Author: Inga Lukauskiene, Associated Partner, Attorney-at-Law and Patent Attorney at METIDA
According to the Law on Trademarks of the Republic of Lithuania, trademark registration under a joint ownership is not forbidden. Therefore, there are a few trademarks in Lithuania that are co-owned by more than one proprietor.
However, it may be risky to register the trademark belonging to several natural persons, especially in cases where one of the proprietors decides to do business alone, as this may evoke disputes related to the trademark use. These difficulties may be avoided if an ownership agreement is signed beforehand which would set the satisfactory conditions subject to the circumstances mentioned above.
The rights after the split are the same
The trademark registration under the joint ownership is usually exercised by the natural persons who work together towards the creation or development of the same business. This is a usual practice if business is performed without juridical person and when all shareholders have equal rights. Yet, even folk sayings discourage us to work with friends in the same business or to lend them money. No problems arise if the relationship between the partners is fair and friendly, but if one of them chooses another path, it may become unclear which partner is entitled to which right.
For example, it is often agreed that all co-owners should have equal rights, however views start to differ and serious conflicts arise when proprietors have to decide whether they should renew the registration. Another problem occurs in the event of the split of the business, as it becomes unclear how to avoid consumer confusion if both former joint owners continue to use the mark separately. Due to these and other difficulties, if you opt for the trademark registration under the joint ownership, arrangements should be made not only related to the trademark use, the renewal of the validity and costs distribution, but also to the trademark’s future in the event that you and the other co-owners decide to go on separate ways.
More co-owners, more investment opportunities
Using the trademark of joint ownership gives you an opportunity to invest more into the recognition and prosperousness of your business, especially if you own a company. Yet, even this may cause risks. Specifically, if one of the trademark’s co-owners faces financial problems or decides to declare bankruptcy, this will have a negative impact on the other co-owner. In the event of the bankruptcy, trademarks are sold together with bankrupting company’s liquid asset, since trademark rights are intangible property that has a financial value. The co-owner in this case is forced to pay a lot to avoid trademark’s parts to be sold to competitors.
Therefore, if you and your business partner decide to co-own the trademark, you have to arrange the agreement which would set the provisions suitable for cases when trademarks cause financial losses to any co-owner, as well as provisions concerning the rights to use the trademark, the distribution of the investment into trademark’s recognition and the choice of changing the legal status of the trademark.