One commonly asked question! So, it is worth spending time here to discuss this acute issue.
To shield against risk, it will be wise for you to set up a limited company (the “Company”) to run your business. When a thing does not go well as you wish, you can always liquidate the Company, limiting your loss to the size of the share capital.
When comes to trademark filings, you then have two choices, filing your trademark either (i) in your own name; or (ii) in the name of the Company. In most circumstances, we recommend the latter for at least two obvious good reasons:-
1. Limited Liabilities
When we talk about trademarks, it is always the rights which are under the limelight; how trademark registrations can protect my business, how I can deter others from using my trademarks, etc.
Please however don’t forget that obligations always go hand in hand with rights! A trademark registration could at times mature into contentious matters, for example,
(i) If there is a confusingly similar trademark in the market, you may have no choice but to take action against it;
(ii) Occasionally, a third party may issue a non-use cancellation against your registration, typically as a strategy for trying to secure its own trademark application; or
(iii) If a third party sues you for infringement, whether grounded or not, you are under pressure to pay a hefty fee for compensation.
Worse still, you may be asked to pay the legal fees of the adverse party in some jurisdictions when you lose a lawsuit. Against these “obligations”, a limited company may effectively help limit your financial risk, subject to exception. For some special scenarios, you may also be made personally liable (lifting the corporate veil) for the Company’s losses.
2. Less affected by the Probate Process
Like other valuable tangible assets (e.g. cash or apartments), trademarks (intangible assets) form part of the estate, subject to the probate process when one passes away.
Let’s say I filed a trademark “Trasomark” under my name, to cover “global trademark services” provided under my own company Trasomark Limited. Two sons Peter and Jason are currently working with me, but the youngest son Jordan is not interested in Trasomark and has his own career development.
When I pass away, even if my three sons do not fight for larger shares of my estate, it could take months or even years to complete the probate process especially if I have a lot of assets: houses, businesses, cars, stocks, cash, etc… Not until the completion of the probate process, the ownership of the Trasomark mark could not be said to be certain and settled, making it much harder for commercial exploitation or anti-counterfeiting actions. Moreover, the Trasomark mark (as part of the estate) could end up being divided among Peter, Jason, and Jordan as their co-owned personal asset (but not the property of Trasomark Limited). This may lead to disputes, for example, while Peter and Jason believe that Trasomark Limited should pay a nominal sum as licensing fee of Trasomark mark to them (Peter, Jason, and Jordan), Jordan, being not interested in Trasomark, may well ask for a larger licensing fee for own personal benefit.
By contrast, if the Trasomark mark was originally filed in the name of Trasomark Limited, the situation could be clearer. While the ownership of Trasomark Limited is still uncertain during the probate process, it could be run by Peter and Jason (or an appointed professional manager) as directors/ managers. The Trasomark mark remains a vital asset for Trasomark Limited, and could be reasonably utilized by Trasomark Limited during the probate process. As you can see, probate-wise, it will create less trouble if a mark is filed under the name of a company as opposed to its shareholder(s).
Exceptions
Occasionally, however, it will be more practical to file a trademark in your own name.
In some jurisdictions, it can take a few months to set up a company and bank account. For commercial and legal reasons, however, you want to secure trademark registration asap. Weighing against various factors, it may be better to file the trademark in your name first. If needed, you can always assign the trademark back to your company in the future.
Let’s consider also another scenario. You create a beautiful brand of evening dresses called “Dejavu”. Albeit early success, you need investment for expansion, and Jeff would like to buy 50% of your shares for one million dollars. To protect yourself, you can file the “Dejavu” mark in your name first, and license the mark (royalty-free) to the company for the business. Otherwise, if the mark is filed in the name of the company, Jeff will technically become a 50% owner of your self-created “Dejavu” mark.
Suffice to say, the above examples are never-exhausting, and each case should be decided on its own factual matrix. With our sharing, however, now you should be able to make a better commercial decision.
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