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Avoiding Trademark Ownership Pitfalls

We help a lot of small businesses protect their trademarks and one issue that comes up frequently is identifying the correct owner.  This is the very first entry you must fill out on the application, and it is easy to enter the information without giving it careful attention.  But the correct identification of the owner is critical to avoid losing your rights. Identifying trademark ownership is key to the trademark succeeding.

Who Should Be Listed as the Owner on the Application?

A trademark application may only be filed by the owner of the mark. Normally, the owner of a mark is the person who applies the mark to goods that he or she produces, or uses the mark in the sale or advertising of services that he or she performs.  If an applicant is not the owner, the application is void and cannot be amended, so it is important to get this right.

There are many different types of legal entities that can own a trademark. The most common that we see, and also the simplest, are LLCs and corporations.  Usually, a LLC or corporation develops a mark to identify itself as a source of goods or services.  Since it applies the mark to the goods or uses it in advertising, it (not its owners!) is the correct owner.  Owning the mark allows it to license or assign the mark, recognize the value in the mark for accounting purposes, use the mark as a security interest, or enforce the mark against infringers.  Company ownership also reduces the risk that a change in ownership of the company (such as the sale of the business, or the departure of an owner) will create a problem.

The next most common ownership arrangement we see is individual ownership.  This usually occurs in one of two cases:  (1) the individual is operating as a sole proprietor, or (2) the individual is filing an ITU, and has not yet used the mark or formed a company to use the mark.  In the former case, the owner should seriously consider creating an appropriate business entity.  In the latter case, the individual should usually be planning to do so before it begins to use the mark.  If neither of these cases applies, there is a good chance that the correct owner of the mark is not an individual.

Partners, without a LLC or corporation, may have issues with trademark ownership!

Occasionally, we run in to more challenging ownership structures.  For example, one situation that sometimes arises is multiple individual owners. A simple example of this would be a husband and wife operating a business as a sole proprietorship.  Less frequently, a group of people might wish to own a mark.  When this is the case, the attorney must go through a state-law specific analysis to determine the proper owner.  For example, are the individuals operating as a partnership, or a joint venture? The answer will depend on the applicable state law.

Joint ownership is permissible in appropriate cases, but can be a red flag for possible risks down the road.  Sales of the business will likely be more difficult, and, in some cases, it may be possible for one owner to enter into contracts regarding the mark without the knowledge of the others.  An applicant considering listing multiple individuals as owners should think carefully about whether the individuals are in fact the correct legal owners, and whether that is the correct structure for the business in the long term.

Why Does Ownership Matter?

Ownership can be critical when it becomes time to enforce your mark. Only the registrant of a mark (including the legal representatives, predecessors, successors, and assigns of the registrant, or an exclusive licensee) has standing to sue for infringement.  If a company is the correct owner of a mark, but the application identifies the company’s president individually as the owner, then the company will not be able to sue for infringement, because it does not own the mark.

In addition, a trademark registration can be invalidated if the person or entity claiming ownership is not the one controlling the nature and quality of the goods or services under the mark.  One ground for cancelling a registration is that the owner is not, and was not at the time of filing, the rightful owner of the mark.  If a company sues a competitor for infringement, but the company’s president owns the mark as an individual, the infringer may succeed in invalidating the mark.

It Pays to Get It Right

In some cases, such as simple business entities, identifying the correct owner is simple.  In others, it can be a difficult question of state law. Getting it right at the outset can make the difference between having a valid mark and having no mark at all.  A trademark attorney can guide you down the right path to avoid problems later.

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38 comments

  • Hi Larry,

    I am starting a clothing brand while I am finishing up college to help pay bills. I want to trademark the brand name before it is taken. I did search Trademark Electronic Search System (TESS) and the name is not trademarked yet. However, after reading I am realizing it is smarter to have a LLC before getting the trademark? Do I need to have the LLC yet? I am not sure what I want the name of the LLC to be, just the clothing brand which was what my trademark was going to be for. If it is smarter to make the LLC first can I change the name later? Also how long will the LLC process take? Lastly, can I start selling the brand before the trademark? If not can I sell it on sites like etsy where it does not need a trademark while I wait for the process to complete. I look forward to hearing from you as soon as have a chance!

    Thank you, Amber 🙂

    • Hi, Amber.

      I’m sorry for the delay in responding to you.

      All excellent questions. You do NOT need to form a LLC first, to get a trademark. Although if you do register a trademark, and form a company later, make sure that you do a proper “assignment” from yourself to the company when the time comes.

      With that said, I would recommend you form a LLC if you’re going to start conducting business (whether or not you have a trademark). The reason is that a LLC provides some important benefits, including liability protection, some tax savings, survivability and flexibility (to partner with others, create unique relationships, etc). But, it’s not legally “required” to have a trademark first, or a LLC first, and you can theoretically conduct business as yourself (it’s called a sole proprietorship).

      Forming a LLC doesn’t cost very much (although it depends on which state you’re in). You can learn more, see pricing and/or order a LLC using this link: https://www.l4sb.com/product/llc-formation/.

      Good luck to you. Larry.

  • Hi Larry,

    Great post! What would you recommend if I’m a single member LLC? Would you file under the LLC business name? Or do I put it under my own name…and if I put it under my own name do I select LLC or individual as the entity? It’s not quite clear on the USPTO forms. The issue is another company has recently registered my exact business name in another state (I registered years ago before them) so if I put it under my business name how will they know it’s owned by my LLC and not theirs?

    • Hi, Victoria.

      If you have a LLC, and the LLC is use the TM, then I would file under the LLC. Doesn’t matter how many owners own the LLC, it’s still operating the business.

      Larry.

  • Thanks for the informational article. I feel silly now as I may have thrown the $250 fee away for the TEAS Plus application I just filed. I formed an LLC for my business with an effective date in a few months. I then applied to trademark my business name with my LLC as the owner, knowing that I was filing as a 1b anyway. Reading now, and in other places, I see it doesn’t matter that I have my UBI number, am filed in my state SOS office, and my intent to use would have lined up with the start of my LLC. Since my LLC was not effective yesterday, at the application filing, it will be refused and I have to start over, right?

    • Hi, Nikki.

      I don’t believe your application will be refused for the reasons you’ve stated. The bigger issue is, if your trademark is registered and you end up having an infringement dispute, could the issue of your dates be a reason for the other party to seek invalidation of your trademark?

      It’s hard to say yes or no with the facts you’ve presented. However, if your LLC is valid and existing at the time your trademark is registered, you’re probably going to be okay.

      Larry.

  • Tina Shorthouse /

    Hi….hope this message finds you well! I am getting ready to file an application for a trademark for my brand of clothing that I have been selling online for 5 years. My business name is ABC, Llc and my brand is XYZ. Do I use my LLC for the application or my personal name. This is a sole proprietor right now.

    I also have a second question please:
    An international company recently applied for a trademark in my brand name about 30 days ago. They applied to trademark many other brands across the globe. The attorney name is fake as I checked with government courts via phone and email. The phone number and address is based in Wuhan, China and the attorney’s office is a virtual office space in New York…. Long story short, the application is bogus. I need to get my brand trademarked and I am not sure weather or not I can apply while they have an application pending? Meaning, will I, the mark owner, just get rejected? They have applied in class 026 and I am 025. I am not sure what to do. Any help or guidance would be GREATLY appreciated. TIA 🙂

    • Hi, Tina.

      My recommendation is almost always that your company should be the owner of the trademark, not you personally. There are exceptions to this recommendation, but it’s really dependent upon your unique circumstances. If you want to talk about it, we do sell a 30-minute trademark attorney consult you may be interested in. You can order from https://www.l4sb.com/product/trademark-consultation/.

      As it relates to the previous filing, my advice is to file anyway. Your application will eventually be “suspended” pending the outcome of the earlier registered mark, but if they aren’t approved, you’re application will then next be considered and taken off suspended status. If the other trademark is approved, then you should file an opposition when it comes time.

      You will be much better served working with a trademark attorney through this process.

      Good luck to you. Larry.

  • I am confused as I read everything. I created an LLC. I am a therapist. I am in the process of trademarking my name for by LLC. I will only be offering counseling services to individuals families and groups and possibly training. I want to know with the trademark do I make myself the owner or my LLC. I have no partners and at the time, I do not plan to sell anything, but down the line perhaps t shirts and motivational materials. I want to understand why or why not would I be the owner of the trademark. I want to make the correct choice.

    • Hi, Ali.

      Typically, the trademark should be owned by the company that is conducting business. You can also own it individually. Either way, you can reassign the trademark to the other party, provided you are using the legally valid entity names. You run into trouble, when the legal name assigned to own the trademark is invalid.

      Larry.

  • Thanks for posting such an informative article. For some reason it’s difficult to find this information online in the way you spelled it out. That said, I need a bit more specific info about applying for a trademark. I called the USPTO office yesterday and they were not willing to answer this question:

    My business partner and I have an LLC for let’s say “company 1”, which is the umbrella for “company 2”. Not wanting to pay for another LLC right away until it proves worthy of the cost, we got a DBA for “company 2” under “company 1”. We realized that we need a trademark for “company 2”, but it’s not an LLC. The question is this – can we apply for the “company 2” trademark under the “company 1” LLC? And in time, when make “company 2” an LLC, do we need to change the trademark ownership to the “company 2” LLC?
    Appreciate any input on this situation. Thank you.

    • Hi, Melanie.

      Thank you for your question, and I’m sorry for the delay in answering it. I sort of let these questions batch up, then answer all at once.

      If I’m understanding exactly what you’re saying, it sounds like you have one company, let’s call it “Company 1, LLC”. Just because you have one or more “DBA’s”, doesn’t mean you have other companies. Think of a DBA as nothing more than an “alias”. In “people” terms, my real name is “Laurence Donahue,” which is my legal name but my “DBA” is “Larry Donahue.” I’m still the same person, just with different names.

      This same approach applies to you. You’re thinking of your DBA as a different company, and you may be handling the finances that way, but it’s not a different company — not until you actually form a new LLC and then that new LLC will either be wholly owned by Company 1, LLC, or not. Either way, it will need to “acquire the assets” of Company 1, so that you can peal off whatever DBA business you’re doing in Company 1 (which you call “Company 2”), but the concepts are the same.

      Given everything I just said, the answer as it relates to trademarks should become somewhat clear: Company 1, LLC, will be the owner of the trademark. Assuming you form a separate LLC for “Company 2” someday, then Company 2 will purchase the appropriate assets from Company 1, including the trademark. This asset purchase will include a “trademark assignment.”

      This is perfectly fine. Larry.

  • Hi Larry — Thank you for the article. I am currently the majority owner of an LLC. My business party wishes to sever our professional relationship, and both our last names are part of the entity’s name. I believe she will try to have her last name removed. We are both listed as owners of the trademark.

    From your article, it seems as though she would not be able to remove it. That said, we are a professional services firm, therefore, it makes it difficult to define the “goods” but we do use it in advertising, etc..

    Should I be concerned or am I in the clear?

    Thank you so much for your help.

    Cheers!
    Misha

    • Hi, Misha.

      Thank you for reaching out to us. Unfortunately, it’s hard to give you a clear answer here you can depend on. There are a few factors outside your control (or outside my understanding to give you a reliable answer).

      This is one of the problems with company names / trademarks that include the names of the owners.

      If you have a partnership agreement or other formation document that specifies, that would control.

      If you are a licensed professional (you did say professional services firm, after all), you may have board or other licensing rules and regulations on “trade names” or “fictitious names,” and there could be language relating to departing professionals. You should definitely look into any requirements coming from your regulatory organization.

      Finally, the point of the article (with respect to partnerships) is that ownership is resolved at the state-level, not at the federal level. Just because you are both listed as “owners of the trademark,” doesn’t mean there are local / state laws / regulations governing ownership (and or use) of the trademark and brand-name of your business.

      You need to get a handle of these issues to better understand what you are (or are not) required to do. Assuming there are NO rules or regulations or former agreements that would control, then it’s a matter of negotiations between the two of you. We lawyers would certainly love to take your money and argue this all day long, but in the absence of clear state rules governing, the answer isn’t so clear.

      Sorry I cannot be more help to you. Good luck. Larry.

  • I formed a L.L.C. (ABC Enterprises) & under that Entity name, obtained a business license (firm name) Good Business Inc. as a L.L.C. with dept of revenue.

    Question 1: When I applied to Trademark ‘Good Business Inc’ I put myself as the owner & the legal entity info type as L.L.C. Did was that the correct/best way to go?

    Question 2: I am attempting to Trademark ABC Enterprises L.L.C. JUST the name though. My plan is to only use this as the “Umbrella” so to speak. ABC Enterprises will not be providing any goods/services. How do I go about doing so? There is no option to NOT offer goods or service

    • Hi, Taion.

      Thank you for your questions. Answers are:

      (1) No, you didn’t do it correctly. If the legal entity is LLC, then you need to give them the legal name of the LLC, not you personally. Alternatively, if you wanted to be the owner, then you can put your name, but then you need to indicate “individual” as the entity type.

      (2) Trademarks are “source identifiers” for good and services. When you think “Apple,” what do you think of? Amazon? Amex? Nike? McDonalds? These are all products and/or services. You cannot trademark a name for lots of reasons, including but not including it being descriptive, likely to be confused with a pre-existing trademark, geographically misdescriptive, profane, a surname, etc, etc, etc. Another reason you cannot trademark something, is it’s not being used as a “source identifier”. Think taglines.

      Larry.

  • I’m working for my brother at his startup LLC – it’s just me and him. As a law student, I’ve been taking on legal-type tasks that I’d understand better than he would, and I was hoping to apply for a trademark for his business name for him. This ownership stuff is throwing me off – since the LLC will be the owner, does that mean anyone from the LLC can apply? I’ve never seen any info anywhere addressing that scenario. I don’t see why I couldn’t do it if the LLC owns it, not my brother, if we both work for it.

    • Hi, Matt.

      Excellent question. The quick and dirty answer is that one of the owners or a licensed trademark attorney can actually apply. The unlicensed legal providers on the Internet will get around this requirement by generating the trademark application in the name of one of the owners, and then have the owner actually submit the trademark application.

      Larry.

  • LAWANDA D BAKER /

    I have not established an LLC, I do not have a state business license, my website is in the works but not live… I have not started operating as a business yet… basically my business is in early stages of formulation… BUT I DO have a domain, a name and a logo and I need to start marketing my product/service. MY QUESTION IS: without having all of these parts in play CAN I STILL APPLY FOR A TM

    • The quick answer is “yes,” you can still apply for a trademark. I’m not exactly sure what you mean by “marketing my product/service,” but if you’re not yet using the trademark in commerce, then you can file for what’s called an “Intent-to-Use” (or ITU) trademark. Once approved, you’ll need to file a “Statement of Use” (or SOU) when you start using the mark. If you don’t start using within 6-months of receiving approval from the USPTO (called a “Notice of Allowance”), then you’ll need to file an extension which will give you another 6-month window to start using it. You can file up to 5 extensions.

      Once you have your LLC in place, then you can assign the trademark to the LLC. You do need to be careful about ownership issues, however, as mentioned in this blog article.

      Larry.

  • I already have my products for sale online. I am planing to open an LLC , and trademark the name, when the sales improves.
    Can I do the trademark first and use a sole proprietorship Until I am ready to move into the LLC?

  • Since I have an LLC for my business, would I put my name in as the owner of the mark and the entity being an LLC?I see people are putting individual under entity but they have a LLC

    • Hi, Terah.

      A trademark can be owned by a variety of entities, including companies (LLCs and Corporations) and individuals (US citizens and non-US citizens). Sometimes, folks will register for a trademark under their personal name, only because they haven’t yet setup the company. Sometimes, I see an individual owner wanting to retain the ownership rights of a trademark, even though it’s used by a company (not the best idea).

      Larry.

      • Hi, I was advised by a lawyer that it might be a good idea to hold my TM as an individual vs a LLC. I haven’t done the TM yet, so nothing has been done yet, but I am curious why it is not a good idea. If for any reason my company goes bankrupt, I could still own the TM separately as an individual. I think that was one of my lawyer’s points.

        Also, do you recommend your LLC name to be different from the trademark name? I have heard of people loosing their TM as someone else started the TM process right after the LLC was formed. It happens a lot with domain names too. One solution could be just using a different name for a LLC. Would you recommend that as a strategy? Thank you.

        • Hi, Moni.

          Great questions.

          Why do we recommend the TM is owned by the company (i.e. LLC or Corporation) versus the individual? Several reasons. First, the trademark represents the brand of the business, and therefore establishes goodwill that has value. If you turn around and sell your business someday, some of the value of that sale will be attributed to the goodwill, including branding assets, like the TM, domain name, social media accounts, etc. In this instance, you own the TM and therefore whatever value of that TM goes to you directly versus the business. That can create some significant tax consequences if you’re not careful, including but not limited subjecting your goodwill portion of the sale to ordinary income taxes versus capital gains. It may be possible to avoid this, but you really would need to consult with a tax professional and be very careful.

          Second, it’s a great way to destroy the liability protection afforded by a corporate entity. Why? Because if I were to sue you, and your LLC didn’t have a lot of assets, I would want to go after you personally. I would do that by arguing “piercing the corporate veil,” which requires I argue you’re doing something inappropriate, such as not following corporate formalities or commingling funds or resources. Owning a TM used by your company gives me an opportunity to argue commingling resources, unless you’re being very careful.

          Do we recommend the LLC name be different from the TM name? Not really. It’s more convenient to be able to standardize on a single name, should you be so lucky. Note that it’s difficult to do, and many problems can arise (such as you’ve identified) that would mean you’re DBA / brand name is different from the legal name of the company. I don’t see significant legal issues or problems either way, so rather ambivalent on the issue.

          Thank you. Larry.

  • Thanks for this article. So if I am the main one creating the business but if anything like death were to happen I would want my family husband/daughter to have the rights to the business trademark etc. Would an LLC be a better options to protect my family from legalities like that? Just want to reaffirm what I read.

    • Hi, there.

      In general, I always recommend a corporate entity for conducting business, and a LLC is usually the best choice. We do have a smart, AI-based, entity selection tool that can help you figure out which type of company to form (it only takes 5 minutes): https://www.l4sb.com/business-entity-selector-tool/.

      There are four primary reasons I recommend a corporate entity, like a LLC: (1) Liability protection, (2) potentially better tax options / savings, (3) greater flexibility for future changes, such as a sale or partnership, and (4) survivability.

      A LLC can also simplify and assist with ownership issues for assets, including intellectual property and trademarks.

      Larry.

  • I intend to form an llc later on down the road. The correct way to file an itu trademark would be to file it under my name, or should I file the llc 1st and then proceed to file the itu trademark under the llc’s name?

    Thank you

    • Hi, Kyle.

      That’s a good question, and there’s really not a legal answer here. I think it’s more a set of business questions.

      From a practical standpoint, if you file an ITU in your name, you can always assign ownership to your LLC later, although there is a fee associated with that. But, if you have partners, and something happens to you personally (i.e. death or incapacity), then that means the trademark goes into probate. Unless you have a Will, it could present an issue for your other partners. A LLC would eliminate that possibility.

      Another possible area of concern, is if you care about anonymity. Many folks want to have a trademark and business without disclosing ownership information. See Anonymous LLC. If you care about that (or will), then you definitely want to form the Anonymous LLC first, before filing the ITU, and then doing it under the ownership of the Anonymous LLC.

      Other than those issues, I don’t see strong arguments one way or the other in my opinion off the top of my head.

      Larry.

  • If a New Mexico LLC owns an Overseas Trademark and a third party takes an Invalidation in the Overseas Country against BOTH the New Mexico LLC AND the sole Member of that LLC can the sole member then be held liable under New Mexico Company law ?.

    • Hi, there.

      Under NM law? A LLC can certainly be liable for the harms / wrongful acts committed by the LLC. Can the sole member be held liable for the acts of the LLC? Rarely. It would require the opposing party to make an allegation that permits them to “pierce the corporate veil,” and then prove their case.

      Larry.

  • Marc Shafer (Seattle) /

    Thank you! Great information…very helpful!

  • If the owner of a trademark is an LLC and that LLC has an expired business license do they still have ownership of the trademark?

    • Hi, Adam.

      Maybe, maybe not. The owner information at the USPTO doesn’t necessarily have to be correct — people often transfer ownership of a trademark, only to update the USPTO database later (i.e. upon renewal of the trademark, for example). Assuming the USPTO has the correct information, then there are locate state rules on what that means for assets owned by the LLC.

      You said “expired business license,” and I’m not exactly sure what that means. The literal interpretation is that their local business license is expired, but their LLC is still active. If that’s the case, then the expired business license has no bearing whatsoever as it relates to ownership of assets. If you misspoke, and meant the LLC is no longer in good standing or otherwise administratively dissolved, those mean two different things. “Not in good standing” is still a valid LLC, although it’s not in good standing in in jeopardy of becoming administratively dissolved or at least anything requiring “in good standing” status would be frustrated. “Administratively dissolved” means the company no longer exists, and all the assets (and liabilities) would fall to the previous owners or existing owners, if it’s still operating.

      That is the “general rule”, which could vary depending on the state, existing contracts in place between owners and more.

      So, your question is you can see, is very hard to answer with any certainty.

      Good luck to you. Larry.

  • Can someone file for a Trademark for a name that someone already has an LLC for?

    • The short answer is “yes,” from a legal standpoint. The answer is “maybe not,” from a prudent standpoint.

      Specifically, is the name someone already has a LLC for being used in the marketplace as a brand or trademark, such that you use of the same name could create a “likelihood of confusion” in the marketplace? If so, then you cannot trademark such a name.

      Let me give you an example: Let’s say someone has created a LLC named “Orchard Farms” for a computer company and you want to use the name for a restaurant, you’re probably going to be okay. Or, suppose someone has “BLK Holdings, LLC”, and they simply own property, but you want to create a picture framing company under the same name, you’re probably going to be okay.

      If, however, you want to form a company called “Future Athlete” for a sports club, but someone else is using “Future Athletics” for workout equipment. You’re probably going to have a problem (yes, I purposefully chose Athlete versus Athletics, and sports club versus workout equipment). The reason is, these names and products/services can be viewed as “similar,” and therefore hit on a few elements in the likelihood of confusion test.

      Larry.

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