What is a trademark? And, do you have a trademark that you want to register?
In general terms, a trademark is defined as one or many words, designs, shapes, pictures, logos, brands, sounds, or a combination of the latter, that is used on the market to distinguish goods or services of a person or an organization from those of others.
The question often asked, however, is who will register and own the trademark? In fact, there is more than one possibility. Generally, you may own a registered trademark personally – if there is more than one individual, then personally under a partnership agreement – or you may own it under various other entities such as a corporation.
There is no single right answer, and as such, the question must be treated on a case-by-case basis. As a trademark is an intellectual property that may develop a considerable amount of monetary value on the market place over time, it is wise to answer the ownership query prior to registration. In doing so, the following may be useful to consider:
- If you are a “sole proprietor” engaged in your business activities and you have established the use of a brand under which you operate, you may choose to register and personally own the trademark of your brand.
- On the other hand, if you are operating a business which has established the use of a brand under a corporation, then the registered trademark may be owned by that corporation, commonly referred to as the “Operating Corporation.”
- However, a third entity may own a trademark, commonly referred to as a “Holding Corporation", which, namely, may establish its usage of the trademark brand via licencing agreements to third parties in exchange for royalties.
In this case, your business and corporate structure may consist of an Operating Corporation, which will mainly operate the day-to-day operations of the business, and a separate entity, the Holding Corporation, will own the trademarks. The two will be connected by a licencing agreement, in virtue of which the Holding Corporation authorizes the Operating Corporation to use the trademarked brand. In addition, the Holding Corporation may also hold shares in the Operating Corporation, as well as the lease in which the day-to-day operations take place and many other intangible items.
In fact, the trademark in and of itself is marketable, which is why in most instances we would like to protect them. Basically, it is the concept of not placing all your eggs in one basket. Assuming that the trademark has a significant value, owning the trademark under a Holding Corporation will protect it from creditors in the unfortunate eventuality that the Operating Corporation becomes insolvent or bankrupt; in most cases, applying this concept also deters individuals from owning a trademark personally.
Owning a trademark under a Holding Corporation may provide convenience and flexibility in many other circumstances. For example, since the Holding Corporation owns the trademark, the Operating Corporation may be sold to a third party without necessarily having to give up ownership of the trademark.
In any case, a well-established trademark may be used as negotiating leverage with third parties for financing. Or, since a trademark may generate revenue, financial and tax consequences are to be considered; the question which remains is: under which veil should the ownership of a trademark be registered to best meet one’s needs?
In consideration of the favourable potential that a trademark may yield for a business, it is important to weigh the pros and cons with the help of a legal counsel, who can place relevant scenarios before you and explain the options that best fit your situation.
Emmanuel Kouzelis, Attorney-at-Law
Alepin Gauthier Avocats inc.
This text contains legal information of a general nature and should not replace legal advice with a lawyer or notary who will take into account the particularities of your situation.