Imagine a situation where you want to buy the “Café Coffee Day”. You go and tell the owner of the “Café Coffee Day” that you are interested in buying the same. He reverts back, saying that he is ready to sell his brand. This is called an Assignment.
Now imagine a new situation where you want the franchise of “Café Coffee Day,” and you are ready to pay the royalty for the same. This is termed as Licensing of a trademark.
To summarize it, it can be said that in case of an assignment of a trademark, there is a change in the ownership of the registered brand, and in case of licensing of trademark, the ownership of the trademark continues to vest with the original owner, but few limited rights are given to the third party. Trademark registration is compulsory for the Assignment and licensing of trademarks.
Assignment of a Trademark
When the ownership of a trademark is transferred from one party to another either with or without goodwill, it is called an assignment of the trademark. Such Assignment must be recorded in the register of trademark if the trademark is registered. Trademark registration is necessary in such cases. The Assignment is different from licensing of the trademark.
A trademark can be assigned or transferred to another in any of the following manners:
● Complete Assignment of the trademark to another entity
The owner of the trademark transfers all its rights with respect to a mark to another entity, including the right of transfer of the rights such as to further transfer, to earn royalties, etc.
● Assignment of the trademark to another entity but concerning only some of the goods or services
The transfer of ownership, which is limited only to specific products or services, is termed as a partial assignment.
● Assignment of the trademark with goodwill
Where the rights and value of a trademark associated with the product are also transferred along with the main product, it can be said to be an assignment of the trademark with goodwill.
● Assignment of the trademark without goodwill
Where the owner of the trademark limits the right of the buyer and does not allow him to use the brand for the products that are being used by the original owner, it is said to be the Assignment of a trademark without goodwill. Therefore, it can be said that the goodwill of the product is not transferred to the buyer. It is also notable that in other countries like the United States, the Assignment of the trademark without goodwill is not allowed. However, in India, the assignment of the trademark without goodwill is allowed.
In the case of the registered trademark, the trademark act of 1999 itself puts certain limits on the Assignment of trademarks where there is a possibility of creating confusion in the minds of the general public. The restrictions are:
- Assignment of a trademark that leads to the creation of exclusive rights in more than one person concerning certain goods and services or their description for the same
- Assignment of the trademark leads to different people using the trademark in various parts of the country at the same time.
Licensing of Trademark
The licensing of a trademark allows others to use the mark without transferring ownership, and it can be done for all or some of the goods and services covered. It is to be noted that the Trademark Act of 1999 does not use the term ‘License’ or ‘Licensing of Trademark’. It is mentioned as a ‘Registered User.’
The licensing of trademarks is beneficial to both parties. The Licensor gets the right to enjoy the benefit of the brand which he got after paying the royalty, while the licensee can develop the brand reputation and expand the market operation of the brand in licensing of the trademark.
In the case of Licensing of a trademark, the Licensor is free to license the rights over the registered trademark in the manner he may like. The Licensor can limit the rights of the licensee in a trademark or brand in respect of certain products or services wherein the licensee can use the brand by following certain terms and conditions of the Licensor. This is the benefit of licensing of the trademark.
Agreements for Transmission
By way of a properly executed Trademark assignment agreement, a trademark is generally assigned. The agreement is related to the transfer of a trademark from the person who is the owner to another person. Therefore, while drafting the agreement, the following must be kept in mind:
- Due to obligations defined in the agreement, the right of the owner of the brand should not be affected adversely.
- It should be mentioned and determined in the agreement whether the Assignment should be with or without the goodwill of the business.
- The purpose of the transaction must be kept in mind while drafting the agreement.
Licensing of the trademark is done by way of a license agreement. Licensing of the trademark may take place by way of a License Agreement. The trademark act of 1999 makes it clear that the registration of a license agreement with the Trademark Registrar is voluntary and compulsory in respect of licensing of the trademark. However, it is better to get the agreement registered in case of licensing of the trademark. It should also be kept in mind while drafting the license agreement that the rights and duties of the licensee and Licensor must be determined and defined. This must be done to protect the right of both parties. Registration of licensing of a trademark is also important to secure the brand and protect against any misuse of it. This is necessary in the case of licensing of the trademark.
Assignment and Licensing of trademarks are two important concepts. While assigning and Licensing of trademark, the Licensor and licensee must come together and define the rights and obligations in an agreement. It would be correct to take expert legal advice while preparing the agreement to protect oneself.