Does it matter whether you incorporate or trademark first?
Incorporate or trademark first? The answer matters a great deal. Filing a trademark application properly requires a correct identification of the owner. Naming the wrong applicant can be fatal since the USPTO will not allow you to change the applicant’s name after filing your trademark application. Only corrections to minor clerical errors will be allowed (e.g., missing a comma or misidentifying the state of incorporation). So who is the trademark applicant?
Unless your application is based on a foreign trademark, trademark ownership generally depends on use. A federal trademark application filed with the USPTO must be based on either use of the mark in commerce or an Intent-To-Use (ITU).
Who is the applicant if the trademark is already in use?
Let’s start with the simpler question. If products bearing the trademark have already been sold, who is the individual or entity selling the products? In most cases, the answer to that question should be identified as the trademark owner.
Though it’s rare, it may be possible that the trademark owner is a licensor who has not sold any product, but has licensed the use of the mark to licensees. The licensor must maintain quality control over the goods or services sold under the mark. Assuming that this does not apply to the vast majority of startups, then the trademark owner is the one selling the goods or services under the mark.
Trademarking an Unused Mark: What can go wrong?
The situation facing most founders who have not yet incorporated will typically involve a trademark that is not yet used. You have a trademark in mind, but you have not yet sold any goods or formed your company.
Anyone can file an ITU trademark application identifying an individual as the applicant. Here’s the problem with that. If an individual is named as the applicant of an ITU application, then the individual must follow through with selling the goods or services identified in the application before they can transfer the trademark application.
The USPTO frowns upon people filing ITU applications, and then transferring them without usage. In other words, you cannot transfer an ITU trademark application the way you would with a domain name.
Yet, most founders would likely plan to sell their products through their new company, and not through themselves as individuals. So what happens if an individual files an ITU application and incorporates after?
Can an individual file an ITU application and then transfer it to a company without using the trademark?
In limited situations, it may be possible to transfer an ITU application from an individual to a company without first showing use. A certain type of trademark assignment must be specially drafted to indicate that the new owner (“assignee”) is taking over the entire business of the old owner (“assignor”). In other words, the new owner is a successor to the applicant’s business, or portion of the business to which the trademark belongs.
This means that the old owner would no longer be engaged in the line of business being transferred to thew new owner.
Incorporate First Before Filing Trademark
In the majority of situations, I generally recommend incorporting first, and then filing an Intent-To-Use trademark application on behalf of your newly formed entity. This is the better approach because you avoid the need to transfer the ITU application to another entity, and having to meet all the rigid requirements for doing so.
Once the trademark has been used by your new company, you simply file a Statement of Use. In summary, trademarking after entity formation avoids the problem of assigning an ITU application for a mark that has not yet been used.
Ready to file a trademark application after forming your company?
Contact startup patent and trademark attorney Vic Lin at firstname.lastname@example.org or call (949) 223-9623 to see how we can help you save time and money by properly filing a trademark application on behalf of your newly formed company.
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