all necessary rights to you. After the vendor has completed the creative process on your behalf and you have completed a trademark search conducted and analyzed by seasoned trademark counsel, it is always advisable to seek trademark registration for your marks.

There are numerous pitfalls associated with the acquisition of trademarks from third parties.  Keep the points listed above in mind when planning any of these types of transfers.

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