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Use Trademark’s Magic Words: Assignments Must Include ‘Goodwill;’ Licenses Must Include ‘Quality Control’

The two most common transactions relating to trademarks each require specific words to be effective. Trademark assignments must include “goodwill;” trademark licenses must include “quality control.” To ensure the transfer of a trademark is valid, the assignment must include the goodwill of the business associated with the mark. Trademarks represent the goodwill of a business, which is different from the accounting principle of goodwill listed on a balance sheet. A trademark license must include a provision by which the licensor exerts some manner of quality control over the licensee’s use of the mark. The quality control provisions can be extensive or bare-bones but must always allow the licensor to have some inspection right over the goods or services offered. The licensor must also be certain, on regular occasions, to inspect the goods or services to be sure the licensee is meeting the quality standards. While it is clear that a licensor would want quality control, a licensee should understand the benefit as well. The licensee is using a brand and should want the brand to remain strong by being properly protected with necessary quality control provisions.

 

Ned T. Himmelrich
410-576-4171 • nhimmelrich@gfrlaw.com