Fact Sheet: Introduction to Trademarks
Assignments, Licensing, and Valuation of Trademarks
Updated: November 9, 2020
1. How do I know what my trademark is worth?
The value of a trademark lies in the goodwill associated with that trademark. Goodwill is an intangible asset that is part of the value of the trademark owner’s business. It can be quite difficult to assign a monetary value to goodwill because many variables must be considered. For example, reasonable people can disagree on future business expectations, such as opportunities for increasing business value, competitive threats, and marketplace risks, all of which can affect the value of a business’s goodwill and, consequently, any trademarks that are symbols of that goodwill.
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 of the goods/services associated with the trademark; (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 of equivalent 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 and may provide significant expertise in attributing a monetary value to a trademark.
See also Brand Valuation Fact Sheet
2. Can I sell my trademark?
“Trademark assignment” is the name of the legal instrument that is used to transfer a trademark owner’s rights, title, and interest in a trademark to another party. In a trademark assignment, the transferring party (the “assignor”) transfers, i.e., “assigns,” 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; differences may 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, whether a portion of the underlying business 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 cannot be assigned until they have matured to registration.
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 the licensee permission to do something the law would not otherwise allow.
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. Normally, a license agreement contains provisions governing the term (length) of the license, the territory or jurisdictions covered by the license, the royalty the licensee must pay to the licensor for use of the trademark, whether the license must be recorded, whether the license covers all or just some of the goods or services protected by the licensed mark, whether the license is transferable or sublicensable, and whether the licensee has exclusive or sole 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, without which the licensed trademark may be deemed a “naked license,” which could result in the loss of some or all trademark rights. The rationale is that consumers interpret trademarks as symbols of the quality of associated goods or services, so the licensor must have 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.
In many jurisdictions, trademark applications cannot be licensed until they mature to registration. In the United States, a trademark application filed on an intent-to-use basis can be assigned only if the underlying business associated with the mark is also assigned.
See also Trademark Licensing Fact Sheet.
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. Membership required.
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