WHY FILING A TRADEMARK APPLICATION BY JOINT OWNERS IS PROBLEMATIC AND HOW TO AVOID THE POTENTIAL PITFALLS.

Filing a trademark application by several joint owners is not prohibited but raises a host of potential issues and concerns that must be kept in mind by anyone who thinks about co-owning a trademark application. The goal of this short article is to discuss the potential dangers and pitfalls of joint trademark ownership and how to avoid them.

It may come as a surprise to many, but the main goal and purpose of the U.S. trademark laws is not to protect trademark owners but rather to help consumers avoid getting confused in the marketplace. A trademark is protected only to the extent it designates a unique singular source of goods and aids consumers in selecting their preferred source based on certain quality expectations and other considerations. For example, a person may prefer the TIDE® laundry detergent due to its specific quality and unique characteristics and expects every new purchase to always meet the same expectations. The detergent’s manufacturer achieves this uniformity by having a strict vertical chain of quality control. The TIDE brand therefore represents a unique singular source of laundry detergents and any consumer who likes the brand’s quality can easily distinguish it from competing products. All this means that joint trademark ownership is allowed only when a trademark’s co-owners can work closely together to create and maintain a singular source of goods or services. The singular source policy is fundamental. Whenever joint owners fail to cooperate in creating or maintaining such a singular source, legal problems ensue. Let me illustrate.

Imagine two childhood friends who decided to jointly register a trademark without intending to operate a joint business under that mark. They have entirely separate businesses but plan to concurrently use the same mark. The only reason why they want to jointly register the trademark is to save some money by sharing the registration fees and costs. And because they are friends, they think they can always work out any potential disagreements between them regarding the trademark.

Well, such an arrangement is very problematic from the very start because it violates the singular source rule. When the same mark is used by two different businesses simultaneously, the mark not only fails to designate a singular source but also misleads consumers because a person may mistakenly buy products from one co-owner when she may have wanted to buy from another instead. Enforcing such a problematic trademark against infringers will likely present significant challenges, and the mark itself may be subject to cancellation or invalidation for violating the important trademark policy.

Even if joint trademark owners do plan to cooperate and run a business together, there are other fundamental problems with joint trademark ownership arrangements that are likely to manifest themselves as soon as the business relationship starts to show cracks. If a trademark’s co-owners disagree on how to ensure product quality or fail to properly cooperate, for example, then a court may rule that the trademark was abandoned. And whenever the joint owners decide to split up, the question about who should inherit the trademark upon separation may become very contentious. Clearly, joint trademark ownership arrangements can potentially give rise to some very serious problems. The question is how to avoid them.

One solution is for any joint owners to make sure they have proper agreements in place, to govern all the relevant trademark ownership issues. At the very minimum, there should be a clear agreement on who and how will control each trademark, how product quality will be uniformly enforced and what will happen to the trademark in the event of a breakup. But I would argue that the best way to avoid those potential pitfalls is to simply avoid the murky waters of joint trademark ownership in the first place. Joint trademark ownership arrangements just seem to cause far more problems than they can possibly solve.

What business partners can do instead is start a formal business entity (a corporation or LLC, for example) and to put all intellectual property, including trademarks, in that entity’s name. That way, each founder will become a shareholder and will own a share of the entity’s assets (including intellectual property) while avoiding the potential pitfalls that we discussed above