In Short
Selling a registered trade mark transfers full ownership of the mark to the buyer. Once the assignment is complete, you generally lose the right to use the trade mark unless you agree to a licence back. Businesses should carefully consider valuation, confidentiality and the legal process before completing a trade mark sale.
Tips for Businesses
Before selling a trade mark, assess whether a licence may better suit your commercial goals if you want to retain ownership. Put a non-disclosure agreement in place before sharing sensitive business information with potential buyers. Obtain professional advice on valuing goodwill and ensure the assignment is properly recorded with the Intellectual Property Office.
Summary
This article explains common mistakes businesses should avoid when selling a registered trade mark in the UK. It is written by LegalVision’s business lawyers, and LegalVision, a commercial law firm that specialises in advising clients on intellectual property and trade mark matters.
You may wish to sell your existing registered trade mark to another business. Trade marks are intellectual property and, therefore, capable of you selling to others as a business asset. This article will discuss common mistakes to avoid when selling your trade mark.
LegalVision’s Trade Mark Essentials Guide provides valuable information for any business looking to register or enforce a trade mark.
Selling vs Licensing
Intellectual property is a form of property, which means you can buy, sell, licence, assign, and mortgage it like any other property. Each of these transactions has its own advantages and disadvantages. Therefore, you should consider which is most appropriate.
If you sell your trade mark, you lose all ownership rights over it. Subject to any sell-and-license-back agreement, you cannot use the trade mark without infringing upon the new owner’s rights. Therefore, if you would like to retain an interest in your trade mark but still gain financially from allowing others to obtain certain rights, you may prefer to license your trade mark instead.
Licensing a trade mark involves a formal agreement between you and another business allowing them to use your mark in a certain way. The licence agreement should specify what exactly the other party can do with the trade mark. It is crucial that the agreement includes sections that ensure the usage of the trade mark does not diminish its value or validity. Trade marks carry important reputational value for your business. Therefore, an intellectual property lawyer should draw up the licensing agreement. This maximally protects your business’s reputation.
Protecting Confidential Information
When negotiating a trade mark sale, you will likely need to share sensitive business information with potential buyers. This may include financial records, customer data, marketing strategies, and details about the goodwill associated with your mark. Before disclosing such information, you should ensure that a non-disclosure agreement (NDA) is in place. An NDA legally binds the potential buyer to keep your information confidential, even if the sale does not proceed. This protects your business interests and prevents competitors from gaining access to valuable commercial information under the guise of expressing interest in purchasing your trade mark.
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Understanding the Value of Goodwill
A common mistake when selling a trade mark is undervaluing your mark. When you sell a trade mark, it is not the equivalent of selling a product associated with your business. Trade marks can be incredibly lucrative pieces of intellectual property. This is because a trade mark will have built up goodwill. Goodwill comprises reputation, trust in the brand and attraction to the business. Your trade mark’s value depends on its associated goodwill. You may find it difficult to precisely value the trade mark. Again, an intellectual property lawyer or tax adviser can help you obtain a valuation.
Executing the Agreement
Selling a trade mark is often referred to as trade mark assignment, as it is the name of the legal instrument involved in the sale process. If you have decided that selling your trade mark and therefore losing the rights attached to it is the route you want to take, you should ensure the transfer of rights is carried out in the correct way. You must be aware that if you only intend to sell one part of your trade mark, this is known as a partial assignment rather than a full ownership transfer. There is a difference in terms of which forms you will need to complete.
If you intend to pass all rights over to your buyer, you will need to complete an application form to record a change of ownership. If, however, you intend only to sell one part of your trade mark you will need to complete an application to record a partial assignment of goods and/or services. These forms should be sent to the Intellectual Property Office with a fee of £50.
Key Takeaways
Selling your trade means you transfer complete ownership to the buyer. This means you lose all rights over the trade mark, subject to any sell-and-license-back agreement. Licensing, in contrast, provides the other party with some rights of usage. However, your business retains fundamental ownership. If you have decided to sell your trade mark, you must ensure you obtain the best price for it. Value is calculated in relation to the goodwill your mark has gained. If your trade mark holds a strong reputational value, you should be able to demand a good price. It is difficult to calculate an exact value, and you should seek professionaladvice when assessing this prior to any sale.
If you need help or advice around selling or licensing trade marks, LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced intellectual property lawyers help businesses across industries manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Value is calculated in relation to the goodwill a trade mark has accrued and therefore, its reputational value. You should instruct an intellectual property lawyer to calculate this for you as it is difficult to assess without professional advice.
This is ultimately a choice for your business to make based on your long-term goals. If you wish to transfer complete ownership of your trade mark to another business, selling may be the best option. If, however, you still want to retain ownership but still gain financially from usage, licensing could be a better option. It is often best to seek advice from an intellectual property lawyer if you are having difficulty deciding.
No, once you sell your trade mark, you lose all ownership rights and cannot use it without infringing the new owner’s rights. The only exception would be if you negotiate a sell-and-licence-back agreement as part of the sale, which would grant you specific usage rights under a licensing arrangement.
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