Who Should Own the Trademark: The Company or the Individual?

Trademarks are valuable assets that help businesses and individuals distinguish themselves from their competitors and build brand recognition. But who should be the owner of a trademark? Should it be the company that uses the mark to sell goods or services, or the individual who created or applied the mark? This is an important question that can have significant implications for the protection and enforcement of trademark rights. In this blog post, we will explore some of the advantages and disadvantages of both options and provide some tips on how to choose the best ownership structure for your trademark.

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Trademarks are valuable assets that help businesses and individuals distinguish themselves from their competitors and build brand recognition. But who should be the owner of a trademark? Should it be the company that uses the mark to sell goods or services, or the individual who created or applied the mark? This is an important question that can have significant implications for the protection and enforcement of trademark rights. In this blog post, we will explore some of the advantages and disadvantages of both options and provide some tips on how to choose the best ownership structure for your trademark.

Individual Ownership

Owning a trademark yourself, as an individual, is a very common form of trademark ownership. Typically, the reason you would own the trademark yourself is because you are (1) operating as a sole proprietor (or simply not using any business structure), or (2) because you have simply not yet formed a company to use the mark, and you have decided you want to file the trademark now without further delay.

Individual ownership can have some benefits, such as:

  • The owner has full control over the trademark and can decide how to use, license, or assign it without involving other parties.

  • The owner can avoid potential conflicts with other shareholders or partners of the company regarding the ownership or management of the trademark.

  • The owner can retain the trademark rights even if the company goes out of business or changes its name.

However, there are drawbacks to using individual ownership:

  • The owner is personally liable for any infringement claims or damages arising from the use of the trademark. This means that the owner’s personal assets, such as bank accounts, property, or vehicles, could be at risk if a lawsuit is filed against them.

  • The owner may face difficulties in transferring the trademark to a company later on, especially if they have already registered the mark with their name as the owner. The USPTO does not allow changing the owner name after filing an application, so the owner would have to assign the mark to the company and file a new application with updated information.

  • The owner may lose some tax benefits that are available to business entities, such as deducting expenses related to the trademark or depreciating its value over time.

Business Entity Ownership

Another common way of owning a trademark is the business entity ownership structure. This usually occurs when a company, such as a corporation or a limited liability company (LLC), develops and uses a mark to identify itself as a source of goods or services.

Business entity ownership can have some advantages:

  • The company can protect its personal assets from any liability arising from the use of the trademark. This means that only the company’s assets, such as inventory, equipment, or cash flow, could be at risk if a lawsuit is filed against it.

  • The company can easily transfer or license the trademark to other parties without affecting its ownership rights. This can facilitate mergers, acquisitions, franchising, or joint ventures involving the trademark.

  • The company can take advantage of various tax benefits that are available to business entities, such as deducting expenses related to the trademark or recognizing its value as an intangible asset.

However, there are also some disadvantages:

  • The company may have to deal with potential conflicts with other shareholders or partners regarding the ownership or management of the trademark. This could lead to disputes, litigation, or dissolution of the company.

  • The company may lose its trademark rights if it goes out of business or changes its name without updating its registration with the USPTO. This could result in abandonment, cancellation, or dilution of the mark.

  • The company may have to comply with more complex legal and regulatory requirements than an individual owner. This could include filing annual reports, paying fees, maintaining records, and following corporate formalities.

The Importance of Using the Correct Owner

Choosing the correct owner for your trademark is not only a matter of convenience and preference, but also a matter of legal validity and enforceability. If you name the wrong owner in your trademark application or registration, you may face serious consequences, including:

  • Your application or registration may be voided by the USPTO or challenged by a third party in a cancellation proceeding. The USPTO does not allow changing the owner name after filing an application, so if you name yourself as the owner when you should have named your company, or vice versa, you may lose your trademark rights. Similarly, if a third party believes that you are not the rightful owner of the mark, they may file a petition for cancellation before the TTAB and seek to invalidate your registration.

  • Your trademark rights may be limited or weakened by your ownership structure. If you name yourself as the owner when you should have named your company, you may not be able to fully exploit the benefits of federal registration, such as nationwide priority, presumption of validity, and incontestability. You may also face difficulties in transferring or licensing your mark to other parties without affecting your ownership rights. If you name your company as the owner when you should have named yourself, you may lose your trademark rights if your company goes out of business or changes its name without updating its registration with the USPTO.

  • Your trademark enforcement may be hindered or compromised by your ownership structure. If you name yourself as the owner when you should have named your company, you may expose yourself to personal liability for any infringement claims or damages arising from the use of the mark. You may also lack standing to sue for infringement if you have granted your company a license to use the mark. If you name your company as the owner when you should have named yourself, you may have to deal with potential conflicts with other shareholders or partners regarding the ownership or management of the mark. You may also lose control over the mark if your company is sold or dissolved.

Because of these reasons, it is crucial to use the correct owner for your trademark and avoid naming an incorrect owner that could jeopardize your trademark rights.

How to Choose

As you can see, both individual and business entity ownership have their pros and cons. So how do you choose which one is best for your trademark? Here are some factors to consider:

  • The nature and scope of your business. If you are a sole proprietor or a freelancer who offers services under your own name, you may prefer individual ownership. If you are a larger or more established business that sells goods under a brand name, you may prefer business entity ownership.

  • The level of risk and liability involved in your industry. If you operate in a highly competitive or litigious market where infringement claims are common, you may want to protect your personal assets by choosing business entity ownership. If you operate in a niche or low-risk market where infringement claims are rare, you may be comfortable with individual ownership.

  • The future plans and goals for your trademark. If you intend to keep your trademark for a long time and use it exclusively for your own business, you may opt for individual ownership. If you plan to expand your business, collaborate with other parties, or sell your trademark in the future, you may opt for business entity ownership. Just keep in mind that whichever you choose as the owner of the trademark needs to be the actual owner.

Ultimately, the decision is up to you and your specific circumstances. However, it is always advisable to consult with a trademark attorney before filing an application or registering a mark. A trademark attorney can help you determine the best ownership structure for your trademark, as well as assist you with the application process and the maintenance of your registration.