Assigning a trademark when we sell the business

You have built a brand. Now a buyer wants the business, and the name on the shopfront or the app comes with it. The question is simple: how does the trademark pass from you to the buyer so that it holds up later?

This article uses the Trade Marks Act, 1999 and the Trade Marks Rules, 2017. It covers registered and unregistered marks, but the register-entry steps below apply only to registered marks.

Your situation: who can sell, and what can be sold

The person entered in the register as proprietor of a trade mark can assign it. That person can also give a valid receipt for the price (s.37, Trade Marks Act 1999). This is "subject to any rights appearing from the register to be vested in any other person". So if the register shows a licence or a charge in someone else's favour, deal with that first.

A registered trade mark can be assigned "whether with or without the goodwill of the business concerned". It can be assigned for all the goods or services it is registered for, or for only some of them (s.38, Trade Marks Act 1999).

An unregistered trade mark can also be assigned or transmitted, with or without goodwill (s.39, Trade Marks Act 1999).

"Goodwill" here simply means the customer connection and reputation of the business that uses the mark. In a sale of a business, the mark normally travels with that goodwill. That is the easy case.

Choose the structure first

Business sales take one of three shapes, treated differently.

1. Sale of the whole business, mark and goodwill together. The mark moves "in connection with the goodwill of the business". No advertisement is needed under s.42. The buyer goes straight to recording the title under s.45.

2. Sale of the mark alone, without the goodwill. You keep the shop and the customers, or the business is wound up, and only the brand is sold. Section 42 then applies. The assignment does not take effect until the buyer applies to the Registrar for directions on advertising it and advertises it as directed. More on this below.

3. Part sale. The buyer takes the mark for only some of the goods or services, along with the goodwill in those goods or services only. The Act says this is not treated as an assignment made without goodwill (Explanation (a) to s.42, Trade Marks Act 1999). The same goes for an assignment of a mark used for export goods, or for services used outside India, if it comes with the goodwill of the export business only (Explanation (b) to s.42).

Pick the structure before you draft the deed.

Check these restrictions before you sign

Two sections can make an assignment invalid. Both apply "notwithstanding" ss.38 and 39.

Section 40: two owners with overlapping rights. A mark cannot be assigned if, as a result, two or more persons would hold exclusive rights in the same or similar marks, for the same, same-description or associated goods or services, in a way likely to deceive or confuse (s.40(1), Trade Marks Act 1999).

If you are unsure, the proprietor who proposes to assign can submit a statement of case to the Registrar. The Registrar may issue a certificate saying whether the proposed assignment would be invalid under s.40(1) (s.40(2), Trade Marks Act 1999). A certificate in favour of validity helps only if the application to register the buyer's title under s.45 is made within six months of the certificate date.

Section 41: exclusive rights in different parts of India. If the sale would leave one person with an exclusive right limited to one place in India and another person with a similar mark in another place, the mark cannot be assigned. The Registrar can approve it if satisfied that use would not be contrary to the public interest. The approval protects the assignment only if the s.45 application is made within six months of the approval (s.41, Trade Marks Act 1999).

Certification marks and associated marks.

• A certification trade mark cannot be assigned without the Registrar's consent, applied for in writing in the prescribed manner (s.43, Trade Marks Act 1999).


• Associated trade marks can be assigned only as a whole, not separately (s.44, Trade Marks Act 1999). Linked registrations go together.

The clock: three time limits to know

• Six months for the s.42 advertisement application. Where the mark is assigned without goodwill, the buyer must apply to the Registrar for advertisement directions "not later than the expiration of six months from the date on which the assignment is made". The Registrar may allow an extended period, not more than three months in all (s.42, Trade Marks Act 1999). The request for extra time is made in Form TM-P (rule 80(3), Trade Marks Rules 2017).
• Six months from a certificate or approval. If you obtained a s.40(2) certificate or s.41 approval, the s.45 application should be made within six months of it, or the protection does not apply (ss.40(2) and 41, Trade Marks Act 1999).
• No fixed outer limit for the s.45 application, but delay has a cost. Section 45(1) says a person who becomes entitled "shall apply" to register title. It does not give a number of days. Section 45(4) is the practical reason to hurry. Until the application is filed, the assignment "shall be ineffective against a person acquiring a conflicting interest" in the mark without knowing of the assignment.

The Registrar ordinarily disposes of a title application within three months of the application date (rule 76(2), Trade Marks Rules 2017). Section 45(3) leaves the Registrar free to refuse to register an assignment that is in dispute between the parties until a competent court decides the rights.

Step by step: recording the buyer as the new owner

The Registry uses Form TM-P for post-registration requests. The e-filing screen offers a request type for "subsequent proprietor by way of assignment or transfer of mark". One form carries one request only, and the form says to file different forms for different requests.

Step 1. Sign the assignment deed.
It should name the mark, the registration number, the classes and the goods or services, state whether goodwill passes, and state the date. Rule 84 lists what the Registry will enter in the register: the assignee's name and address, the date of the assignment, a description of the right assigned if it is only a part, the basis of the assignment, and the date of entry.

Step 2. Stamp the deed properly.
If the Registrar thinks an instrument produced as proof of title is not properly or sufficiently stamped, the Registrar must impound it and deal with it as Chapter IV of the Indian Stamp Act, 1899 provides (rule 78, Trade Marks Rules 2017). The Rules do not give a stamp duty rate, so check the current duty for the state where the deed is signed before you sign.

Step 3. Decide if s.42 applies.
If the sale is of the mark without goodwill, the buyer first files Form TM-P for directions on advertising the assignment. The form states the date of the assignment and gives registration particulars. For an unregistered mark, the form shows the mark and gives particulars including its use (rule 80(1), Trade Marks Rules 2017). Where s.41 applies, obtain that approval first (rule 80(2)). The buyer then advertises "in such form and manner and within such period as the Registrar may direct" (s.42, Trade Marks Act 1999).

Step 4. File Form TM-P to register the buyer's title.
The buyer files Form TM-P (rule 75, Trade Marks Rules 2017) with:

• a duly certified copy of the original document, instrument or deed that transfers the title, and


• a statement of case in support (rule 76(1), Trade Marks Rules 2017).

The application must say whether the mark was used in the business for those goods or services, and whether the assignment was made without goodwill. If both are true, the buyer must also leave at the Registry a copy of the advertisement directions and proof such as copies of the advertisements. If the Registrar is not satisfied that the directions were followed, the Registrar will not proceed (rule 81, Trade Marks Rules 2017).

Step 5. Answer queries.
The Registrar can call for further proof of title only where there is a reasonable doubt about a statement or document (s.45(2), Trade Marks Act 1999; rule 77, Trade Marks Rules 2017). Keep the sale agreement and proof of use ready.

Step 6. Check payments out of India.
If the sale price is to be sent outside India, the Registrar will not register the title unless the permission required by the law on moving money abroad is produced (rule 79, Trade Marks Rules 2017).

Fees: paid by the applicant to the Registry

The government fee goes from the applicant to the Registry. The sale agreement can say who bears it, but the applicant pays it on the portal.

The First Schedule to the Trade Marks Rules, 2017 lists these fees against Form TM-P. Figures below are as the Schedule was notified in 2017:

• Application under s.45 to register a subsequent proprietor, for each trademark: ₹10,000 for physical filing and ₹9,000 for e-filing (First Schedule, entry 6, Trade Marks Rules 2017).


• Application for a s.40(2) certificate, s.41 approval, or direction for advertisement under s.42: ₹3,000 physical and ₹2,700 e-filing (First Schedule, entry 7).

Fee tables get amended, so check the current figure on the Trade Marks Registry portal before you file. The Schedule has separate columns for physical filing and e-filing; the lower figure is the e-filing one.

The fee is for each trademark, so several marks mean several applications.

What not to do

• Do not sell the mark without goodwill and skip the advertisement. Under s.42, the assignment "shall not take effect" until the buyer applies for directions and advertises. A deed alone does not finish the job.
• Do not leave the register in the seller's name. Until the buyer's application is filed, the assignment is ineffective against someone who takes a conflicting interest without knowing about it (s.45(4), Trade Marks Act 1999).
• Do not keep a similar mark after selling without advice. If you keep a near-identical mark for the same or associated goods, the assignment may fall foul of s.40(1) because two persons would hold exclusive rights likely to confuse.

What to do now

• Next step: Confirm whether goodwill passes with the mark. If it does not, plan the s.42 route. In either case, prepare the signed and stamped deed and the Form TM-P for the buyer's title (rules 75 and 76, Trade Marks Rules 2017).
• Deadline: For a sale without goodwill, the buyer applies for advertisement directions within six months of the assignment, extendable by up to three months in all (s.42, Trade Marks Act 1999). For a s.40(2) certificate or s.41 approval, apply under s.45 within six months of it (ss.40(2) and 41).
• Consequence of missing it: An assignment without goodwill "shall not take effect" if s.42 is not followed. Until the s.45 application is filed, the assignment is ineffective against a person who acquires a conflicting interest without knowing about it (s.45(4)).

Have a CA review your facts before you act or file.

FAQs

Do I have to register the assignment of my trademark?
The Act says a person who becomes entitled to a registered mark "shall apply" to register title (s.45(1), Trade Marks Act 1999). Without it, the assignment is ineffective against someone who takes a conflicting interest without knowing of it (s.45(4)).

Can I sell the trademark but keep the business?
Yes. A registered mark can be assigned with or without goodwill (s.38). If without, the s.42 advertisement steps apply, and the assignment does not take effect until they are followed.

Can I sell an unregistered brand name?
Yes, with or without goodwill (s.39). Section 42 applies to registered and unregistered marks alike (rule 80(1)).

Which form is used?
Form TM-P covers the s.45 application (rule 75), the s.42 application for advertisement directions (rule 80(1)), the s.40(2) and s.41 requests (rule 83), and the extension of time for the s.42 application (rule 80(3)). Rule 85 separately covers an extension for registering a company as subsequent proprietor under s.46(4).

How long does the Registry take?
The Registrar ordinarily disposes of a title application within three months of the application date (rule 76(2)). A disputed assignment can be held back until a court decides the rights (s.45(3), Trade Marks Act 1999).

Who pays the Registry fee?
The applicant pays it to the Registry on filing. The sale agreement can say who bears the cost between buyer and seller. Check the current amount on the Registry portal before you file.

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See Also

• Someone opposed my trademark application: what to do in the first two months
• Missed your trademark renewal? How to renew late or restore the mark
• Someone wants our unused trademark removed: what you can still do