Assigning a trade mark and how ownership changes hands in Australia

Buying or selling a business usually means the brand moves with it. In Australia a trade mark is a piece of property owned by a registered owner, and when that ownership changes hands the law has a specific mechanism for the transfer: an assignment of the trade mark.

An assignment is the process by which the current owner of a trade mark (the assignor) transfers the mark to another person or entity (the assignee). It is routine commercial activity. Businesses assign trade marks when they sell a brand or a product line, restructure a company group, incorporate a partnership, buy out a partner, or bring in a new investor. Getting the assignment right matters because a trade mark is only as valuable as it is enforceable, and the person recorded as owner on the trade marks register is the one who can deal with the mark and take infringement action against copycats.

This article explains how trade mark assignment works in Australia: who is involved, what can be assigned and when, how the transfer is recorded with IP Australia, and where the process commonly goes wrong.

Who is involved in a trade mark assignment

There are two main parties to an assignment, and two bodies that can become involved depending on the circumstances:

• The assignor: The current owner of the trade mark, being the person or entity recorded as owner on the register, or the applicant if the mark is still pending. The assignor transfers the mark.
• The assignee: The person or entity the mark is transferred to. After the assignment is recorded, the assignee becomes the owner.
• IP Australia: The federal agency that administers Australia's trade marks system. Its Registrar keeps the Register of Trade Marks and records assignments and other changes of ownership.
• The ACCC: The Australian Competition and Consumer Commission has a role in one specific case: certification trade marks cannot be assigned without its consent.

The most important thing to understand about how the mechanism works is the division of labour. The transfer of ownership itself is a private act between the assignor and the assignee, done by contract. IP Australia's role is to record that transfer so the register reflects reality. Ownership changes by agreement; recording makes the change public and binding on the world.

What can be assigned, and who can own a trade mark

Section 106 of the Trade Marks Act 1995 (Cth) sets out the basic rule: a registered trade mark, or a trade mark whose registration is being sought, may be assigned. In other words, you can assign a mark at any point from when the application is filed through to after formal registration. The assignment can be made with or without the goodwill of the business concerned in the goods and services, and it can be partial, covering only some of the goods and services the mark is registered for. What it cannot be is partial by reference to a geographic area: you cannot assign the right to use the mark in one state while keeping it in another.

The Act distinguishes an assignment from a transmission. An assignment is a transfer made by an act of the parties, which is what this article is about. A transmission is a transfer that happens by operation of law, such as the mark passing to the personal representative of a deceased owner, or to a trustee in bankruptcy, or under a court order. Transmissions are also recorded with IP Australia, using the same forms.

Eligibility: who can hold a trade mark

Not every structure can own a trade mark. An application for registration must be made by a person or persons having legal personality under s 27 of the Act, and the same rule applies to who can receive a mark by assignment. In practice this means a trade mark can be owned by:

• an individual;
• a company;
• an incorporated association;
• a body that exists under legislation, such as a registered charity; or
• more than one of these jointly.

IP Australia's guidance on assigning ownership of a trade mark is blunt about the structures that cannot hold a mark. A business name is not a legal entity, so the mark is owned by the business owner, not the business. A trust cannot own the mark; the trustee does. A partnership cannot own the mark; the individual partners do. And other unincorporated bodies, such as clubs and associations, can only own one particular kind of mark, a collective trade mark.

This causes real problems at the assignment stage. If a business has operated as a trust or partnership and the principals want to transfer the brand to a newly incorporated company, the assignment must run from the correct legal owners: the trustee or the individual partners. An assignment signed in the name of the trust or the business name does not transfer anything.

There is one useful planning point. Section 27 of the Act allows a person to apply for registration of a trade mark intending to assign it to a body corporate that is about to be constituted. So a business that has not yet incorporated can file the application in an individual's name, then assign the pending application to the company once it is formed. The same idea applies where the mark is owned jointly, for example by partners about to incorporate: all the joint owners need to be parties to the document transferring the mark to the new company.

The agreement that transfers ownership

The assignment itself is a contract between the assignor and the assignee. IP Australia makes the point directly: transfer of ownership is enacted through an agreement between the parties, and it is the parties' responsibility to make that agreement. Recording the assignment with IP Australia comes afterwards.

The agreement needs to do the work of actually transferring the title. At a minimum it should:

• identify the trade mark or marks being assigned, by registration or application number;
• state whether the assignment is full or partial, and if partial, which goods and services are moving;
• name the assignor and assignee accurately, using their full legal names;
• state the date of the assignment;
• record any consideration, if the mark is being sold rather than transferred within a group; and
• be signed by a person authorised to sign on behalf of each party.

The document itself can take various forms. A deed of assignment is the most common and most robust, because a deed does not require consideration to be effective. A sale agreement, a clause within a broader business sale contract, or a certificate of merger where two companies have merged can all serve the same purpose, as long as they clearly state that the title is transferred.

Two points from IP Australia's guidance are worth flagging. First, even where the new and old owners share common ownership, such as a restructure between related companies, a documented agreement is still necessary. The same person can sign on behalf of both entities, but the transfer must be documented. Second, a document that merely says the parties do not object to a change of ownership is not an assignment. IP Australia needs a document signed by the authorised parties that clearly states a transfer agreement has been made.

Recording the assignment with IP Australia

Once the agreement is signed, the next step is to have the assignment recorded. This is what makes the register accurate, and it is the step that determines who the world can rely on as the owner.

For a registered trade mark, s 109 of the Act requires either the registered owner or the assignee to apply to the Registrar for a record of the assignment to be entered in the Register. The application must be in an approved form and filed with the prescribed documents. Under reg 10.1 of the Trade Marks Regulations 1995 (Cth), the prescribed document is one that establishes the title of the assignee: in practice, the deed of assignment or other transfer agreement. For a certification trade mark, written evidence of the ACCC's consent is also required.

IP Australia's guidance sets out what the supporting evidence should contain: the date of the assignment; the details of both parties, including their names, addresses and, for Australian companies, ACN or ABN; the number or numbers of the assigned trade marks; a clear statement about the agreement and transfer; and signatures from both parties, showing the signatory's name, the party they are signing for, and their capacity and authorisation where they sign for a company.

The practical steps are straightforward. IP Australia provides specific forms, one for a full assignment or transmission and one for a partial assignment, which can be lodged through IP Australia's online services or by post. Either the assignor or the assignee can lodge the application.

Once a valid application is lodged, the effect is significant. Under s 110 of the Act, the Registrar must enter the particulars of the assignment in the Register and register the assignee as the owner of the trade mark for the goods and services covered by the assignment. The entry is taken to have been made on the day the application was filed, and the assignee's ownership is backdated to that day. The Registrar must also publish the recording of the assignment and the registration of the new owner. For a pending application, the mechanics are similar under s 108: the Registrar records the particulars, publishes them, and the assignee is then taken to be the applicant for registration.

There is one further requirement that catches people out. If someone is recorded on the Register as claiming an interest in, or a right in respect of, the trade mark, the Registrar must notify that person that the assignment will be recorded at the end of two months, unless they consent in writing first (reg 10.5). This protects people such as secured lenders who have registered an interest in the mark. It also means that a trade mark with a messy interests history can slow down an assignment, and it is worth checking the Register before committing to a deal.

Where the recording process gets held up

The most common failures at the recording stage are avoidable:

• Missing or unsigned documents: IP Australia will not record an assignment without a signed document that establishes title, and the evidence must be in English or accompanied by a translation.
• Assigning from a deregistered company: Once a company is deregistered it no longer owns its assets, so it cannot assign a trade mark. A company's assets must be dealt with before deregistration, otherwise they fall under ASIC's jurisdiction.
• Assigning to an entity without legal personality: A trade mark cannot be assigned to a business name, a trust or a partnership, because none of them can hold the mark. The assignment needs to name the underlying owner, trustee or partners.
• Assuming recording enacts the transfer: The reverse mistake is also common: treating the recording as the transfer itself. If the parties have not actually signed a transfer agreement, IP Australia has nothing to record and no ownership has changed hands.

Partial assignments: splitting the goods and services

A partial assignment transfers ownership of the mark for only some of the goods and services it covers. It is a common tool when a business sells off one product line but keeps trading under the same brand for its remaining products.

The outcome is that two or more trade marks with the same representation end up with different owners for different goods and services. IP Australia records the assignee as owner of the mark for the assigned goods and services, while the assignor remains the owner for the rest. The parties need to be precise about which goods and services are moving, because the statement in the agreement is what the registrar will record. IP Australia also notes that, in the case of a partial assignment, the consent of a co-owner to the assignment may be required.

Certification and collective trade marks: special rules

Two special types of marks do not follow the ordinary rules.

A certification trade mark is a mark that certifies that goods or services meet particular standards, such as a mark used to show that produce is organic. Certification marks are subject to ACCC oversight because of the risk that the certification rules will be misused. Under ss 180 and 180A of the Act, once an application for a certification trade mark has been sent to the ACCC, and for any registered certification trade mark, the mark may be assigned only with the ACCC's consent. In deciding whether to consent, the ACCC looks at matters including whether the proposed assignee intends to apply the same rules governing use of the certification mark (regs 16.10A and 16.11 of the Trade Marks Regulations). A decision by the ACCC refusing consent can be reviewed in the Administrative Review Tribunal.

A collective trade mark is a mark used by members of an association to distinguish their goods or services from those of non-members. Here the rule is absolute: s 166 of the Act provides that a collective trade mark may not be assigned or transmitted. If the association restructures or dissolves, the mark cannot be transferred to the new entity. The practical consequence is that the association would have to allow the mark to lapse and the new entity would need to apply for its own registration.

Unregistered trade marks: assignment only with the business

Unregistered trade marks are in a different position entirely. A mark that is neither registered nor the subject of an application is not protected under the Trade Marks Act at all. Its only legal protection is through the law of passing off, which protects the goodwill of a business, not the mark as such.

The Act recognises this in the note to the definition of predecessor in title in s 6: a trade mark that is neither registered nor the subject of an application for registration may be assigned in Australia only in conjunction with the goodwill of the business concerned with the mark. In practical terms, you cannot strip a brand out of a business and sell it on its own. The unregistered mark moves with the business, or it does not move at all.

There are two workable paths if the parties want the mark to change hands separately from the rest of the business. The first is to include the mark in a sale of the business, with the goodwill passing as part of the transaction. The second is to file an application for registration first, then assign the pending application. Once an application is on foot, the mark becomes assignable under s 106 with or without the goodwill of the business, and the usual recording process applies.

When to call in a trade mark lawyer

A straightforward assignment between a willing seller and buyer is mechanical, but the surrounding facts are where the value of advice shows up. A trade mark lawyer can help with:

• drafting the deed of assignment or reviewing the transfer clause in a business sale contract, because the document itself is what establishes the assignee's title with IP Australia;
• checking that the assignee can legally hold the mark, particularly where the buyer trades through a trust, a partnership or a business name;
• making sure all joint owners are parties to the transfer, and that the goods and services are described correctly for a partial assignment;
• preparing and lodging the application to record the assignment, and chasing it through IP Australia;
• handling the ACCC consent application where a certification trade mark is involved; and
• reviewing the Register before the deal, to identify any recorded interests that will trigger the notification process and delay the recording.

A lawyer is also worth engaging before a business restructure, when the brand is part of a larger package of assets. Trade marks rarely move alone: domain names, copyright in branding and logos, and registered designs often need to be dealt with at the same time, and a restructure is the moment to make sure all of them end up in the right hands.

The gap between your contract and the Register

The risk that costs the most in this area is the gap between the private agreement and the public record. Ownership changes hands the moment the assignment is signed, but the world still relies on the Register. Until the assignment is recorded, the seller remains the registered owner, which means the seller can still deal with the mark and the buyer cannot properly enforce it against infringers. A purchaser, a financier or a court will look to the Register, and to whether the recorded documents actually establish the assignee's title.

The assignment is not a difficult document to get right, and the recording is a form-filling exercise once the underlying agreement is sound. The failures come from the surrounding detail: the wrong entity named as assignor, a trust or business name as the supposed owner, a certification mark without ACCC consent, or an unregistered mark treated as if it could be sold on its own. Checking those details before the documents are signed is where a lawyer adds the most value, and a first consultation can quickly tell you whether your situation is a straightforward recording or one of the traps.