Exactly who should own a trademark is almost a metaphysical question. A statutorily vital function of a trademark is to identify “the” source of goods and services. At the outset, trademarks presume a certain unity of the owner of the trademark.
Nonetheless, USPTO permits joint ownership of trademarks. There is an implicit legal fiction that the various owners all provide goods and services to the public that are indistinguishable from one another, under the same mark. In many ways, joint trademark ownership is the intellectual property equivalent of a general partnership. As you may have heard, there is a common joke among attorneys that recommending a general partnership to a client is tantamount to malpractice.
General partners have joint liability for the actions of the partnership, and are equally empowered to act in the name of the partnership under the default rule. This is generally a recipe for conflict and risk. Similarly, default joint trademark ownership empowers each owner to use the mark fully in its independent capacity.
The common practice among trademark attorneys is to consistently recommend a single entity own a trademark. After all, joint ownership adds several dimensions of potential conflict between the owners. Even an entity created exclusively to hold intellectual property, with ownership structure reflecting the proposed joint ownership can still be preferable to actual joint trademark ownership for many cases.
The Curious Case of Distributors
With that in mind, who could possibly benefit from joint trademark ownership? Consider the case of an exclusive U.S. distributor of the goods from a foreign manufacturer. The foreign manufacturer manufactures the goods, but does not itself market or distribute them in the U.S.. An independent (or less than wholly owned firm) is the exclusive U.S. distributor for these goods, handling marketing and distribution. Trademark law is riddled with cases of these entities fighting over conflicting trademark filings. So much so, that there are specific legal precedents governing this particular fact pattern.
First, there is a presumption that a foreign manufacturer owns a mark unless agreement between them provides otherwise. Global Maschinen GmbH v. Global Banking Systems, Inc., 227 USPQ 862 (TTAB 1985). Second, mere distribution of the goods of a foreign manufacturer is not sufficient to “acquire a right of ownership in the manufacturer’s or producer’s mark.” TMEP § 1201.06(a). However, courts have held that the above is a rebuttable presumption when a distributor “gives them the benefit” of their name, reputation, or business style. Tactica Int’l, Inc. v. Atlantic Horizon Int’l, Inc., 154 F. Supp. 2d 586, 600 (S.D.N.Y. 2001).
While joint trademark ownership would largely prevent ownership disputes between manufacturer and distributor for its term, joint trademark ownership is a recipe for other conflicts anyway, right? Consider how joint ownership creates conflicts in other circumstances: the individual owners gradually develop distinct business interests that draw them into conflict over a unitary trademark, while each has equal right to wield it. Certainly, manufacturers and exclusive distributors can encounter similar issues.
When Shotgun Weddings May Make Sense
An exclusive distribution agreement is an attempt to bind the interests of two firms with respect to a set of goods. Joint trademark ownership makes two entities equally empowered and invested in the mark. It follows that joint trademark ownership is a way to further entrench an exclusive distribution agreement.
Normally, a manufacturer will want as many of its goods distributed as widely as possible, to increase revenues. There is a natural inclination to find other distributors absent some restriction whenever there is excess production – or an opportunity for a higher wholesale price. Similarly, a distributor will develop connections, relationships, skills, and a reputation that can apply to both the manufacturer’s goods and to competing goods. One way to restrain these divergent impulses is with heavy contracting between the parties. But there may be a readily available legal form for the relevant trademarks that locks both parties into a static, mutually dependent relationship, specifically with respect to their products.
Would you like a weighty, off the shelf, prenup for your next exclusive distribution arrangement? Perhaps a joint trademark filing is for you.
Disclaimer – No Legal Advice: The information and content available on this site is offered only for informational purposes and is not intended to be legal advice. Posts are for educational purposes only as to provide general understanding and general information of the law, not provide specific advice. Blog posts should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.
ROBERT MAKAR, is an Associate Trademark Attorney with LegalForce RAPC. He holds a BA in Philosophy, Politics, and Economics from the University of Pennsylvania, and a JD with honors from the Sandra Day O’Connor College of Law at Arizona State University. He is admitted to practice law in Arizona.