In Short
- Purchasing or using another company’s trade mark requires careful legal consideration to avoid infringement.
- Trade mark licences or assignments can facilitate the authorised use of a trade mark, ensuring compliance and protecting both parties’ rights.
- Due diligence and clear agreement terms are essential to successfully navigating the purchase or use of a trade mark.
Tips for Businesses
Before using or buying another company’s trade mark, conduct thorough due diligence to understand any legal implications. Secure a proper licence or assignment agreement that clearly outlines usage rights, restrictions, and terms to avoid infringement. This will help protect your business and ensure compliance with intellectual property laws.
Trade marks are valuable business assets that distinguish one company’s goods or services from competitors. In order to lawfully use a trade mark, you must be either the owner of the mark or appropriately licensed to use the trade mark. For example, as a franchisee, you likely do not own the trade marks associated with the master franchise. However, when you set up or took over the franchise business, you likely executed an IP Licence Agreement, giving you the right to use the trade mark for an agreed period or purpose.
There are various circumstances in which the opportunity to purchase another company’s trade mark will arise, such as a business acquisition. While purchasing and using another company’s trade mark is possible, the process requires careful consideration of legal requirements and potential risks. This article will outline whether you can purchase and use another company’s trade mark.
Trade Mark Assignment
The formal process of purchasing a trade mark is called an assignment. This involves transferring ownership rights from the current owner (assignor) to the buyer (assignee). Under Australian law, trade mark assignments must be in writing and signed by both the assignor and the assignee.
If you plan on purchasing a trade mark, conducting thorough searches is essential. These searches can include:
- verifying the trade mark’s current registration status (including when the trade mark registration renewal is due and the associated cost of renewal);
- checking whether there are any existing licences to use the trade mark;
- confirming the seller’s authority to transfer the mark (i.e., verifying that the seller is listed as the owner of the trade mark on the register);
- reviewing the mark’s reputation and market value (this may require an independent market valuation); and
- assessing whether there are any ongoing legal disputes or oppositions concerning the use of the trade mark.
Legal Requirements
In order to effectively transfer or assign ownership of a trade mark, the assignment must comply with the Trade Marks Act 1995. As the new owner, you must record the assignment of a registered trade mark with IP Australia to ensure enforceability against third parties.
An IP assignment agreement should clearly specify the following:
- the details of the trade mark, including the trade mark itself and the registration number;
- the scope of rights being transferred;
- the purchase price and any applicable payment terms;
- any conditions or restrictions on the use of the trade mark;
- warranties about the mark’s validity; and
- the effective date of the transfer of ownership.
Using the Purchased Trade Mark
After you have acquired the trade mark, you must use it properly to maintain its registration. To use a trade mark properly, you should use the mark consistently in its registered form and in connection with the goods and/or services for which it is registered.
Ongoing Obligations
Additionally, once a trade mark has been effectively transferred to you, you will have ongoing obligations, such as:
- paying ongoing renewal fees;
- monitoring and defending against any improper or unauthorised use of the mark by others;
- maintaining proper use of the trade mark (as discussed above);
- keeping accurate records; and
- filing any necessary documentation with IP Australia (such as keeping the owner details and address for service details up to date on the register).
Associated Business Assets
When purchasing a trade mark from another business, you should also consider the transfer of other business assets, such as:
- domain names;
- social media accounts; and
- any associated marketing materials.
Commercial Risks and Considerations
Before finalising the purchase of a trade mark, you should consider these potential risks:
- Consumer confusion can occur if the mark remains reputationally associated with the previous owner: For example, if McDonald’s were to theoretically assign ownership of the ‘Big Mac’ trade mark to KFC, consumers might understandably be confused;
- Existing contractual obligations may affect the mark: For example, if any other party has been licensed to use the trade mark, you may be obliged to uphold these obligations;
- Potential damage to the mark’s reputation: For example, a change of ownership might affect consumer trust in the reputation of the trade mark; and
- Costs of rebranding and marketing: To use the trade mark, you may need to rebrand and incorporate the mark into your own brand concept.
Alternative Options
If purchasing a trade mark outright does not feel like the right fit for your company, you may consider other options, such as:
- licensing agreements (where the original owner may retain ownership rights but might license you the right to use the trade mark in limited circumstances);
- co-branding arrangements (involving a strategic partnership between two brands, such as Oreo and Coca-Cola, Louis Vuitton and The North Face, etc); or
- creating a new trade mark altogether.
This guide explains the essentials of trade marks and the steps required to register a trade mark.
Key Takeaways
Purchasing and using another company’s trade mark is a significant business decision that requires careful planning and execution. Successfully purchasing and using a trade mark depends on the following:
- ensuring the trade mark is properly assigned;
- conducting thorough research and due diligence searches in connection with the trade mark;
- ensuring all legal requirements are complied with (including ongoing obligations); and
- considering the commercial risks associated with buying an existing trade mark.
If you are considering purchasing and using an existing trade mark, our experienced trade mark lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
You can legally purchase a trade mark by completing an assignment, where the current owner transfers ownership rights to you. Ensure the transfer is in writing and complies with legal requirements, including notifying IP Australia.
Conduct due diligence searches, verify the seller’s ownership, check for existing licences or disputes, and evaluate the trade mark’s reputation. Understand ongoing obligations like renewal fees and infringement monitoring.
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