Assignments, Licenses and Valuation of Trademarks
1. Can trademark rights be sold?
Yes, a trademark owner may sell or “assign” trademarks rights to another person or entity in one or more jurisdictions. Many individual jurisdictions have specific laws or regulations that govern the requirements for a valid sale or assignment of trademarks. These requirements vary from jurisdiction to jurisdiction, but can include the form of an assignment, whether notarization is required, the type of consideration that must be expressed, and whether the goodwill of the mark must be transferred. The laws of each jurisdiction where a trademark exists should be reviewed before undertaking to sell or assign a trademark. Failure to follow such laws or regulations could lead to unanticipated tax consequences or result in the invalidation of the transfer.
See also Assignments
2. How do I know how much my trademark is worth?
The value of a trademark lies in the goodwill associated with that trademark. However, in many cases it can be quite difficult to ascertain the goodwill and then place a true value on it at a point in time because of the many variables that must be considered. For example, reasonable people can differ on future expectations such as opportunities for increasing the value of the trademark and competitive threats and marketplace risks to the trademark.
The three most common approaches to valuing a trademark are the: (1) income approach which assigns the value of a trademark based on past and future expected profits associated with the mark; (2) the market approach which assigns a value based on comparisons of transactions such as royalty rates involving similar assets; and (3) the cost approach which assigns a value based on the cost of creating a trademark and the cost of replacing the existing trademark with a trademark with the same market power. Other approaches to valuing trademarks are also used depending on the nature of the transaction and the reason for the valuation. Many companies specialize in the valuation of trademarks. These companies may provide significant assistance in attributing a monetary value to a trademark.
See also Brand Valuation
3. Can I retain ownership of a trademark if I allow others to use it?
Yes, you can allow others to use your trademark in commerce while still retaining ownership by entering into a license agreement with that person or entity. A trademark license is an agreement between the trademark owner (the “licensor”) and another person (the “licensee”) in which the licensor permits the licensee to use the licensor's trademark.
At a minimum, a typical license agreement will have provisions permitting the licensor to control the quality of the goods or services produced by the licensee under the licensed trademark, and also include provisions governing the term (length) of the license agreement, the royalty rate paid by the licensee to the licensor for use of the trademark, and whether the licensee has exclusive rights to use the trademark.
In the United States and in other countries such as Canada and the United Kingdom, it is essential that the license agreement have quality control provisions because without such provisions the trademark may be vulnerable to attack or even be deemed abandoned by the licensor. The rationale for requiring quality control is that consumers tend to rely on a trademark’s reputation in terms of quality when purchasing goods and/or services, and the licensor thus has a duty to exercise sufficient control over the quality of the goods and services offered by the licensee.
See also Trademark Licensing