A start-up or a small or medium sized enterprise (SME) is like a newly planted tree in the commercial ecosystem. It is young, promising of exponential growth in the right conditions, and yet in unique danger of fierce competition from the bigger, firmly rooted competitors which surround it.
A fundamental way to equip yourself on this journey of growth, is to properly protect your intellectual property (IP) assets. Managing rights of ownership to IP assets can help you flourish and avoid complaints from those who have the commercial stability to pursue costly litigation in case of conflict.
One of the earliest – if not the very first! – IP assets which a new enterprise will generate is its brand name. Here we will briefly address the key points to consider when managing ownership of trade mark assets in the UK.
IP assets and start-ups or SMEs
As discussed in the recently published the World Intellectual Property Organization’s (WIPO) guide to Intellectual Property for Start-ups, IP ownership is a particularly potent issue for a start-up or SME as it enters into a new market. This is because these enterprises move through the phase of growth and development at a speed that tends to be uniquely fast, compared to that of larger enterprises.
As noted by WIPO, during its growth, a new enterprise will consume and generate IP assets. “IP consumption” refers to the use of others’ assets that are protected by IP rights. “IP generation” is when the business creates a new asset that can be protected. Often, the rate of an SME’s growth will be significantly influenced by how effective its cycle of IP consumption and generation is.
To steer this cycle, a start-up or SME must ensure that it manages its ownership of IP assets properly.
Securing ownership of your brand name or logo
Brand names can be protected by registration as trade marks, unlike some of the other IP rights – namely copyright and unregistered design rights – which do not require registration. Once registered, a trade mark can be owned by an individual or specific legal entities which are discussed below.
Joint application and joint ownership of a trade mark is also perfectly possible. However, co-ownership is a more tricky territory to steer, from a legal perspective, and it can lead to nuanced issues if the co-owners fall out, which we explore in more depth here.
Therefore, one of the first things that you will need to decide during the application process is who, or what entity, you would like to be entitled to the ownership of your trade mark.
Should I register a trade mark under a personal name, or a company/ partnership?
A trade mark can be owned by an individual, or a legal entity that is capable of owning property in their own name. Keep in mind that:
- An individual may own the trade mark as a sole or a joint owner.
- Any form of company, that is, a business incorporated into a legal entity that is distinct from its members or directors, is also capable of owning a trade mark in its own name.
- Partnerships, including limited liability partnerships, partnerships governed by an agreement and partnerships at will, are also allowed to own a trade mark.
- In the case of charities, an application on behalf of an unincorporated charitable trust must be made by the trustees. In the case of registered charities, some other form of legal personality may be needed before it is allowed to possess property holding powers.
Generally, other unincorporated bodies do not have capacity to own trade marks. There are some complex exceptions such as those relating to unincorporated charitable trust and unincorporated associations that are partnerships.
Ultimately, the decision of ownership can be critical for your brand, and it must be correctly formalised in your application to take effect.
An illustrative case in this space is that of Ball v Eden Project Ltd [1], which went as follows:
A co-founder of The Eden Project was appointed as one of the directors of the company which operated this well-known visitor attraction. For those interested in botany, it may be of interest to know that The Eden Project hosts thousands of plant species, stimulating rainforest and Mediterranean environments down in Cornwall.
After the project was successfully established, the director in question registered the brand name trade mark under which it was trading - “The Eden Project” - in his own name, rather than the company’s. At the time of the director’s dismissal from the company, the project was thriving. However, the company was left without rights to its now-reputable brand name, as it was registered under the individual director’s own name. The former director requested payments to transfer the trade mark to the company, so that it could continue trading under The Eden Project name.
As it was, the High Court decided that the former director breached his duty as a director, by registering the mark whilst knowing that the name was being used by the company. Since the application for the trade mark was done purely for his personal interest, there was an obvious conflict with the interests of the company he was bound to protect in his position as a director.
However, directors’ duties which were decisive in this case’s outcome, will not be applicable to individuals who are not part of a company’s board of directors.
It is worth noting that if the trade mark had been originally registered under the company name, then the entire dispute could have been avoided. Under UK law, a company is deemed a “separate legal personality” [2]. This means that a company holds rights and duties just as like any individual person.
Maintaining your trade mark ownership rights
Once a trade mark is granted and registered by the United Kingdom Intellectual Property Office (UKIPO), it may last for up to ten years. It is possible to renew a trade mark for an unlimited number of times, thus elongating its lifecycle. For this reason, trade mark rights in the UK may be potentially perpetual.
One important caveat to a trade mark’s potential perpetual existence, is the requirement to actually use the trade mark in the market. This requirement takes two forms:
- Firstly, every applicant must be either currently using the trade mark (or allowing someone else to use it with their consent) or have an intention to use it in relation to the goods or services requested. The declaration on the application form, stating this, must be signed by the applicant or their representative. [3]
- Secondly, five years after the date of completion of the registration the trade mark may be subject to a proof of use requirement and it may be vulnerable to cancellation if it is not used on the products and services covered by the registration. To learn more about the proof of use requirement, see our article here.
As with any IP rights, it is also vitally important to consider territoriality. An IP right will cover only a relevant territory, which will be governed by its own trade mark laws that may differ from those in the UK.
Securing rights to use others’ IP assets: Licensing and Assignment of trade marks
Once an enterprise has generated an IP asset, such as a trade mark, it can exploit it by granting someone else the right to use it. A trade mark owner can grant the permission to use their trade mark to another through a license or assignment.
Licensing is the act of authorising someone else to use your IP asset, whilst still maintaining your ownership. Assignment is the transfer of ownership of the IP asset; essentially this is a sale of the asset.
IP licensing agreements set out the rights of the licensing parties. They are highly flexible and will determine key aspects, such as the territory in which the IP asset can be used, whether the licensee can share the rights with others (sub-licensing), confidentiality and non-disclosure obligations as well as the scope of what is granted, in exchange for what. Commonly rights of use are exchanged for regular payments (royalties), however commercial practices are highly varied.
If a trade mark is being licensed, the owner will often also want to agree on the quality of the product and/or service that will be provided under the trade mark. This is because it is important to any trade mark owner, that its products and/or services meet a standard that consumers have been educated to expect from the brand. This is known as the “quality assurance” function of a trade mark.
A start-up or SME may carefully consider a blended approach of licensing and assignment. It ought to consider what IP assets it wishes to license out, which can be sold outright and when, and which assets it would like to keep for its own future growth.
IP agreements are flexible, yet complex. We strongly recommend seeking professional legal advice when considering licensing or assigning your IP asset, to tailor the agreement to your specific business needs and goals, with which we can help.
Funding your journey of obtaining ownership over IP assets
Many Intellectual Property Offices recognise the importance of helping SMEs establish themselves in the market. To that end, there may be schemes available to help with the funding of your applications to register various IP assets in your journey to secure ownership.
For example, the United Kingdom Intellectual Property Office (UKIPO) has previously launched an IP support scheme for any qualifying SME to provide businesses with financial support to invest in their IP, allowing it to develop and grow securely.
Likewise, the European Union Intellectual Property Office (EUIPO) more recently launched an SME Fund which offers financial support to SMEs established in the European Union. This involves offering “vouchers” for relevant applications for IP protection, which can be used to reimburse some of the official costs associated with the registration procedures.
It is always worth keeping in mind such opportunities. We keep strictly up to date with available funding and will inform you about relevant opportunities that are fit to your business.
Key takeaways for start-ups and SMEs
The commercial ecosystem is indeed made up of light and shadows. Navigating this space successfully requires careful management of IP assets. Ownership rights present a somewhat complex legal terrain, but they are a crucial aspect for protecting and guiding a start-up or SME’s cyclical movement from IP consumption and generation. There is also a ray of sunshine in the form of financial grants, which are increasingly being introduced by Intellectual Property Offices to support SMEs on their journey of IP asset management.
References
- Ball v Eden Project Ltd [1] [2001] 4 WLUK 335
- Salomon v A Salomon & Co Ltd [1896] UKHL 1
- Section 32(3) Trade Marks Act 1994
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