Branding And Un-Branding In Joint Venture

Parties deciding to lend their names or trademark for JV purposes need to first examine if such co-branding leads to a brand that is strong and adequately protected. A diluted or not very well-established brand or common words or names may not result in creation of an immediately recognizable JV brand.

Secondly, they need to evaluate what they are licencing to the JV — the name (word) or any creative logo or both. Thirdly, trademarks are protected in relation to particular goods or services. Registration of a trademark in one or more classes does not guarantee protection across all 45 classes. Unless the mark is a well-known mark. Therefore, it is also important to analyse whether the licenced trademark is or can be protected in the class(es) relevant for the JV's business.

Next, licencing of trademarks needs to be in consonance with law. The Trademark Act has certain baselines provisions for licencing purposes. For instance, the party licencing the mark should actually have the rights to do so. This is especially relevant for large groups where the licensor entity may differ from the intellectual property-owning entity.

Additionally, the trademark licence should be subject to certain control conditions, failing which the licence can result in issues of "naked licencing", which has its own set of challenges for the owner of the mark.

It may also be important to keep in mind that a trademark clearance is typically required for company name registration. The brand licencing agreements help in securing company name clearances. Lastly, the question of goodwill accruing from use of the composite trademark is an important one as goodwill is a balance-sheet item as well.

In a classic licencing situation, goodwill from use of a trademark accrues to the benefit of the licencer. This is distinguished from a JV scenario where goodwill from business and, sometimes, the new brand name accrues to the benefit of JV. This may happen in situations where the JV is permitted to register the composite trademark in its own name. This question requires some ponderance and examination, especially from a structuring, tax and accounting perspective.