Many business owners ask what a trademark is: a trademark is a word, phrase, symbol, design, or any combination, that identifies or distinguishes the source of goods of one company from other companies in their market. A trademark allows a customer to identify your brand on shelves, online, commercials, and/or billboards, for example. Accordingly, Federal trademark laws protect a trademark holder from other companies using confusingly similar marks that could mislead their customers.
Nevertheless, they do not consider who should own their trademark, i.e., them personally or their business. At Jas Talks Law, we encourage our client's to register their trademarks in their business's name, and here are five (5) reasons why:
1. Because you may want to sell or license your trademark.
Under trademark law, the trademark holder has the right to assign the use of their trademark to a third party, meaning: if a business owner files a trademark in their personal name, instead of their company, the person will have to assign the trademark to the company, first, before the company can then assign to a third party. In other words, you cannot assign what you do not own. As such, to prevent this unnecessary step, make your company the trademark owner. Moreover, when you apply in your personal name, but your company actually uses the mark, fraud questions may arise (we'll discuss this in another blog post – stay tuned!).
2. Because who owns the trademark should also control the nature and quality of the attached products and/or services.
A trademark owner should be the party who controls the nature and quality of the goods and or services used in connection with the brand. As such, it is in the best interest of both you and the company that your LLC owns all trademarks and assets, both tangible and intangible, to ensure that you are protected and that your company can operate most efficiently.
3. Because Trademarks add value to your LLC.
Trademarks are quantifiable assets. As such, the amount of goodwill associated with your company can be used as leverage and could increase your company's value as a whole. For example, when you are looking for business partners to invest in your company or negotiating the sale of your company now or in the future, you can say with confidence: "And this brand is trademarked!" But, referring to why we created this blog post, you will only get this additional value if the trademark is in the LLC's name because that asset will only follow the company if the company owns the trademark. If the company does not own the trademark, the company cannot use the trademark without a licensing or assignment agreement between the company and the current trademark holder.
4. Because Trademarks can Be Used as Security Interests in Financial Transactions
Because trademarks are quantifiable assets, they can be used as collateral in a security agreement, meaning: if you ever have to go to the bank for a loan on your company's behalf, the bank could consider giving you more money if your LLC's trademark has goodwill associated with it. But if the company does not own the trademark, goodwill can not be associated with the trademark, potentially ruining your chance of loan security.
5. Protecting Your Limited Liability
An LLC owner can protect their limited liability status if they maintain their company separate from themselves. For example, mixing personal and company funds or blurring the lines between the company and the company owner by making the company owner the trademark owner can lead to court findings that the company is not running as a limited liability company. If there are blurry lines, such as the company owner being listed on the trademark registration, the court system could pierce the corporate veil and hold the owner(s) of the LLC liable instead. As a result of being held personally responsible, the LLC owner's personal assets could be awarded as damages in the underlying lawsuit. All in all, keeping the company's assets under the LLC's name maintains the LLC's autonomy and decreases the chances of the court coming after the LLC owner's private assets.
Conclusion: All in all, it can only help your business to own your trademark. But, let's leave this open for discussion: Can you think of any reasons you would not want your company to own your trademark? Feel free to comment below.
P.S. If you have any questions about filing a trademark or reassigning a current trademark to your company, please contact Attorney Jasmin Robinson and request a consultation by clicking here.
As always, this article is for educational purposes only and in no way constitutes legal advice. If you have any questions, please seek Attorney Jas for legal representation.
Author: Brittany Griffith
3rd year Mercer Law Student and Jas Talks Law's Legal Extern
Editor: Attorney Jas