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Introduction to Trademarks


 


Assignment, Licensing, and Valuation of Trademarks


Updated November 2016


1.     
How do I know what my trademark is worth?

In general, the value of a trademark is based directly on its earning power. Where little or no income history is available, however, imagination, common sense, and experience may be the best guides to apply in ascertaining the value of a trademark. In addition, studies of the industry in which the trademark is (or will be) used, market surveys of probable sale prices and expected profits, and opinions of industry experts may also be applied.

The value of a trademark lies in the goodwill associated with that trademark. Goodwill is an intangible asset that forms part of the value of the trademark owner’s business. 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.

Some of the most common approaches to/methods of valuing a trademark are: (1) the income approach, which assigns a value to a trademark based on past and expected future 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; (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; and (4) the relief from royalty method, which estimates the expected royalty savings attributable to the ownership of the trademark. 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 firms may provide significant assistance in attributing a monetary value to a trademark.

See also Brand Valuation Fact Sheet


2.      Can I sell my trademark?

The term used for the transferring of an owner’s rights, title, and interest in a trademark or service mark to another party is “trademark assignment.” In a trademark assignment, the transferring party (the “assignor”) transfers its property rights in the mark to the receiving party (the “assignee”).

An assignment of trademark rights can be either outright, in that it results in the total transfer of ownership of such rights from one entity to another, or (in some jurisdictions) partial, resulting in the transfer of only a portion of the trademark rights of a person or entity. Depending on the jurisdiction, partial assignments may be for a portion of the territory covered by the registration, or for only some of the goods and/or services covered by the registration.

The laws governing trademark assignments vary from one jurisdiction to another, but they can include the form an assignment must take, whether notarization is required, the type of consideration that must be expressed (if any), whether the goodwill of the mark must be transferred, and whether the assignment must be recorded. The laws and regulations of each jurisdiction where a trademark exists should be reviewed before a trademark assignment is undertaken. Failure to comply with the requirements could lead to unanticipated tax consequences or result in the invalidation of the transfer. In some jurisdictions, trademark applications can be assigned.

See also Trademark Assignments Fact Sheet


3.      Can I retain ownership of a trademark if I allow others to use it?

Yes. You can allow another party to use your trademark in commerce, while still retaining ownership of the mark, 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 party (the “licensee”), in which the licensor permits the licensee to use the licensor’s trademark. In other words, a license gives permission to do something that would otherwise be prohibited without the consent of the trademark owner.

The licensing of trademarks facilitates merchandising, franchising, and distribution agreements, playing an important role in the way goods and services are distributed, marketed, and sold, both domestically and internationally. Most licenses contain provisions governing the term (length) of the license agreement, the territory covered by the license, the royalty rate to be paid by the licensee to the licensor for use of the trademark, whether the license must be recorded, the jurisdictions covered by the license, and whether the licensee has exclusive rights to use the trademark (and if so, in which jurisdictions).

Many license agreements will also have provisions permitting the licensor to control the quality of the goods or services produced or offered by the licensee under the licensed trademark, which are known as “quality control provisions.” In some countries (e.g., the United States and Canada), 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 is that consumers tend to rely on a trademark’s reputation in terms of quality when purchasing goods or services, so the licensor is considered to have a duty to exercise control over the quality of the goods and/or services offered by the licensee. Exercising quality control can also be a good business practice for other reasons—for example, it can help maintain a high level of goodwill for the brand, and, in certain cases, reduce possible liability.

As is the case with assignments, in some jurisdictions, trademark applications can be licensed.

See also Trademark Licensing Fact Sheet.


Additional INTA Resources

Country Guides: Essential Information on Trademark Protection Worldwide
Searchable database of basic information on trademark filing, prosecution, registration, maintenance and enforcement in more than 100 jurisdictions. INTA membership required.

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