How Do You Own Your Trademark?
A trademark is property. It can be bought, sold, traded, leased, loaned, leveraged, forfeited, lost, damaged, misappropriated and stolen. It is often considered the most valuable asset of a business, representing all the good will a business enjoys with its customers.
If someone uses your mark without your permission, uses it to deceive, abuses it, slanders it, defaces it, you have recourse in the courts to seek compensation and restitution for the damage done to it.
But what makes a mark your mark?
The general rule is that the person or legal entity that uses a trademark owns the trademark. After all, a trademark is not a trademark until it is used as a trademark – that is, used on or in connection with goods and/or services that are traded in the marketplace. So, in general, the first person, company, or organization to use a trademark in trade should own it, but there are qualifications that you need to take into account:
Affiliates and Licensees:
U.S. trademark law recognizes use by a “related company” or a “licensee” as use by or to the benefit of the owner. It is often the case that, in a group of affiliated companies, one company will hold ownership or control of all of the trademark (and other) properties that are used by the other affiliates. This can protect a trademark from being forfeit as a result of a judgment for damages against the company using the mark. It is also often the case that a person or company that has achieved local success with trademarked goods or services will license use of the mark to others who are able to provide same goods or services in other locations, or nationally, or internationally. The licensing of the use of a trademark is often at the center of franchises.
In either case, related company or licensee, the relationship between the companies or the licensee must explicitly provide that “use of a mark is controlled by the owner of the mark with respect to the nature and quality of the goods or services on or in connection with which the mark is used” and that the trademark “is not used in such manner as to deceive the public.” That means that the agreements, by-laws, and other documents that define the relationship between companies, or between an individual and a company, must give “control” to the trademark’s owner, and the owner must exercise that control in fact. And, likewise, a license agreement between parties that may not be otherwise related gives use of the trademark to the licensee and real control to the mark’s owner.
When you or the company you operate does not exclusively use a trademark, you need to be very careful that you or your company does what is necessary to maintain ownership of the mark by maintaining control over its use in fact. When you own a mark and allow a company you form or join to use that mark, if you don’t transfer ownership of the mark to the company and want to retain personal ownership, you need to be careful that your stakeholder’s position in the company affords you control of the use of the mark or that there is an express license between you and the company.
Joint Ownership and Partnerships:
Not long ago, U.S. law made it difficult for two or more unrelated persons (or companies) to jointly own a trademark. The joint owners had to be married or otherwise joined in a partnership or joint venture organized under the aegis of a domestic or foreign state. One of the consequences of becoming party to the Madrid Treaty (see International Trademark Registration) has been allowance of joint ownership where there may be no formal relationship at all among the owners. This is a “consequence” because, in the absence of a express agreement between unrelated joint owners, there is no certain determination of ownership when the joint owners part company for whatever reason, and in fact all such owners could claim equal ownership rights that, if exercised, would likely lead to confusion in the marketplace and invalidation of the trademark rights of all owners.
In contrast, if a married couple or legally sanctioned domestic partners divorce, there is a mature body of law almost everywhere that provides a process to determine how the common or joint property may be divided. Similarly, a formal partnership agreement usually governs the ownership rights of the partners and the passing of ownership as the membership changes, but in the absence of such an agreement, there is a also a mature body of law governing all aspects of the operation of partnerships. In neither case does the fact of settled law and process guarantee an uncontested transfer of ownership, but it does make outcomes predictable enough to tend to discourage litigation.
Since ownership rights in a trademark derive from use, it is not necessary to register a trademark in order to own it. If you or your company is using a mark, and your use is not infringing on the ownership rights of a senior user, then your use establishes your ownership rights in your mark to the extent in time and place that you use it, and those rights can grow over time and expand in geography. What is missing from unregistered use is clear title to your mark, and absent registration, your rights in your mark can diminish quickly over time and place and be lost as a result of interrupted use and disuse.
Obtaining state or national registration of your mark is akin to acquiring a deed to the trademark property. It establishes a public record of your claim of title in the mark. It establishes a date certain from which your rights and their priority over the claims of others originate. It extends the effect of your rights to the borders of the state or country where you registered. It deters others from trespassing on your rights, gives you the legal basis to prohibit others from trespassing, and it bars others coming afterward from obtaining registration in the state or country of registration. Furthermore, registration maintains your claim of ownership and your ownership rights for a definite period of time, the term of registration, in spite of lapses in use.
In a number of countries, including the United States, the act of applying for trademark registration is considered use of the mark. Called “constructive use” in the U.S., an application for registration establishes your right to register your mark before others who may come after you, regardless of whether you have actually used the mark, and upon registration, your mark will be considered as having been in use from the date you filed the application, even if actual use in the marketplace comes much later.
If you stop using your trademark for a time, your ownership rights will diminish over time and eventually disappear, leaving the mark abandoned and available for anyone else to take up. How long it takes before you can no longer claim ownership of a trademark depends on whether you registered the mark, and how well known the mark became while you used it. Without registration, the evaporation of your ownership rights can occur very quickly. When an enterprise goes out of business without having registered the trademark, there is no title to the property to be sold off, passed to departing stakeholders, or taken by creditors. In the case of a registered mark, the title to the mark remains in force for as long as the registration is maintained, and in the U.S. a registration can be maintained in force even when it is not being used with a declaration of the trademark owner’s intention to take up use again in the future. And where a mark has become “famous,” a claim of ownership can be sustained even years after the mark goes out of use, simply because consumers remember the association between the mark and the product it represented.
Finally, your ownership rights in a trademark can melt away simply by your inaction, by your standing by and allowing othesr to use your mark for themselves. As with any other property, you must assert your ownership of it or lose it.