Tips from the Trademark Insider: Who Owns Your Trademarks?

Last week we had a new case come in the door which was somewhat rare for us. Most of the cases we see involve two different companies with two marks that may, or may not, be similar to one another. Somebody sues somebody for infringement. Somebody wins. Somebody looses. The end.

But the new case we have involves a question which goes to the very core of trademark rights: Who owns a trademark when it is developed in the course of a business or partnership.

Why is this important? Let’s say you and your partner start a business. As you do not want to be bogged down with legal stuff there is no writing that defines the “partnership.” At the onset you and your partner, old roommates from college, cannot image a day when you will no longer be working together in blissful harmony.
While strategizing over the future brand name and in an amazing act of coincidence you both simultaneously blurt out that “Our product should be called” and state the exact same trademark. Great! There won’t be any problems naming the product. But as sales grow, interests diverge, and you find yourself wanting to take the company in a completely different direction than your old roommate. You amicably part ways with your “partner” and begin preparation for continuing the business under the mark and brand you have both built. The only problem – so does he.

Suddenly it hits you – who owns the mark? We are writing today because this issue has now crossed our proverbial desks 3 times in one week. As such, we wanted to get some information out to the public on how to deal with these issues. So here are a few tips on who owns the mark and how to protect your interests therein.

Rule No. 1: If it is Not in Writing it Does Not Exist

First and foremost, every business should have everything in writing. Corporation, partnership or otherwise make sure there is a writing and one which, in particular, discusses the ownership of the assets of the corporation or partnership and how they are to be treated in the case of the dissolution of the corporation or partnership or otherwise. Memories and oral agreements fade over time. A writing persists. So get it in writing. Otherwise at the end of any relationship you may be left arguing he said / she said over critical business assets.

Some common events that should be addresses are who owns the assets, the intellectual property assets, what happens should the company, principals or partners file for bankruptcy (corporate and individual), what occurs when one but not all principals leave the business, as what happens should one of the principals or shareholders move on to the great beyond.

Rule No. 2: Contributions and Assets

If you contribute it make sure you know what happens to it. Specifically, let’s say your partnership is to be formed with two other individuals. One brings cash. One brings market savvy. One brings an existing trademark. What happens to the ownership of the trademark if the business dissolves. Spell it out at the beginning. Do not wait for litigation over who owns what. If you bring the trademark or come up with it and it is your contribution, consider adding a provision that the trademark is an asset that leaves when you do or that you have a right of first refusal on the same, etc. The important thing is not what exactly you negotiate with your prospective business owners. Rather the important thing is a recognition that you need to address this going into the deal.

Rule No. 3: Work for Hire

Also, who owns the trademarks, etc. that are created by your employees for your business while they are on the job?

As a general rule these works for hire are owned by the employer. However, make sure that their employment agreement specifically states that all intellectual property created for the business or partnership in the course of their employment is the property of the business or partnership. Thus, when they leave and try to take a brand with them they are contractually not permitted to do so.
So hopefully these scenarios are never a concern in your business. However, an ounce of legal prevention can go a long way in making sure that your brand stays just that: YOURS!

As always, if you have any questions or if we may be of service just let us know.

The Trademark Company