Intellectual property (IP) is integral to an evolving business ecosystem. IP is crucial to developing brand recognition/identity; determining a business’ valuation; and creating sustainable credibility in the marketplace over time. Trademarks, like other types of IP assets, allow consumers to differentiate between products and services within the marketplace. As businesses continue to mature, often reorganizing or transitioning from being a sole-proprietor to being privately held with a separate legal entity (e.g. private limited company or LLP), businesses frequently will assign or transfer their trademark rights from one party to another. One of the common legal issues that arise when transferring trademark rights is whether or not an assignee (or new trademark owner) can utilize its name, as manufactured by, on products once transferred from the assignor (prior trademark owner) to the assignee (new trademark owner). This question is pertinent to India where, as previously mentioned, there are many businesses that begin as sole-proprietor company structures before transitioning to either a private limited company or LLP because of the need for growth, compliance, recognition/credibility. When businesses change ownership, in the majority of cases, the trademark will be assigned to the new company. However, business owners will often question whether they have automatically granted rights to use that trademark as the manufacturer. Understanding this issue requires clarification about trademark ownership, how a trademark is legitimately transferred to a new owner, proper labeling requirements and the possible legal or regulatory implications of a trademark assignment. In this blog we will explore the concept of trademark assignment and what constitutes the legal framework of trademark assignment; we will also discuss the trademark assignment process; we will consider whether after a trademark assignment the assignee may properly show its company name on its products as “Manufactured By”; and we will review important compliance considerations and practical implications of the assignment process from a business and regulatory standpoint.
Understanding Trademark Assignment
What Is Trademark Assignment?
Trademark Assignment refers to the legal transfer of ownership of a trademark from one party (assignor) to another (assignee). This transfer may be:
Under Indian trademark law, assignment transfers the proprietary rights in the trademark, including the right to use, license, sell, and enforce the mark against infringement.
Once the assignment is legally executed and recorded with the Trademark Registry, the assignee becomes the lawful owner of the trademark.
Common Business Scenario: Proprietor to Company
Many entrepreneurs in India begin by registering trademarks personally before forming a private limited company when their business expands under the Companies Act. Business assets (including trademarks) are frequently transferred to the limited liability company at this point.
At this time, it is essential that a formal process be used to assign a trademark.
The existence of a trademark in the name of the individual but used by the company will generate potential legal problems, including:
• Ownership disputes
• Investor concerns with their due diligence
• Valuation concerns
• Confusion about who owns the brand
As a result, businesses use a formal trademark assignment service to transfer legally to the company.
The Trademark Assignment Process in India
Prior to knowing if the Assigned company will be permitted to describe its items as "manufactured by" – It is important to comprehend the procedures related to trademark assignments.
Step One: Prepare Assignment Agreement
There must be an executed assignment agreement between both the assignor (Proprietor) and the Assignee (registered company).
The agreement should contain the following information.
Step Two: File Form TM-P.
This will allow the Registrar to record your assignment with the Trademark Office.
Step Three: Registration Of Assignment.
An application must go through review Scrutiny by Trademark Registrar.
Step Four: Registration of Assignment
When approved; the Assignee will be listed as the official owner of the trademark in The Trademark Register.
The assignee will possess legal rights to the trademark following completion of this process.
Ownership vs Manufacturing: Two Different Legal Concepts
One of the biggest misunderstandings associated with trademarks is thinking that owning a trademark equal having the right(s) to manufacture products that are associated with the trademark. Let’s take a closer look at it:
Trademark Ownership
The right to solely use a particular logo and/or brand name
Manufacturing Status
Dependent upon which company produces the related products and who holds the necessary manufacturing licenses.
The ownership of a trademark does not give rise to or grant the right of a company to manufacture products. The designation of who shall be shown as "manufactured by" shall depend on the following factors:
• Who physically made the goods
• Who holds factory licenses
• Who has complied with sector regulatory approvals
• Who bears responsibility for manufacturing.
When Can the Assignee Company Write “Manufactured By”?
The answer will vary based on the specific facts surrounding the manufacturer's legal situation.
Scenario 1: Where the Manufacturing Is Not Transferred
In this scenario if a proprietor has transferred;
• Trademark
• Manufacturing Unit
• All Factory Licenses
• Machinery, employees and operational control
Are in fact owned and operated by the Company at Law, then Yes, the "Company" can label their products "Manufactured By [Company Name]".
This is lawful because
Scenario 2: Where the Manufacturing Continues with the Proprietor
In this scenario if:
• Only the Trademark has been transferred.
• The Proprietor is still manufacturing.
• No Factory ownership was transferred.
Then the assignee company cannot falsely represent itself as “Manufactured By” unless:
• It becomes the legal manufacturer through contract manufacturing agreements.
• Regulatory compliance is updated accordingly.
In such a case, correct labeling may be:
• “Manufactured By: [Proprietor Name]”
• “Marketed By: [Company Name]” Misrepresentation may attract penalties under consumer and legal metrology laws.
Legal Framework Governing “Manufactured By” Representation
There are several additional Acts that could be relevant in addition to the Trademarks Act including but not limited to:
• Legal Metrology Act
• Protection of Consumer Rights Act
• Drugs and Cosmetics Act (if applicable)
• FSSAI Regulations (for food products)
• GST Compliance Laws
A business may incur one or more of the following penalties for labelling errors:
• Fines
• Seizure of Goods
• Cancellation of Licence
• Litigation by Consumers
As a result of these potential penalties, businesses need to ensure that their branding decisions comply with the law.
Regulatory Considerations
1.Trademark Laws and Assignments
Under trademark laws, upon registration of an assignment:
• An assignee holds the right to exclusively brand products;
• An assignee can use a trademark on products;
• An assignee can prevent others from using trademarks unlawfully;
However, trademark law does not govern the declarations of manufacturing.
2. Rule of Law for Consumer Protection
Consumer protection laws typically mandate:
• Clear identification of manufacturer information;
• Accurate labeling;
• Non-deceptive packaging;
Failure to distinguish as the manufacturer of goods by labeling as “Manufactured By” may violate state or federal laws against false representation.
3. Industry Specific Compliance
Certain industries have an increased regulation of product labeling, such as:
• Pharmaceutical products;
• Food and beverage;
• Cosmetic products;
• Electronic products;
Each of these sectors generally require:
• Manufacturing license numbers;
• Manufacturing addresses;
• Batch record numbers;
Even with an ownership interest due to Trademark Assignment, there still exists a requirement to comply with laws regarding labeling of products.
Importance of Recording the Assignment
The Registering of the Assignment with the Trademark Registry is an important step in the Trademark Assignment Process.
Failure to record the Assignment can lead to:
• Problem for the Assignee in enforcing their rights
• Not being able to secure your rights against a third party
• Potential legal issues.
Engaging a Professional Trade Mark Assignment Service will ensure that:
• You have a properly drafted Assignment Deed
• You have paid all applicable fees
• You have filed your documents correctly with the appropriate authorities
• You receive regular updates on the progress of your registration.
These considerations are particularly relevant in India, where compliance with procedure is critical to the legality of a Trade Mark Assignment Service.
Importance of Proper Documentation in Trademark Assignment
Using a professional trademark assignment service guarantees that the process will provide you with:
• A Clear Transfer of Rights
• Proper Documentation of Goodwill
• Avoidance of Future Disputes
• Compliance with Registrar Requirements
If This Is Not Done Correctly, You May Have Issues with:
• Ownership Of Trademark
• Labeling Rights
• Investors Diligence Checks
A structured trademark assignment service in India reduces legal risk.
Contract Manufacturing and Third-Party Manufacturing
A company that does not take ownership of a facility (outsourced) will need to review the following factors to ensure compliance with regulations and transparency in their work:
Who has the manufacturing rights?
Who is responsible for quality control?
What does the contract specify?
Typically, the labels on the product will indicate:
"Manufactured by: XYZ Industries"
"Marketed by: ABC Pvt Ltd"
To provide transparency and compliance with both internal and external requirements.
Impact on Brand Reputation
Consumers depend upon Product Labels. The phrase "Manufactured By" implies the following:
• Responsibility for the quality of the product,
• Compliance with regulations,
• Responsibility for operational actions.
Misrepresenting this manufacturing statement can:
• Jeopardize the credibility of your company's brand
• Prompt regulatory action taken by the government
• Result in consumer complaints against the manufacturer.
Therefore, obtaining legal clarity is critical before making any packaging changes resulting from the Trademark Assignment process.
What If Manufacturing Is Outsourced?
Most businesses today work with one or more of the following types of business models:
• White Labeling;
• Contract Manufacturing;
• Third Party Manufacturing;
Manufactured By" label must clearly identify who the true manufacturer is.
The company assigned the right to Market the product can state:
o "Marketed By";
o "Brand Owner";
For example:
Manufactured By: XYZ Industries.
Marketed By: ABC Private Limited
Even after completing the Assignment of Trademark, there is still a requirement that the label contain truthful information.
Risks of Not Recording Assignment
In the event that an assignment is not noted on the Registry:
• The Registry continues to indicate the Proprietor as the Owner;
• The Company won't have any ability to enforce its Trademarks; and
• Investors may have concerns.
• Lawsuits will increase.
Even if a Company writes that it is "Manufactured by", there may be Legal ownership resolution issues.
Practical Example
Imagine:
Mr. A registers a trademark as a sole proprietor. Later, he forms ABC Private Limited and assigns the trademark to the company.
Scenario 1:
Result: Company can write “Manufactured By: ABC Private Limited.”
Scenario 2:
Result: Company cannot falsely declare itself as manufacturer.
Investor & Compliance Perspective
From an investor's perspective:
• The Company must own all its Trademarks in its name as an entity;
• The Company's Declaration of Manufacturing must correspond to reality.
Due Diligence will check the following:
• The Trademark Registry records;
• The Assignment documents;
• The Manufacturing Licenses;
• All Regulatory Compliance.
As a result, improper alignment will negatively affect valuation.
Strategic Business Benefits of Proper Assignment
Using a structured Trademark Assignment process provides:
• Ownership is clearly defined;
• Increased strength associated with brand valuation and investor confidence;
• Greater ease in licensing; and
• Legal rights associated with the enforcement of your trademarks.
The process helps by providing:
• Consistency and continuity throughout the transition period caused by business restructuring; and
• Allowing for an end to disputes among family members who may have claims to proprietary rights in the company.
Corporate Structuring and Rebranding
After performing a trademark assignment, companies that change their legal name may then...
• Re-create packaging for their products;
• Create a new corporate identity;
• Combine operational efforts; and/or
• Construct new production facilities.
In each case, the labels must include:
• Updated legal entity name;
• Correct manufacturing address; and
• The accurate registration of applicable statutes.
Key Compliance Checklist After Trademark Assignment
Once the Trademark Assignment is complete, businesses should perform the following activities:
Conclusion
The assignment of trademarks from owners to registered companies can represent a strategic direction for an organization as part of its developmental processes, formalization of its corporate structure or for growth purposes. However, there are also many legal implications of the assignment of a trademark other than to reflect brand ownership. Completion of a Trademark Assignment will grant the assignee company exclusive rights over the trademarked brands, but does not in itself permit the assignee to represent itself as the manufacturer of the goods unless the assignee has also transferred or restructured its relevance manufacturing operations, licensing agreements and/or legal obligations. This is because statutory liability attaches to the use of the term “Manufactured by” under many regulatory regimes, and therefore, an entity can still incur penalties, suffer loss of reputation, and face compliance issues through a misrepresentation of its product, regardless of whether or not the misrepresentation was intentional or inadvertent. Businesses should therefore consider the assignment of the trademark holistically from the perspective of aligning trademark ownership with manufacturing control, regulatory approvals and labelling standards. Utilizing an experienced trademark assignment service, and complying with legal requirements under the Indian legal system will protect both the brand's integrity and the legality of the operations of the new entity. Ultimately, for any business that wants to effectively navigate through the Trademark Assignment process and accurately portray its role in the manufacture and marketing of its products, clarity, openness and legal precision are all critical.
Frequently Asked Questions (FAQs)
1. What is Trademark Assignment?
Trademark Assignment is the legal transfer of trademark ownership from one party to another through a formal agreement and registry recording.
2. Is executing an agreement enough for ownership transfer?
No. The assignment must be recorded with the Trademark Registry to complete the legal process.
3. Can a company write “Manufactured By” immediately after assignment?
Only if the company actually manufactures the goods and complies with regulatory requirements.
4. What if manufacturing is outsourced?
The actual manufacturer’s name must be declared. The company can mention “Marketed By.”
5. Is Trademark Assignment mandatory during business conversion?
Yes, especially when converting from proprietorship to private limited company, to avoid ownership disputes.
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