Proper Ownership of Trademark Registration is Critical

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Only the owner of a trademark has standing to enforce rights under that trademark. This may seem like common sense, but all too often shareholders and executives of companies file for trademark registration in their own personal names. Not only does this devalue the company by depriving it of assets, but also it could hinder or outright prevent the company from enforcing its rights against competitors using the same or similar trademark. It could also jeopardize the validity of the trademark registration.

District courts have held that a company does not have standing to assert infringement of a registered trademark where the registration is not in the company’s name, even if it is in the name of a sole shareholder. In a recent case, the plaintiff had been doing business under a registered trademark for over 20 years before the defendant (a customer) started using the same trademark. The court dismissed the plaintiff’s federal trademark infringement and cybersquatting claims because the registration was owned by the sole shareholder of the company, not the company itself. (Inflatable Zoo Inc. v. About to Bounce, No. 12 CV 1709 (E.D. La. Apr. 11, 2013).) Since individuals and businesses are distinct legal entities, the company could not enforce the registration.

A trademark registration may be invalid if the owner is not the person or entity that controls the nature and quality of the goods and services provided under the trademark. In the case of a sole shareholder that is also the managing director of a company, that person likely controls the company to be a valid owner of trademark rights (although this may not be wise for at least the reasons discussed above). However, a shareholder or executive of a company who does not control the company’s goods and services is likely not appropriate to list as the owner of the company’s trademarks. Doing so could void any resulting registration.

Trademarks are extremely valuable and potentially perpetual assets and should always be treated as such. Although the electronic forms for federal trademark applications may be easy to fill out and file online, and there are many firms that act as drop boxes for trademark applications, business owners and decision-makers should consult with a trademark lawyer who can provide guidance on how to best protect these assets, not simply obtain certificates of questionable value. Anything worth doing, is worth doing right.

Additional Resources

http://www.foxrothschild.com/uploadedFiles/newspublications/Kinkade_IP_Alert_ProperOwnershipofTrademarkisCritical_April2013.pdf

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