Selling and Licensing of Trademarks

Selling and Licensing of Trademarks

Just like all other forms of intellectual property, trademarks serve as important assets for any business. Therefore, trademarks can be sold and licensed when their owner deems such a move to be needful. The sale of a trademark involves a business owner’s disposal of a certain product line or trademark name as well as the interest of another entity. The licensing of a trademark, meanwhile, involves the trademark owner’s consent to another entity’s use of that trademark under specific terms and conditions.

Sale of a Trademark

A trademark can be defined as any sign which can be represented graphically and serves to distinguish goods and services of a business from those of another. Trademarks may include words, names, numerals, letters, or any other item used for such a purpose. Trademarks are associated with specific products or services; therefore, they cannot be directly sold. They are sold in conjunction with the sale of any business or product represented by the trademark. 

The sale of a trademark is a complex process involving many different factors. Perhaps the most important part of the sale of any trademark is the transfer of goodwill. Goodwill is defined as the value of any non-financial assets involved in the transaction. Examples of these non-financial assets include brand reputation, trademark strength, and customer loyalty. The more recognizable a trademark, the more the amount of goodwill possessed by the business. Large quantities of goodwill make a business more valuable. When a trademark owner sells a trademark, buyers of the trademark must provide a guarantee that they will not diminish or tarnish the trademark’s reputation and value in any way.

Licensing of a Trademark

During the process of trademark licensing, the trademark owner is known as the licensor. The entity receiving the license is known as the licensee. The licensing of a trademark permits the licensee to produce and distribute certain items according to the licensor’s trademark agreement. For this reason, trademark licensing can be regarded as a type of merchandise agreement.

As compensation for the sharing of the trademark, the licensee is entitled to receive a certain amount of money, known as royalties. Details about the royalties are usually included within a trademark licensing agreement. This agreement is usually created by the licensee; however, it is also possible for the licensor to do so. Although trademark licensing agreements do not have to be in written form, all parties involved are encouraged to provide such an agreement. This is because in the event of any legal cases, the presence of a written agreement will make such cases less time-consuming and costly. They will also be easier to resolve.

Reasons to Sell or License a Trademark

There are several reasons why a trademark owner might intend to sell or license a trademark. Those who have been using a trademark for a long period of time but have not made much profit from it should consider selling it. This is because trademarks can be costly to maintain; such a trademark would be a net financial loss for the business. Any business owner who plans to sell the business should include all profitable intellectual property as part of the sale. Doing so would maximize the business’s sale price. Of course, those who need immediate funds should also consider this step because the sale of a trademark provides an instant influx of money.

The licensing of a trademark allows the trademark to reach new markets. Through the licensee’s marketing and distribution channels, the trademark can make an impact in markets beyond its original range. Licensing also increases brand recognition. When products bearing a trademark enter new channels or when the trademark is used for new products, the brand’s visibility among the general public will be greatly enhanced. In addition, trademark licensing helps with workload distribution. When a licensor signs a trademark licensing agreement, the licensor gains the assistance of a licensee who will share some of the responsibility for various tasks related to the trademark.

Although neither are necessarily common moves, there are clear advantages to selling or licensing a trademark in certain situations. If you are a competent business owner, you will understand exactly when is the time to sell or license yours. Then, you can take advantage of the moment, sell or license your trademark, and reap the rewards accordingly.

This article brought to you by Exy Intellectual Property Malaysia