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IP Cases & Commentary – Details

05 November 2012

Assignments - A Legal Overview and Pitfalls to Beware

Assignments - A Legal Overview and Pitfalls to Beware

Many trade marks will see a change in ownership at some stage in their lives. Assignments are commonplace and occur for a variety of reasons; for example, in the context of a business sale where a buyer purchases all of the assets (including intellectual property assets) of a business from the vendor. Another is in the context of intra-group reorganisations. Assignments can also occur as part of settlement of an on-going dispute. This article outlines some of the pitfalls of which you should be aware when assigning trade marks; many of which can be averted by careful drafting of the assignment agreement.

Unless the assignment is intra-group, there will usually be some distance between what the assignee wants (typically, a variety of representations, warranties and indemnities in respect of the assigned rights) and what the assignor is prepared to give. This is a commercial decision and hence no two negotiated trade mark assignments will be identical.

Pitfalls!

Consideration

Under English law, to be a valid contract there must be consideration which is either money or money’s worth. This is often overlooked but a key point required for the assignment agreement to be legally binding (even if only for £1). An alternative is to execute the assignment as a deed, though there are specific formalities which must be followed for the agreement to be a deed. Of course, if the parties agree to nominal consideration (eg, £1), it is imperative that this small amount is actually paid to the assignor.

Signing

An assignment of a UK registered trade mark (or application) must be signed by the assignor; however an assignment of a Community trade mark (or application) must be signed by both parties. In reality, both parties will usually sign the assignment agreement. Where one or both of the parties is an individual in their personal capacity or a foreign entity, special testimonial provisions are required; for example the signature to the assignment may need to be witnessed.

Legal and equitable assignment

English law distinguishes two types of assignment: legal and equitable. To assign the legal interest in something means that you have assigned the title of that property. However, if the equitable (beneficial) interest is not also assigned with the legal title, this can result in a split in ownership. The implication may be that the goodwill in the mark is owned by one entity, but the registered title is owned by another. Such a split in ownership causes issues for trade marks since it is fundamental that the trade mark is able to act as a guarantee of the trade origin of the goods/services concerned. Unless the parties specifically agree otherwise, legal and beneficial ownership should be assigned together.

Don’t forget tax

Currently, there is no stamp duty payable on the assignment of a trade mark in the UK. However, particularly for assignments which include foreign intellectual property rights, there can be considerable tax implications in transferring ownership of intellectual property rights and it is always prudent to check that the transfer will not result in excessive tax liabilities for you.

Update the register

Registered rights need to be updated at the registry. You will need to decide who pays for this: in the case of one mark, it is a simple process, however in the case of a whole portfolio, the costs can be considerable. Remember, if you ever need to take any action based on a registered trade mark you own, you need to ensure you are the registered owner of that mark at the applicable trade marks registry.

In the UK, assignments can be registered but there is no statutory requirement to do so. In the case of international assignments, local registries may require recordal of the assignment. In any event, it is desirable for an assignee to ensure that the transaction is recorded, since otherwise the trade mark may be ineffective against a third party acquiring a conflicting interest in the mark. Furthermore under English law, if an assignment is not registered within six months of the date of the transaction, the assignee has no right to its costs relating to any infringements occurring in the period from the date of the assignment to the date of registration of the assignment.

Further assurance

The assignee will typically take charge of amendments to the trade marks register, however they will often need the assignor’s help in doing so. A ‘further assurance’ clause is a key element of the assignment from an assignee’s point of view both for this purpose and for assisting in the defence and enforcement of registered marks or applications for registration. On the other hand, the assignor will typically seek to qualify its further assurance covenant by limiting it to what the assignee may reasonably require, and that anything done should be at the assignee's expense.

The assignee should also consider negotiating the inclusion of a power of attorney clause which is designed to ensure that the assignee can take action for the assignor where necessary to give full effect to the assignment agreement.

International transactions

In transactions which involve the transfer of trade marks in various countries, the parties can execute a global assignment which covers all the trade marks being transferred, or there can be separate assignments for each country.

The former, global assignment, is usually preferred however this will frequently need to be supplemented by further confirmatory assignments in forms prescribed by the registries in the countries in which the marks are registered.

As noted above, the preparation and execution of such assignments can be time-consuming and costly, hence the need to decide in advance who bears the cost of such recordals, and the assignee should insist on a further assurance provision.

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