Parent Or Subsidiary: Who Should Own The Trademark?

When a company has a complex organizational structure that involves several legal entities, trademark ownership must be given careful consideration. While, as a business, you may have your own preference for trademark ownership, you must ensure the decision is in compliance with the strictures imposed by trademark law. This is essential to minimize the risk associated with ownership rights.

The issue of rights of ownership may arise in a variety of situations. This includes opposition proceedings in the case of pending applications, enforcement of rights, and cancellation proceedings.

• When the trademark application is filed on the basis of use, it may be opposed on the ground that the applicant has not used the trademark since the indicated date of use.
• When the parent company relies on the use of the trademark by the subsidiary or a closely related company, or vice versa, for enforcement of rights, the entity that has actually used the mark becomes essential.
• Moreover, the trademark may be cancelled if it has not been used by the registered owner in association with the registered goods or services for 3 or more years.

Properly identifying who should own the trademark becomes a vital aspect of trademark registration.

Owner Of The Trademark: Parent Or Subsidiary?

When the parent is the owner of the trademark, the use of the mark, by the subsidiary or a closely related company, does not necessarily inure to the benefit of the parent company by virtue of the relation between them. In case an issue regarding the ownership arises, it must be proved that the parent company who owns the trademark maintains control over the quality of the goods and services associated with the trademark. Only then can the use of the trademark by the subsidiary benefit the trademark owner or the parent company.

The organizational structure or the relationship between the two companies is not enough to prevent expungement of the trademark. Likewise, the fact that the parent company can control the subsidiary is not sufficient to prove that it actually does so. Even in a situation where the subsidiary owns the trademark but the parent is the one who actually uses the mark, all of the above-mentioned conditions hold true.

Is A Licensing Agreement Between The Parent And Subsidiary Beneficial?

Having a license agreement between the owner and the user of the mark can prove beneficial when properly prepared. However, the license agreement must demonstrate the nature and the extent of owner’s control, whether the parent or subsidiary, has to ensure the nature and quality of the goods or services provided. Such agreement must include:

• The goods/services provided by the licensee conform to the standards and instructions of the owner.
• The right to inspect the licensee’s premises and the samples of products sold lies with the owner. This must actually be exercised by the owner.

A well-drafted license agreement can be relied on in the case of cancellation, opposition or infringement proceedings, to reduce the risk of expungement of the trademark.

Registration and protection of a trademark involves dealing with complex legal statutes. Businesses with a large organisational structure, involving several entities, should seek legal counsel to minimize the risks associated with ownership issues and protect their trademarks.