Insights Archives - Page 6 of 12 - Polikarpov Law Firm

Question 1

In what cases is it more appropriate to fully transfer (alienate) the rights to a trademark, and when is it better to limit yourself to a license agreement?

Accepted Answer

The choice between the full transfer of rights (alienation) to a trademark and the granting of a licence to use it is a strategic decision that depends on the long-term goals of the brand owner and the specific business situation.

A full transfer of rights (alienation) is appropriate when the owner

Sells the business: If the entire business or a significant part of it is being sold, of which the trademark is an integral part, it is logical to fully assign the rights to it to the new owner along with other assets.
Completely withdraws from a market or area: When a company decides to stop operating in a certain area or market where a trademark was used, selling it becomes a way to get compensation for the brand it has created.
Rebranding or changing strategy: If the existing TM no longer fits the company’s new positioning or becomes unnecessary, its disposal allows you to monetise an asset that will no longer be used.
Wants to receive a lump sum: Alienation implies receiving the entire value of the brand at once (or according to a payment schedule), unlike a licence, where the income is usually periodic (royalties).
Does not want to control the use of the TM anymore: The owner completely loses the rights and obligations in relation to the brand, transferring them to the new owner.

A licence agreement is the best option when the owner (licensor) is the one who wants to do so:

Wants to retain ownership of the brand: A licence allows you to generate income from the TM without losing ownership rights to it.
Wants to receive regular income: Licence fees (royalties) can provide a stable income for a long time.
Seeks to control the use of the TM: A licence agreement allows you to set clear terms and conditions for the use of the brand (territory, term, quality of goods/services, volumes, etc.) and monitor compliance with them by the licensee.
Plans to expand geography or assortment through partners: Granting licences allows you to enter new markets or launch new products under a well-known brand with the help of partners, minimising your own investments and risks.
Uses a franchise model: Franchising is essentially based on the licensing of a brand and business model.

Divestment is the complete sale and loss of control of a brand for a one-time gain or as part of a larger deal. Licensing is a way of making money from a brand and developing it through partners, while retaining ownership and control. The choice depends on the strategic priorities of the TM owner.

Question 2

Is it possible to transfer rights to a trademark only in relation to a part of the goods/services for which it is registered, and what are the consequences of this?

Accepted Answer

Thus, itis possible to transfer (alienate) exclusive property rights to a trademark only in respect of a part of goods and/or services, for which it is registered in Ukraine. The law explicitly allows this.

How to execute it:

A trademark assignment agreement must clearly and exhaustively specify which goods and/or services (with their class numbers according to the International Classification of Goods and Services (ICGS)) are being assigned.
All other goods/services specified in the trademark certificate, but not listed in the agreement as those in respect of which the rights are transferred, remain the property of the original owner (the Alienator).

Consequences of partial transfer of rights:

“Splitting” of ownership:After the state registration of such a partial transfer of rights, a situation arises when the same trademark (under the same certificate number) belongs to belongs to two different owners:
- To the original owner (Alienator) – in respect of goods/services for which the rights were not transferred.
- To the new owner (Acquirer) – in respect of goods/services that were clearly specified in the transfer agreement.
Reflection in the Register: This change of ownership in respect of some goods/services must be registered in the State Register of Certificates of Ukraine for Trademarks and Service Marks. The Register will show who owns the TM for each particular group of goods/services.
Independent use: Each of the owners can independently use the trademark in relation to their list of goods/services, enter into licensing agreements, protect their rights, etc.
Potential risks:
- Risk of confusion for consumers: Despite the different list of goods/services, consumers may associate the brand with one source, which can lead to confusion, especially if the quality of the owners’ goods/services differs significantly.
- Conflicts between owners: Disputes may arise over the scope of use of the brand, advertising campaigns, and attempts to expand into related products/services.
- Complications with further disposal: Further sale or licensing of a trademark becomes more complicated, as it requires coordination between the two owners or involves only a part of the rights.
Maintaining validity: Each owner is solely responsible for maintaining the validity of the certificate in relation to its list of goods/services, in particular, for the use of the mark, to avoid the risk of its early termination due to non-use.

Partial transfer of rights to a trademark is possible, but it creates a situation of co-ownership of one trademark for different goods/services. This requires very clear wording in the contract and awareness of potential practical difficulties and risks in the future.

Question 3

Can the previous owner (Transferor) use a similar trademark or compete with the new owner (Acquirer) in the same field after the transfer of rights?

Accepted Answer

This is a very important practical question, and the answer depends on several factors, including the terms of the assignment agreementitself and general principles of law.

Regarding the use of a similar trademark:

Default: After full alienation of rights to a particular trademark, the Alienator loses any right to use this particular trademark.
Similar trademark: The use by the Alienator of a confusingly similar trademark (especially for homogeneous goods/services) may be considered as a violation of the rights of the new owner (the Acquirer). The Acquirer will have the right to demand termination of such use and compensation for damages, referring to its exclusive rights to the acquired TM. The risk of such use being recognised as an infringement is high.
Contractual restrictions: Very often, the transfer of rights agreement includes a direct prohibition for the Alienator to use not only the transferred TM, but also any similar designations that may mislead consumers.

Regarding competition in the same field:

Default: The mere transfer of trademark rights does not automatically prohibit the Alienator from engaging in the same or similar activities under a different, dissimilar brand. If the Alienator creates a new, distinctive brand that is not similar to the transferred brand, it may formally compete with the Acquirer.
Contractual restrictions (Non-compete clause):However, this issue is almost always regulated in the contract. When acquiring a brand (and often the business associated with it), the acquirer is usually interested in ensuring that the seller does not become its direct competitor immediately after the transaction. Therefore, the transfer agreement often includes non-compete clause (non-compete clause). This provision may prohibit the Alienator from:
- Engage in a certain type of activity.
- In a certain territory (for example, in Ukraine).
- For a certain period of time (for example, 3-5 years).
- Important: Such provisions must be reasonable and not violate the antitrust laws (too broad or indefinite restrictions may be invalidated).

After the transfer of rights, the Alienator may not use the transferred or similar TM, as this would be a violation of the Acquirer’s rights. As for competition in the same field under a different brand, it is possible, but only if it is not expressly prohibited by thetransfer agreement (through non-competition clauses). It is extremely important for the acquirer to insist on the inclusion of clear non-compete provisions and reasonable restrictions on competition in the agreement to protect its investment in the acquired brand.

Question 4

What are the methods for assessing the value of a trademark when it is sold (alienated)?

Accepted Answer

Valuation of a trademark (brand) when it is sold is a complex process, as it is an intangible asset whose value depends on many factors (recognition, reputation, customer loyalty, market share, etc.). Determining an adequate contract price is a key point of the transaction. There are several main approaches (methods) to the valuation of a trademark, which are often used in combination:

Cost Approach:
- The value of a trademark is defined as the sum of the costs required to create it from scratch or to replace it with a similar one.
- What is taken into account: The cost of developing the name and logo, legal registration, market research, advertising campaigns to achieve the current level of recognition.
- When to use: More commonly used for new or lesser-known brands where it is difficult to estimate future revenues or find market analogues. The disadvantage is that it does not take into account the reputation and future potential of the brand.
Income Approach:
- The value of a brand is based on an estimate of the future economic benefits (income, cash flows) that it can generate for the owner over a forecast period.
- Methods:
  - Relief from Royalty Method: Estimates the amount of royalties that the owner would have to pay if he or she were to use the mark under licence. The discounted value of these “saved” royalties is the value of the mark. This is one of the most common methods.
  - Excess Earnings Method: Determines the profit generated directly by a brand over and above what could be generated from a similar “unbranded” business.
- When used: Most commonly used to value well-known, profitable brands with predictable revenues. Requires thorough financial analysis and forecasting.
Market Approach:
- The value of a brand is determined by comparing it to the sales prices of similar brands that have recently been traded on the market.
- What is taken into account: Prices of actual sales transactions of brands in the same or related industries, adjusted for differences in recognition, market share, profitability, etc.
- When to use: Effective if there is an active market for the sale and purchase of brands and sufficient information on comparable transactions. In practice, it is difficult to find completely identical analogues.

Important:

A combination of several methods isoften usedto obtain the most objective valuation .
Valuation of a trademark is a subjective process, and the result may vary depending on the methodology chosen and the assumptions made by the appraiser.
It is recommended to engage professional appraisers or consulting companies specialising in the valuation of intangible assets to conduct a qualified valuation of the brand . The final price in the agreement is the result of negotiations between the Alienator and the Acquirer, where the results of the valuation are an important argument.

Question 5

What are the specifics of transferring rights to a Ukrainian TM to a foreign buyer (Acquirer), in particular regarding currency control and registration?

Accepted Answer

The transfer of rights to a Ukrainian trademark (TM) to a foreign buyer (non-resident acquirer) is quite possible and common practice, but it has certain peculiarities compared to transactions between residents of Ukraine, mainly related to currency transactions and paperwork.

Peculiarities of currency control:

Payments in foreign currency: As the Acquirer is a non-resident, payment under the transfer agreement is likely to be made in foreign currency. Such transactions are subject to the Ukrainian currency and currency transactions legislation.
Banking control: Ukrainian banks servicing the resident Alienator shall exercise currency supervision over such transactions. In order to transfer funds from a non-resident to a resident’s account, the bank will require supporting documents, primarily the transfer agreement itself, which must meet certain requirements (e.g., contain all material terms and conditions, be duly signed). Transfer and acceptance certificates or other documents required by the agreement or banking regulations may also be required.
NBU regulation: The National Bank of Ukraine (NBU) sets the rules for foreign exchange transactions, including possible restrictions on the timing of payments under foreign economic contracts. Although currency regulations have recently become more liberal, it is still advisable to check the current NBU requirements at the time of the transaction.
Documentation for the Acquirer: The foreign Acquirer may also need to provide its bank with the relevant documents to make an international payment.

Peculiarities of registration of the transfer of rights at the Ukrainian National Patent Office:

Registration Procedure: The procedure for state registration of the transfer of rights at the Ukrainian National Intellectual Property and Innovation Authority (UNIPI) is standard and does not depend on the Acquirer’s residence. It is necessary to submit an application, an assignment agreement (or a notarised copy/excerpt thereof) and a document confirming payment of the relevant fee.
Language of the documents: The agreement may be drawn up in two languages (e.g., Ukrainian and English), or a certified translation into Ukrainian may be required to be attached to the foreign version of the agreement for submission to UKRNOVO. The application and other documents for UKRNOVO are submitted in Ukrainian.
Representation: If a foreign Acquirer acts through a representative in Ukraine (patent attorney, lawyer), a power of attorney must be provided to . Such a power of attorney issued abroad must be duly legalised (e.g. by affixing an apostille in accordance with the Hague Convention of 1961, if the country of the Transferee is a party thereto) and translated into Ukrainian with a translation certification.
Payment of the fee: The transfer registration fee may be paid by both the Alienator and the Acquirer (by agreement), but it is important that the payment is made correctly and can be identified.

Other aspects:

Taxes: The tax consequences of the transaction for a non-resident may be governed by double taxation treaties between Ukraine and the Acquirer’s country of residence. The issue of withholding tax may arise.
Applicable law: Although Ukrainian law generally applies to the rights to a TM registered in Ukraine, the parties may specify the applicable law and dispute resolution procedure (e.g., international arbitration) in an agreement with a non-resident.

The transfer of rights to a Ukrainian trademark to a foreign buyer requires attention to currency regulation and proper execution of documents (in particular, legalisation of the power of attorney and possible translation). It is recommended to engage lawyers with experience in international intellectual property transactions to minimise risks.

Blog

Privacy settings

Manage settings

Necessary

Marketing

Personalization

Analytics