So you want to sell your trademark to another business. You can do that because trademarks are considered property and may be bought and sold. But trademarks are also special kinds of property and one must use care when crafting the sale so that it is effective and enforceable by both parties to the transaction.
The outright sale of a trademark is referred to as a “trademark assignment,” that is, the sale of all one’s rights in a trademark. An assignment is distinguished from a “license,” which is the granting to another of a limited right to use the trademark in exchange for a royalty. When you assign a trademark to a third party, you are left with no rights in the trademark.
To insure that your sale or assignment of a trademark is proper, you must understand that trademarks are merely symbols of good will. “Good will” is the reputation and advantage that your business has acquired over time. One commentator has described the relationship between a trademark symbol and good will as “inseparable as Siamese Twins who cannot be separated without death to both.” Without a business or without good will, a trademark is worthless. That brings us to the first requirement: the trademark you wish to assign must be in use. If you’re not using the trademark then there is no associated goodwill and the trademark is worthless.
The second requirement is that assignment of a trademark must be accompanied by the goodwill associated with the trademark. Typically, a trademark assignment will recite that the trademark and the goodwill are being transferred to the buyer. This is more than a technical requirement. If the buyer of the trademark uses it in connection with different goods or services than the seller of a trademark, it may deceive the public into believing that the trademark is associated with something that it is not. A trademark assignment that is made without its associated goodwill is said to be an “assignment in gross” or a “naked assignment.” Such assignments, are forbidden by law and will be deemed invalid if challenged in court.
If you are interested in assigning a trademark or wish to buy trademark, it makes good sense to find a lawyer who can help you avoid the pitfalls. Let us know if we can help.
— Adam G. Garson, Esq.