CG68220 - Intellectual Property Rights: registered trade marks

The term “trade mark” refers to the name or other symbol used to identify the goods produced by a particular manufacturer or distributed by a particular dealer that distinguishes them from products associated with competing manufacturers or dealers. It is defined in S1 (1) Trade Marks Act 1994 in the following terms:

any sign capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertakings. A trade mark may, in particular, consist of words (including personal names), designs, letters, numerals or the shape of goods or their packaging.

A trade mark cannot be registered unless and until the holder makes a successful application under the provisions of the Trade Marks Act 1994. Following registration a trade mark will revert to its unregistered status if it is not renewed at the end of the initial registration period. This is explained in more detail below.

The commercial advantage in owning a registered trade mark is that registration gives a monopoly right to the holder in the use of the trade mark for the classes of goods for which it is registered. Where a third party uses a trade mark on the classes of goods for which it is registered without the owner's permission the holder will be able to seek legal redress by means of an action for infringement. It is therefore relatively easy, fast and inexpensive to take action to protect a registered trade mark.

Registered trade marks are assets for CG purposes within the meaning of TCGA92/S21 (1) as the rights attached to them are a form of property. This is reflected in TCGA92/S275 where a distinction is made between goodwill and other forms of intellectual property including registered trade marks. S24 of the Trade Marks Act 1994 draws a similar distinction by providing that a registered trade mark can be transferred either in connection with the goodwill of a business or independently of it.

Registered trade marks come into existence on the date on which application for registration is made.

Registration of a trade mark in the UK lasts for a specified period depending on when the trade mark was registered. The Trade Marks Act 1994 provides for registration for a 10 year period after which time registration may be renewed every 10 years subject to the payment of renewal fees.

There is no direct judicial authority on whether a renewal operates to extend an existing registration or whether it creates a new one. However, you can accept that the rebasing rules in TCGA92/S35 apply to a registered trade mark held on 31 March 1982 that has been renewed thereafter.

If the registration of a trade mark is not renewed the owner will lose his statutory rights in respect of that trade mark and his protection against its misuse or infringement. It will then become an unregistered trade mark, see CG68210, unless or until it is registered again.

As a registered trade mark is a separate asset from the goodwill of the business in which it is used it does not fall within any of the classes of assets which qualify for rollover relief, TCGA92/S152 - TCGA92/S159.

You may encounter an argument that a registered trade mark is a wasting asset within the meaning of TCGA92/S44 (1). Our view is that it is not a wasting asset because at the time of acquisition it would not be possible to predict that its life will not exceed 50 years by virtue of a failure to obtain renewal of its registration. However, the point has not been tested and the CG Technical Group will be happy to look at any significant case where this is causing difficulty.

The comments on UK registered trade marks apply equally to non-UK registered trade marks because, unless it can be shown to the contrary, the law of any other country is deemed to be the same as that of England. The same principle applies to trade marks registered as Community Trade Marks within the European Community. Any case where it claimed that a different approach should be adopted in respect of a non-UK registered trade mark should be referred to the CG Technical Group with a copy of the relevant foreign legislation.

Registered trade marks often change hands for large sums of money. Whilst they are normally disposed of with the business in which they are used, offshore transfers of registered trade marks sometimes occur where, for example, a UK manufacturer is controlled by a non-resident parent. In such cases, two valuations of the registered trade mark may be required:

• at 31 March 1982 if the asset existed in registered form and was owned by the transferor at that time, and
• at the date of transfer if the transaction was between connected persons, see CG14560.

Where the vendor has retained the business but disposed of a registered trade mark he will normally continue to use the trade mark under the terms of a royalty agreement. If so, the price that he will seek for the sale will be conditioned by his obligation to pay royalties in the future. Similarly, the purchaser will measure the financial cost of purchase against the royalties he expects to receive from the vendor. The price at which the bargain is set will be a balance between the two.

Guidance on the CG treatment of unregistered trade marks is given at CG68210.

Guidance on obtaining valuations of intangible assets is given at CG68300+.