Assignment of Trademark Without Goodwill

Submitted by: Om Kukreja

Semester: X

Roll number: 86

Section: C

Submitted to: Ms. Kuhu Tiwari

(Faculty : IPR Honors; Trademark)

Submitted on: 0/04/201

HIDAYATULLAH NATIONAL LAW UNIVERSITY

RAIPUR

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 ACKNOWLEDGEMENTS

I, Om Kukreja of BA LL.B (Hons.) semester X, am thankful for the topic given to me by Ms.
Kuhu Tiwari to work on as a research project. I am thankful for her help in making us better
understand the concepts of the intellectual property rights subject of Trademarks.

I also thank my friends and family who helped me in many ways to make this project better.

I would further like to extend my thanks to the library staff of HNLU and the IT staff for their
support and help, and the facilities provided by the same.

Thank you.

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 CONTENTS

Acknowledgements..........................................................................................................................2

Objectives........................................................................................................................................4

Research Questions..........................................................................................................................4

Research Methodology....................................................................................................................4

Introduction......................................................................................................................................5

Assignment Of Trademark...............................................................................................................6

Goodwill..........................................................................................................................................8

Assignment of Trademark without Goodwill10

Cases in which Trademark is assigned without Goodwill.11

Conclusion.....................................................................................................................................12

Sources...........................................................................................................................................13

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 OBJECTIVES

The following are the objectives that will be sought to be achieved through this research project:

To examine the intricacies of trademark assignment

To chalk out the role of goodwill in trademarks
To conclude as to the effects of trademark assignment without goodwill and its
consequences and repercussions.

RESEARCH QUESTIONS

The following research question will be strived to be answered through this project:

1. How is trademark assigned

2. What is the importance of goodwill for such assignment
3. Can assignee be assigned trademark by foregoing the quality of goodwill

RESEARCH METHODOLOGY

The researcher has followed the non-doctrinal method for research design. The research is based
on secondary sources. Literature review has been done extensively in order to make a
comprehensive presentation. Computer from the computer laboratory of the university has been
used for the purpose of secondary research and is the main source of project.

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 INTRODUCTION

A trademark is a property of the owner and owner has a right under the Trade Marks Act, 1999 to
transfer the property to other person against any consideration. Although the classical theory
regarding the goodwill and trademark says that, the two are inseparable but the contemporary
law evolved to an extent that now a trademark is treated separately from goodwill and hence a
trademark can be transferred with goodwill as well as without goodwill.

Trademarks like any asset can be transferred from one owner to another. The transfers could be
temporary through licensing or permanent through an assignment. Assignment of a trademark is
a process in which the owner of the trademark transfers the ownership of the mark either with or
without the goodwill of the business. In other words, it is transferring of proprietary rights in the
property of the proprietor.

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 ASSIGNMENT OF TRADEMARK

Assignment of a trademark is a process in which the owner of the trademark transfers the
ownership of the mark; it basically refers to the transferring of proprietary rights in the property
of the proprietor. There are different kinds of assignments of trademarks. Assignment is the legal
term for transfer of ownership which simply means any act of parties by which interest or rights
associated with property of any kind can be transferred from one party to another party.

Trade mark can be assignable or transmissible by three Modes

By legal operation;
Inheritance; and
Giving authority to other party.

The assignee will become the subsequent proprietor of the trademark assigned whether in part or
in full based on the conditions agreed between the parties.

They are given below in brief.

Complete assignment of trademarks

In a complete assignment, the owner of the trademark transfers all the rights with respect to the
trademark, including the transfer of the rights such as right to further transfer, earn royalties, etc.,
to another entity.

Partial assignment of trademarks

In a partial assignment, the transfer of ownership is restricted to specific product or service only.
The owner may retain the right to further transfer, to earn royalties etc.

These are the two kinds of assignments of trademark. Now there is a procedure laid down by the
act, directing how the assignment should be done.

Assignment of an unregistered mark:

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Section 39 stipulates that an unregistered trade mark may be assigned or transmitted with or
without the goodwill of the business concerned. A request has to be made on Form TM-16 for an
unregistered trademark to be assigned or transferred.

Assignment of a registered trademark:

Section 38 stipulates that trade Marks can be either assigned in full or transmitted in part, with or
without the goodwill of the business. All transmissions or assignments must be registered with
the Registrar of Trade Marks on Form 23 or 24 of the Trade Marks1.

From a practical perspective, the following needs to be incorporated in any assignment deed
which involves trademarks;

1. The assignment deed must be in writing where the assignors name must be same as it is in
the Register of Trademarks, i.e. the owner of the trademark;

2. It is absolutely necessary that the territorial extent of the assignment is clearly laid down; for
example, if the assignee is based in India, then it is a must that the assignment deed contain a
clause saying the assignment is for that particular region;

3. The mark/marks that the proprietor wants to assign must be mentioned clearly;

4. The consideration that the assignee needs to pay should be mentioned as well; the standard
phrase of good and valuable consideration wouldnt hold good; The stamp duty has to be
calculated on the basis of the consideration.

5. The effective date of the assignment must be laid down clearly;

6. The most important part of an assignment deed is to mention if the assignment is along with
the goodwill or not.

1 Rule 68 of the Trademarks rule, 2002

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 GOODWILL

Goodwill is also an intangible asset which cannot be easily defined. In the words of Lord
Macnaghten, in case of Commissioner of Inland Revenue v Muller & co's Margarine Ltd 2 can be
described as

"it is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the
good name, reputation and connection of a business. It is the attractive force which brings in
customers. It is the one thing which distinguishes an old established business from a new
business at its first start. The goodwill of a business must emanate from a particular center or
source. However widely extended or diffused its influence may be, goodwill is worth nothing
unless it has power of attraction sufficient to bring customers home to the source from which it
emanates."

Chapter V of the Trademarks Act, 1999 refers to the concept of goodwill as previously
mentioned, in Section 38, however the Act does not define the term. In Charlton v Dougles 3, it
was determined that goodwill must mean every advantage that has been acquired by an old firm
by carrying on its business, everything connected to the premises and the name of the firm, and
everything connected or carrying with it the benefit of the business. There was a time when the
law in UK considered goodwill to be inseparable from trademark. This was subsequently
changed.

This chapter also deals in depth with the transfer of trademark by means of assignment and
transmission. Section 37 of the Act clearly states that only the registered proprietor has the right
to assign a trademark. He is also subject to the rights conferred to him by registration. Section 38
of the Trademarks Act, 1999 provides the assignment of a registered trademark. Trademarks in
India can be assigned with or without goodwill.
2 (1901)A.C. 217 at 223-224

3 (1859) 28 LJ Ch. 841, 845

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Section 42 of the Indian Trademarks Act, 1999 further provides for means by which a sale of
trademark not in connection with goodwill must occur. It has to be registered before the
expiration of six months from the date on which the assignment is made or within such extended
period, if any, not exceeding three months in the aggregate, as the Registrar may allow. Thus the
assignee applies to the Registrar for directions with respect to the advertisement of the
assignment, and advertises it in such form and manner and within such period as the Registrar
may direct.

A trademark which is transferred with goodwill will get much higher value in comparison to the
trademark which is transferred without goodwill. Goodwill of a trademark is local in character
and divisible like in case of business of a brand situated in different countries. In every country
business holds a separate goodwill related to the particular brand although some part of that
goodwill is dependent upon the overall working of the business around the world. Business of a
brand may be closed in a particular country but closing of that business would not affect the
overall goodwill of the business. While the element of goodwill may be based primarily on
earnings, such factors as the prestige and renown of the business, the ownership of a trade or
brand name, and a record of successful operation over a prolonged period in a particular locality,
also may furnish support for the inclusion of intangible value. This shows that goodwill is
inclusive of brand value and based on number of other factors. While trademark get its value
from goodwill associated with products or services.

WHETHER TRADEMARK & GOODWILL ARE SEPARABLE?

In case of assignment with goodwill, assigner transfer absolute rights i.e. all the rights and values
associated with trademark which give absolute authority to transferee to control, to sell or to
improvise or change the quality or structure or completely stop the services of such products. It
is basically that transferor is replaced by transferee in terms of authority, control & rights & after
assignment transferor is completely barred from using such trademark associated with any
products & services in kind.

Whereas trademark assigned without goodwill means the right to use trademark associated with
the specific products or services of transferor is transferred to the transferee & rest of the

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goodwill lies with transferor. Accordingly, transferee can use such trademark for specific
products & services as per agreement unless and until it is likely to deceive or create confusion it
does not create multiple rights in the same goods or services or if they are associated with each
other.

In Associated Electronics & Electrical Pvt. Ltd.v. DCIT 4, Income Tax Appellate Tribunal held
that trademark and goodwill are two different concepts and transfer of trademark does not mean
transfer of goodwill. Therefore, both Goodwill and trademark are different assets.

Similarly in Kwality Biscuit v. Assistant CIT, Bangalore5Income Tax Appellate Tribunal held that
right to manufacture biscuits was independent, separate and distinct right from right to market,
distribute and sell biscuits under the brand name 'kwality', That means right to manufacture is
still with assignor and will continue in the same business but under different brand name.
Therefore, we can conclude that trademark and goodwill are separable.

ASSIGNMENT OF TRADEMARK WITHOUT GOODWILL

This is an assignment where the owner restricts the assignee to use trademark for the products he
uses it for. That is, the goodwill attached to the owners brand with respect to the product already
being sold under such brand, is not transferred to the buyer. This means that assignor & assignee
both can use the same trademark but in dissimilar goods or services, For example, if the owner of
the trademark TH uses it for manufacturing and selling of watches and decides to assign it
without goodwill, it means that the assignee can use the trademark TH for any other product
other than watches.
Once a trademark is assigned it is important to record the change in ownership with the
Trademark Registry. Specific forms with fees have to filed to ensure that the records reflect the
ownership details.
Assignment of trademark without goodwill also referred as gross assignment, is where the owner
of the brand restricts the right of the buyer and does not allow him to use such brand for the
4 IT(SS)A No. 9/Bang/2000, Block Assessment Year : 1988-89 to 1998-99; ITA No. 242/Bang/2001,

5 2012(3) TMI 209

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products being used by the original owner. Thus the goodwill attached to such brand with respect
to the product already being sold under such brand is not transferred to the buyer. (E.g. P, the
proprietor of a brand Shudh relating to dairy products, sells his brand to Q such that Q will not
be able to use the mark Shudh with respect to dairy products but can use this brand for any
other products being manufactured by it. In such case the goodwill which is associated with
brand Shudh for dairy products is not transferred to Q and Q will be required to create distinct
goodwill of brand Shudh for any other product or service like Restaurant wherein Q proposes
to use this brand.). In many jurisdictions like United States, assignment of mark without
goodwill is not allowed at all. India on the other hand allows assignment without goodwill.

CASES IN WHICH TRADEMARK IS ASSIGNED WITHOUT GOODWILL

'Tata Oil Mills Co. Ltd. Vs. Wipro Limited & Another' It was held that, a registered
trademark can be assigned with or without the goodwill of the business concerned while
unregistered trademark cannot be assigned except alongwith the goodwill of the business
concerned6.

It was held in Exide Technologies vs Exide Industries Ltd. 7, It is possible for a trademark
owner to retain goodwill in one territory, even without having a place of business.

It was held in M/S. Nico Quality Products vs V.Sreenivasan 8 that Section 42 of the
Trademarks Act is a condition precedent to apply for the registration of trade Marks in the cases
wherein the assignment of trade marks was made without the goodwill of the business.

6 1986(6)PTC358 (Del)

7 RFA (OS) 113/2012, CM APPL.1673, 6324/2013 & 9066/2014

8 Civil Suit No.605 of 2013

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 CONCLUSION

While wrapping up, it can be stated that the transfer of proprietary rights in trademark is similar
to any other asset, the difference, however, comes in reference to the goodwill attached to it. It is
the goodwill which creates the value of a trademark and in the contemporary period same is also
a separable part of trademark.

Goodwill provides bargaining power in the hand of the seller and therefore same is been
recognized under the law in reference to the transfer of rights in a trademark. A trademark which
is transferred with goodwill will get much higher value in comparison to the trademark which is
transferred without goodwill.

Assignment of brands is a considerable issue and proper strategizing may open vistas of
opportunities for an assignor and an assignee. Both concepts involve a degree of planning for the
future of the parties involved and the brand in question. The development of a brand, its
propagation and its use, all lie in the hands of the proprietor of the brand and trademark and
assignment is an effective method to manage the same.

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 SOURCES

Web Sources:

http://www.mondaq.com/india/x/202886/Trademark/Assignment+Licensing+Of+Trademarks+In
+India

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