Assignment & Licensing Of

Trademarks In India
• Just as in the case of physical property such as land,
every owner of a Brand or Trademark has the right to
sell, license, transfer, etc. its respective brand or
trademark in accordance with legal procedures. A
brand or Trademark owner can transfer his rights
with respect to his trademark either by way of
assignment or by licensing. In India, The Trade Marks
Act, 1999 deals with assignment as well licensing of
trademarks.
• in case of an assignment of a trademark, there is a
change in the ownership of the registered brand and
in case of licensing, the right in the trade mark
continues to vest with the original owner but only
few restricted rights to use the brand/mark are given
to the third party.
 ASSIGNMENT OF A TRADEMARK
• Assignment of a trademark occurs when the
ownership of such mark as such, is transferred
from one party to another whether along with or
without the goodwill of the business. In case of a
registered Trademark, such assignment is
required to be recorded in the Register of trade
marks.
 A mark may be assigned or transferred to another
entity in any of the following manners:
• Complete Assignment to another entity- The owner transfers all its
rights with respect to a mark to another entity, including the transfer of
the rights such as right to further transfer, to earn royalties, etc. (E.g. X,
the proprietor of a brand, sells his mark completely through an
agreement to Y. After this X does not retain any rights with respect to the
brand)
• Assignment to another entity but with respect to only some of the
goods/ services- The transfer of ownership is restricted to specific
products or services only. (E.g. P, the proprietor of a brand used for jams
and jellies and dairy products. P assigns the rights in the brand with
respect to only dairy products to Q and retains the rights in the brand
with respect to jams and jellies.) This is called partial assignment.
• Assignment with goodwill- Such assignment is where the rights and
value of a trademark as associated with the product is also transferred to
another entity.(E.g. P, the proprietor of a brand "Shudh" relating to dairy
products, sells his brand to Q such that Q will be able to use the brand
"Shudh" with respect to dairy products as well as any other products it
manufactures.)
• Assignment without goodwill- Such assignment also
referred to as gross assignment, is where the owner of the
brand restricts the right of the buyer and does not allow
him to use such brand for the products being used by the
original owner. Thus, the goodwill attached to such brand
with respect to the product already being sold under such
brand, is not transferred to the buyer. (E.g. P, the
proprietor of a brand "Shudh" relating to dairy products,
sells his brand to Q such that Q will not be able to use the
mark "Shudh" with respect to dairy products but can use
this brand for any other products being manufactured by
it. In such case the goodwill which is associated with brand
"Shudh" for dairy products is not transferred to Q and Q
will be required to create distinct goodwill of brand
"Shudh" for any other product or service like Restaurant
wherein Q proposes to use this brand.). In many
jurisdictions like United States, assignment of mark
without goodwill is not allowed at all. India on the other
hand allows assignment without goodwill.
• Further, in case of registered Trademarks, the Trade
Mark Act 1999 also puts certain restrictions on the
assignment of a registered trade mark wherein there
exist possibilities of creating confusion in the mind of
public/users. Such restrictions are:
• Restriction on assignment that results in the creation
of exclusive rights in more than one persons with
respect to the same goods or services, or for same
description of goods or services or such goods or
services as associated with each other.
• Restriction on assignment that results in different
people using the trademark in different parts of the
country simultaneously.
 TRADEMARK LICENSING
• The licensing of a mark is to allow others to use the mark
without assigning the ownership and the same may be done for
all or some of the goods and services covered.   The Trademarks
Act does not mention the term 'License', the concept under the
Act is mentioned as that of a 'Registered User'.
• Trademark licensing is advantageous to both the parties. While
the licensor enjoys its rights to the mark by getting the royalties
for its use, the licensee is able to expand its market operations
by using the brand and developing its reputation.
• In case of Licensing, the licensor is open to license the rights
over the trademark in manner it may like. The Licensor can
restrict the rights of the licensee in a trademark or brand with
respect to the products or services wherein the licensee can use
such brand, with respect to time for which it can use such mark,
with respect to area within which it can use such mark etc.
 AGREEMENTS FOR TRANSMISSION
• A trade mark is generally assigned by way of a properly executed
Trademark Assignment Agreement which pertains to the transfer of the
mark from one person or entity who is the owner to another. It is to be
ensured when drafting such agreement that:
• the rights of the owner of the brand are not detrimentally affected due
to the obligations contained.
• the requirement and decision regarding whether the assignment should
be with or without the goodwill of the business is explicitly mentioned
and negotiated
• the agreement should be drafted keeping in mind the purpose of the
transaction in question
• A mark is licensed by way of aLicense Agreement. As per the Trade Mark
Act, 1999, contrary to the requirement in case of Assignment, the
registration of license agreement with the Trademark Registrar of a
mark is voluntary and not compulsory, but it is advisable. Further, like in
an Assignment agreement, it is again very important that while drafting
a License Agreement, the rights and duties of licensee are distinctively
pre determined and defined. This is important not only to protect the
rights of the Licensor in its own brand and to protect any misuse
thereof, but also to secure licensee with his rights to use such brand.
• Assignment and Licensing of brands are
considerable issues and proper strategizing may
open vistas of opportunities for all, a licensor, a
licensee, an assignor and an assignee. Both
concepts involve a degree of planning for the
future of the parties involved and the brand in
question. The development of a brand, its
propagation and its use, all lie in the hands of the
proprietor of the brand and trademark and
assignment and licensing are effective methods
to manage the same.
 Role Of Goodwill In Transfer Of Trademark
• A trademark is a property of the owner and
owner has a right under the Trade Marks Act,
1999 to transfer the property to other person
against any consideration. Although the classical
theory regarding the goodwill and trademark says
that, the two are inseparable but the
contemporary law evolved to an extent that now
a trademark is treated separately from goodwill
and hence a trademark can be transferred with
goodwill as well as without goodwill.
 LAW REGARDING ASSIGNMENT OF
TRADEMARK
• Assignment is the legal term for transfer of ownership which simply means any
act of parties by which interest or rights associated with property of any kind
can be transferred from one party to another party.
• Trade mark can be assignable or transmissible by three Modes
• By legal operation;
• Inheritance; and
• Giving authority to other party.
• The assignee will become the subsequent proprietor of the trademark assigned
whether in part or in full based on the conditions agreed between the parties.
• As per The Indian Trade Marks Act, 1999 (hereinafter "Act"), a trademark can
be assignable with or without of goodwill of the business either in respect of all
the goods or services or part thereof. Indian law according to Sec. 37 of the Act
recognize the right of proprietor in trademark & in Sec. 38, 39 of the Act by
which registered or unregistered trademark can be assignable and
transmissible with or without goodwill subject to restrictions laid down in Sec.
40 of Trade Marks Act, 1999. On the other hand, U.S. legislation under Sec. 10
of Trademark act (Lanhman Act) 1946, recognize only assignment of trademark
with goodwill and assignment without goodwill is termed as assignment in
gross and invalid, therefore assignee acquire no rights in such transfer.
 WHAT IS GOODWILL
• Goodwill is also an intangible asset which cannot be easily defined. In the words
of Lord Macnaghten, in case of Commissioner of Inland Revenue v Muller & co's
Margarine Ltd2 can be described as "it is a thing very easy to describe, very
difficult to define. It is the benefit and advantage of the good name, reputation
and connection of a business. It is the attractive force which brings in customers.
It is the one thing which distinguishes an old established business from a new
business at its first start. The goodwill of a business must emanate from a
particular centre or source. However widely extended or diffused its influence
may be, goodwill is worth nothing unless it has power of attraction sufficient to
bring customers home to the source from which it emanates."
• Goodwill of a trademark is local in character and divisible like in case of business
of a brand situated in different countries. In every country business holds a
separate goodwill related to the particular brand although some part of that
goodwill is dependent upon the overall working of the business around the
world. Business of a brand may be closed in a particular country but closing of
that business would not affect the overall goodwill of the business. While the
element of goodwill may be based primarily on earnings, such factors as the
prestige and renown of the business, the ownership of a trade or brand name,
and a record of successful operation over a prolonged period in a particular
locality, also may furnish support for the inclusion of intangible value. This
shows that goodwill is inclusive of brand value and based on number of other
factors. While trademark get its value from goodwill associated with products or
services.
 TRADEMARK & GOODWILL: SEPARABLE OR
INSEPARABLE
• In case of assignment with goodwill, assigner transfer absolute rights i.e. all the rights
and values associated with trademark which give absolute authority to transferee to
control, to sell or to improvise or change the quality or structure or completely stop the
services of such products. It is basically that transferor is replaced by transferee in terms
of authority, control & rights & after assignment transferor is completely barred from
using such trademark associated with any products & services in kind. Whereas
trademark assigned without goodwill means the right to use trademark associated with
the specific products or services of transferor is transferred to the transferee & rest of
the goodwill lies with transferor. Accordingly, transferee can use such trademark for
specific products & services as per agreement unless and until it is likely to deceive or
create confusion it does not create multiple rights in the same goods or services or if
they are associated with each other.
• In Associated Electronics & Electrical Pvt. Ltd.v. DCIT3 , Income Tax Appellate Tribunal held
that trademark and goodwill are two different concepts and transfer of trademark does
not mean transfer of goodwill. Therefore, both Goodwill and trademark are different
assets.
• Similarly in Kwality Biscuit v. Assistant CIT, Bangalore4Income Tax Appellate Tribunal
court held that right to manufacture biscuits was independent, separate and distinct
right from right to market, distribute and sell biscuits under the brand name 'kwality',
That means right to manufacture is still with assignor and will continue in the same
business but under different brand name. Trademark and goodwill is separable.
 ASSIGNMENT PROCEDURE
• To assign the trademark, application under sec 45(1) of the
Act shall be required to be filed with the Registrar of
Trademark and shall be made either in form TM 24(by
assignee only) or TM 23 (if applied by assignor & assignee
both) with duly stamped original documents or attested
copies of instrument.The important points that needs
consideration are as follows:
• 1. When application is made for transfer of trademark
along with goodwill, it must contain a statement by
assignor stating that all the rights vested in trademark with
rights to use, sell, assign, transfer, modify, delete or stop
such or any kind of products or services in respect of that
trademark are completely transferred to assignee with no
reservation. The Assignment deed should specifically
include the clause related to transfer of goodwill along with
trademark and it should also mention the amount of
consideration for the transfer.
• 2. If the application is made for transfer of trademark without goodwill,
then assignment agreement should state that assignor has reserved his
rights in respect of such trademark in particular goods or services & has
not absolutely transferred the trademark in all goods or services 5 . This
means that assignor & assignee both can use the same trademark but
in dissimilar goods or services. The assignee has to apply to the
Registrar for his direction for publication of the assignment within six
months from the date of assignment other wise same would be treated
as null. After being satisfied with all the conditions the Registrar would
allow the assignment to be advertised for the public. After publication
the assignee will apply for the registration of assignment and leave a
copy of direction of Registrar for the publication together with a copy of
publication at the Trademark Office. After considering all the facts and
circumstance the Registrar may allow the assignment and enter the
particular in the Register.
• 3. An affidavit for no legal proceeding pending against the trademark
assigned from the assignee or its representative shall also be required
to be filed for the assignment.
• As the registration of trademark is optional, likewise the registration of
assignment is also optional and non registration of assignment does not
affect the validity of assignment but registration of assignment would
be a valid proof in case of dispute related to the trademark.
• the transfer of proprietary rights in trademark is
similar to any other asset, the difference, however,
comes in reference to the goodwill attached to it. It is
the goodwill which creates the value of a trademark
and in the contemporary period same is also a
separable part of trademark. Goodwill provides
bargaining power in the hand of the seller and
therefore same is been recognized under the law in
reference to the transfer of rights in a trademark. A
trademark which is transferred with goodwill will get
much higher value in comparison to the trademark
which is transferred without goodwill.