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Yes, You Can Sell a Trademark. You Just Can't Sell It Bare.

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Yes. A trademark can be sold, and so can a pending trademark application. The sale is called an assignment. But federal law attaches a condition that surprises people: the mark has to be transferred together with the goodwill of the business it stands for. You can't sell the name alone, like a used car, and expect the rights to travel with it.

This article looks at the sale from the seller's side. If you're the one buying, I covered that in buying a business or brand.

What you're actually selling

The Lanham Act says a registered mark, or a mark with an application on file, is assignable "with the good will of the business in which the mark is used," or with the part of the goodwill connected with and symbolized by the mark.

Goodwill is the reputation the name has built with customers: the expectation that anything sold under it comes from the same source and meets the same standard. The Supreme Court described the idea more than a century ago in United Drug Co. v. Theodore Rectanus Co., saying there is no such thing as property in a trademark except as a right appurtenant to an established business or trade. A trademark isn't a freestanding asset. It's the symbol of a business reputation, and that's what the buyer has to receive.

You don't have to sell your whole company to do this. The statute allows a transfer of just the part of the goodwill tied to the mark, so selling one product line and its name, while keeping the rest of your business, is a common arrangement. It also says you don't need to include goodwill tied to your other marks or to the name your business operates under.

Before any of this, make sure the seller on paper is the real owner. If the registration is in your personal name but the LLC runs the business, or the other way around, that needs to be sorted out first. I wrote about that mismatch in should the trademark be in your name or your LLC's.

The rule against selling the name alone

A transfer of the bare name, cut off from the business behind it, is known as an assignment in gross. The statute's language is why it's a problem: the law makes marks assignable with goodwill, and a transfer without goodwill falls outside what it authorizes. The USPTO lists "the assignment was not transferred with the good will of the business" among the reasons it can refuse to record an assignment at all.

For a seller, the practical points are these.

The written agreement should say that the goodwill of the business connected with the mark is being transferred along with it.

The deal should match the words. If the buyer plans to use the name on something completely unrelated to what you sold under it, or you plan to keep selling the same goods to the same customers under a slightly different name, there's a real question about whether any goodwill moved. Whether a particular transfer holds up depends on its facts, and it's the kind of issue that tends to surface later, when someone challenges the buyer's rights.

Why would a seller care, once the check clears? Because sale agreements often include promises by the seller that the mark is valid and that the transfer is effective. A flawed assignment can come back as a claim against you.

Intent-to-use applications have their own restriction

If your mark is still an intent-to-use application, meaning you filed before using the name, there's an extra limit. The statute says an intent-to-use application can't be assigned before you've filed the paperwork showing use, either an amendment to allege use or a statement of use.

There's one exception. The application can go to a successor to your business, or to the portion of the business the mark belongs to, if that business is ongoing and existing. In other words, you can sell the actual business and have the application go with it. You can't sell the application by itself as a reserved name.

The consequence of getting this wrong is severe. The USPTO's examining manual says an improper assignment of an intent-to-use application renders the application void, and any resulting registration must be cancelled. Recording the document with the USPTO doesn't cure it. So if a buyer approaches you about a name you've applied for but haven't launched, the structure and timing of the deal matter a great deal. How these applications work in general is in trademark a name before launch.

Put it in writing, then record it

The statute requires assignments to be made by written instruments that are duly executed. A handshake or an email saying "it's yours" isn't the kind of document you want to rely on.

After signing, the assignment should be recorded with the USPTO. That's done through the USPTO's Assignment Center. The recording fee is $40 for the first mark in a document and $25 for each additional mark in the same document. The USPTO says electronic filings are generally recorded in less than a week.

Recording matters for a few reasons. Under the statute, an assignment is void against a later purchaser who pays value and has no notice of it, unless the assignment is recorded within three months after its date or before that later purchase. That rule mostly protects the buyer, but it protects an honest seller too, since it closes the door on confusion about who owns what. Recording also puts the change of ownership on the public record, so anyone checking the mark can see who owns it now.

Two limits are worth knowing. Recording is a ministerial act. The USPTO's rules say it isn't a determination of the validity of the document or of its effect on title. And the ownership record doesn't always update automatically. The USPTO advises checking the registration's status about a week after recording, and a separate filing may be needed if the owner information didn't change.

If you don't want to let go, license it

A sale is permanent. If you want income from the name without giving it up, a license is the alternative. In a license you stay the owner and give someone else permission to use the mark on agreed terms, usually in exchange for royalties or a fee.

The Lanham Act supports this. It provides that when a mark is used by a related company, that use benefits the owner, as long as the owner controls the nature and quality of the goods or services. Control is the whole point. An owner who licenses a name and then pays no attention to what's sold under it risks weakening or losing the mark. I went through how to set that up in licensing your brand.

If you're thinking through a sale or a license of your own mark, you can see how the search and filing packages work on the services page, and the FAQs page answers most of what comes up before a first call.

Book a free 15-minute discovery call with the attorney (opens in a new tab)

(No legal advice is given on the discovery call. It's a chance to tell me what you're building and hear how the process works.)

Sources

This article is general information, not legal advice. Reading it does not create an attorney-client relationship.

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