IN WHICH NAME TO FILE A TRADEMARK APPLICATION?
A Trademark is a sign which enables an economic or social operator to distinguish the goods or services he distributes or wants to have distributed from identical or similar goods or services of competitors.
However, that economic operator may come in various guises and the decision whether to file an application in the name of one or another entity may entail important consequences, both from a legal and an economic point of view.
1. Can I file a Trademark in the name of my company prior to its incorporation?
Although it does not legally exist yet, a company may apply for trademark registration prior to its incorporation. It is up to its founder to fulfil all necessary formalities. Once created, the company will have to take over in its own name the application filed during the pre-incorporation period.
Taking over the trademark by the company may follow different ways.
A distinction must be drawn between 3 hypotheses:
- Trademark application filed by one of the founders before the signature of the by-laws
A list of the acts undertaken on behalf of the company prior to its incorporation, including the trademark application, must be attached to the by-laws. That act will be taken over upon signature of the by-laws by the partners/shareholders.
- Trademark application filed between signature of the by-laws and the company’s incorporation (registration with the Register of Commerce and Companies)
A power of attorney given upon an unanimous decision of the partners/shareholders to an identified person, by a partner or general manager in the case of a SARL, (Limited liability company) or a partnership, one of the shareholders in the case of a SA (public company) not publicly traded.
The power of attorney, granted in the by-laws or by a separate act, must enumerate the acts which it has been granted for and detail their modalities. It therefore has to clearly state that a given partner/shareholder is entitled to file the trademark application in the name of the future company.
- Taking over after the company’s incorporation
Once incorporated, the company may also take over the trademark applied for in its name, by a decision of the partners’ or shareholders’ general meeting. The general meeting will decide according to the quorum or majority conditions determined by law or the company’s by-laws applicable to the different types of companies for the adoption of ordinary decisions.
A recordal to amend the owner’s name must be made at the National Trademarks Register (RNM), in order to have the newly created company appear as the trademark owner. The request for recordal must be accompanied by an explanatory letter, an incorporation certificate (“extrait K-bis”) and depending on each relevant above hypotheses, (1) a copy of the company’s by-laws with the attached list of the acts done on behalf of the company prior to its incorporation, including the relevant trademark application, (2) a copy of the act including the power attorney (by-laws or separate act) or (3) a copy of the minutes of the general meeting deciding on the taking-over of the acts.
2. Do I have to be a trader to file a Trademark application?
The Law does not require trademark applicants to be traders or be allowed to use the Trademarks they apply for. Any individual or legal person, public or private, not for profit organization or company may therefore own a Trademark and exploit it personally or grant licenses thereof.
Concerning collective certification Trademarks, the holding legal person may not be a manufacturer, an importer or a seller of the goods or services; their holders do not have the right to use them personally. The use of a collective certification Trademark is indeed available to all persons distinct from its owner and who provide goods or services which meet the conditions set out by that Trademark use regulation.
3. Can I apply for a Trademark jointly with someone else?
A Trademark may be applied for by several individuals or legal persons represented by a common proxy. However, such a solution has numerous drawbacks.
Trademark co-ownership is governed by the joint ownership common regime (“indivision”). Unanimity of the co-owners is thus required to perform disposal or advanced administration acts, such as renewal, assignment, pledging, grant of an exclusive license or defense of rights (opposition proceedings, cancellation proceedings, and infringement proceedings).
In the absence of a co-ownership agreement, there is therefore a deadlock risk for the exploitation and management of rights and in any case, difficulties are expectable for what concerns the maintenance and the defense of rights: for instance, a co-owner who has not given his consent within the deadline to renew the Trademark may trigger the Trademark to lapse.
This is the reason why co-ownership represents only 7% of the French Trademarks filed with INPI.
4. Is it better to file my Trademark application in my own name rather than in the name of my company?
Trademarks are sometimes very naturally applied for in the project leaders’ own names, either because the legal structures of companies do not exist yet, or because the founders rightly want to keep control over the Trademark ownership or exploitation benefits.
Indeed, a Trademark is a source of complementary earnings which are neither a salary nor a share dividend but non-commercial profits (“bénéfices non commerciaux” or “BNC”).
A Trademark is also a valuable personal asset in view of reselling it or passing it to my heirs.
In return, the Trademark owner is liable in respect of his own assets in case of claims, infringement or claim of ownership actions by third parties. At least, it is necessary that the manager has ordered trademark clearance services in order to assess the legal risk resulting from such ownership. Besides, the extension, the maintenance and the defense of a Trademark may be costly if the owner does not request the payment of license fees from the company exploiting the Trademark for recouping those costs.
Also, partners may be more confident in a company owning the rights and may be reassured by its stability and financial standing.
Advice from tax lawyers or public accountants is of course relevant at this stage in order to determine all the tax consequences of those choices.
Experience shows that the decision depends on each personal situation and on the tax rules applicable at the time of that choice.
No need to explain that if the Trademark is applied for by the manager in his own name, he must bear all expenses in respect of his own assets.
Otherwise, it would be a misuse of corporate assets. It is therefore of prime importance that the Trademark creation costs (trademark clearance searches, trademark creation, application, defense etc.) be borne by the owner. He can later recoup those by the Royalties paid by the company as a licensee.
It is necessary to ensure that the owner’s rights arise before any commencement of use by the company.
To conclude, the choice to apply personally may be made to date the rights before deciding about the use and/or the creation of a legal structure.
In such a case, it is important to comply with the separation between the corporate and the personal assets.
Another question is that of the company’s name. If the latter wants to have the same name as the Trademark, it is necessary to grant a formal license to it so as to avoid that the term belongs to the company once sold.
5. Do I have to request license fees from my company which exploits the Trademark?
If the company has just been created, it is often recommended to focus on its income mainly its commercial development and not on the payment of share dividends to the shareholders or of license fees to the founding manager.
The most important point is not to negatively impact the balance sheet and that the company looks appealing to economic, industrial or commercial partners.
If the goal of the company’s founder is to increase its value to attract new investors or in a view of a resale in the short or medium term, it is more than recommended that the intellectual property rights belong to the company.
Also, the early associate members may be wary that the founder keeps in his sole name as important assets as the Trademark, although they are partners in the company’s commercial development.
Contact : Catherine LEVALET
- Publication date: December 2015
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