Business development · 12 March 2019

Can a private company and community interest company share intellectual property?

Two identical brands
Registering a trademark is relatively straight forward, but you have two tasks to complete before making your application
A community interest company (CIC) is a type of limitedcompanywhich exists to benefit the community rather than private shareholders. It’s a model designed for social enterprises that wish to use assets and profits for a public good.

If a CIC and a limited company have shared values and ethos, but carry out different activities, can they co-exist under the same branding Grid Law founder David Walker explains how joint ownership of intellectual property works in the context of a CIC and a private limited company.

Question

I have read with interest David’s article Intellectual Property Ownership: Who should own what you create?? and have a question about IP ownership and licensing.

How do licensing and ownership work best when a private limited company and a Community Interest Company (CIC), with the same brand, work alongside each other?

Answer

Thanks for your question.

I have carried out a trademark search of your brand and it doesnt appear to be registered.

This means that both the limited company and the community interest company (CIC) are using it as an unregistered trademark.

Unregistered trademarks have very little protection. All they really have is the strength of their reputations (their goodwill?) which builds over time, the more the brand is used. In the early days of a business, their goodwill can be very fragile and is easily lost.

The CIC and the limited company have shared values and ethos, but they carry out different activities. As they use the brand for these different activities they are building up their own reputations and goodwill in relation to it.

In effect, they are creating their own separate (but identical looking) brands.

As they each own their own rights to the brand, there’s no need for a licence between them. They can both use them freely without consulting the other so long as they don’t cause any confusion for their customers.

Whilst this may seem attractive from an administrative perspective, using two unregistered trademarks in this way does have its risks and disadvantages.

Risk of infringement

As unregistered trademarks, neither brand is fully protected and they’re both at risk of being infringed and copied.

When an unregistered trademark is infringed or copied, its owner has to take legal action for passing off. This is far more difficult, time-consuming and expensive to pursue than a claim for infringement of a registered trademark and the outcome is far less certain.

To successfully pursue a claim for passing off, the brand must have a strong reputation. As the owner, you must then prove that your customers were confused about who they bought products or services from.

If you can’t prove confusion, there’s no claim and nothing you can do to stop the infringer.

When you have a registered trademark and someone copies your brand, you don’t have to prove this confusion. This makes a claim for trademark infringement much quicker, easier and cheaper to pursue.

For this reason alone, I strongly recommend you protect the brand by registering it as a trademark or series of trademarks.

As well as giving the brand far more protection, a trademark is an asset in its own right. With the limited company and CIC working alongside each other, this gives you various options for ownership of the brand (which I will explain below).

Registering a trademark

Registering a trademark is relatively straight forward, but you have two tasks to complete before making your application.

Trademarks are registered in one or more of forty-five different classes depending on the products and services they are used for.

Your first task is to look carefully at what both the limited company and CIC do. If they are carrying out different activities, these activities may well fall into separate classes.

If they do, this will influence your second task, which is to decide which entity will own the trademarks you register.

You have three options:

  1. The limited company and CIC could jointly own the trademarks;
  2. The limited company and CIC could each register their own trademarks; and
  3. Either the limited company or the CIC could own the whole brand and grant a licence of the trademarks to the other.
As a general rule, I advise against joint ownership of intellectual property because joint ownership requires joint decision making. Joint decision making can be problematic if the two owners have different objectives, as in your case.

Even though the two entities have shared values, their objectives are different. The main objective of the limited company is to generate profits for its shareholders. The main objective of the CIC is to use its income, assets (which would include the trademarks) and profits for the benefit of the community it is formed to serve.

In achieving these aims, the CIC is likely to be more risk-averse than the limited company and this will affect the decisions it makes.


 
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ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry, advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

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