A trade mark registered to the founder personally

The situation

A sponsor was acquiring 100% of a consumer products company built around a single branded product line. The brand itself — the registered word mark on the label, the packaging, and every piece of marketing the company had produced for eleven years — was the asset the deal was actually paying for; the manufacturing equipment and inventory were a much smaller share of enterprise value.

Standard IP diligence pulled the registration from the Canadian Intellectual Property Office to confirm it was live, unopposed, and in the right classes. It was all three. It was also registered in the founder’s personal name, not the corporation’s.

The problem

The founder had filed the trademark application two years before incorporating the business, back when there was no corporate entity to own it. Once the company was incorporated, the business used the mark, licensed it implicitly by simply operating under it, and built a decade of goodwill around it — but nobody ever executed the paperwork to move ownership from the individual to the corporation. The implicit licence was its own exposure, not a harmless informality. Under Trademarks Act s. 50(1), use by a licensee counts as use by the owner only where the owner has, “under the licence, direct or indirect control of the character or quality of the goods or services.” A founder who had stopped exercising any control over what the corporation put on the label had eleven years of use accruing to nobody in particular, which is a distinctiveness argument waiting for a challenger — and one more reason the fix had to be an assignment rather than a licence tidy-up. Trademarks are federal, so incorporating a business gives it no brand rights on its own; ownership has to move by a separate, deliberate step.

The draft purchase agreement’s IP representation stated that the corporation owned or had the right to use all intellectual property material to the business. As drafted against the actual CIPO record, that representation was inaccurate on its face for the single most valuable asset in the deal.

The numbers

One registered word mark, one registrant to change, eleven years of continuous corporate use behind it — a straightforward fact pattern, but not a small one: the sponsor’s own valuation had allocated the clear majority of purchase price to brand-related intangibles rather than to tangible assets.

The founder was staying on for a two-year transition and remained cooperative, which mattered: an assignment from an unwilling or unreachable former owner is a materially harder and slower fix than one from a seller who is a party to the same closing.

The rule that decided it

Under Trademarks Act s. 48(1), “a trademark, whether registered or unregistered, is transferable, and deemed always to have been transferable, either in connection with or separately from the goodwill of the business.” Ownership can move by a simple written assignment; the statute puts no special formality in the way of a founder assigning a mark to the corporation that has actually been using it. Section 48(4) — marginal note Transfer of trademark — then provides that the Registrar “shall, subject to the regulations, register the transfer of any registered trademark on the request of the registered owner or, on receipt of evidence satisfactory to the Registrar of the transfer, on the request of a transferee of the trademark.” The qualifier matters: recording is a fee-bearing administrative request, and where the transferee rather than the registered owner asks, CIPO requires evidence of the transfer, which is why the assignment agreement itself is the document that gets filed.

Counsel prepared a short-form trademark assignment agreement between the founder and the corporation, executed for nominal consideration recited in the agreement itself, and covering the standard elements: identification of the mark and its registration number, an effective date, the founder’s representations of clear ownership and no conflicting claims, and an indemnity running to the buyer if a third party later challenged the chain of title. The agreement was filed for recordal with CIPO before the closing date, not after it, because “until the assignment is recorded, the public record can still show the previous owner, which creates real practical problems if the new owner later needs to enforce the mark, license it, or sell the business again.”

The purchase agreement’s IP representation was revised to reference the assignment directly rather than being made in the abstract, and the founder’s own representations and warranties in the assignment agreement were carried through as a specific indemnity in the purchase agreement, separate from the general basket, for any claim arising from the pre-assignment chain of title.

Related reading

The mechanism generalizes: any founder-era asset — a domain name, a design, a piece of custom software — can sit in the wrong name for the same reason a trademark did here. On the corporate-records side of the same diligence file, see a minute book that stopped in 2009.

Takeaways

• • Incorporating a business does not, by itself, transfer a founder’s personal trademark registration to the corporation — ownership moves only by a deliberate assignment.
• • Trademarks Act s. 48 makes assignment simple in principle; the practical work is the assignment agreement’s representations, indemnities, and getting it recorded with CIPO, which s. 48(4) makes a request-and-evidence process rather than an automatic one.
• • Where a corporation has been using a mark registered to its founder, check s. 50(1) control as well as ownership — an informal licence with no control over character or quality does not bank the use for the registered owner.
• • An unrecorded assignment still leaves the public register showing the old owner — record it before closing, not as a post-closing covenant.
• • A cooperative, still-involved seller makes this fix fast; do not assume the same fix is available once a founder has exited and lost interest in signing anything more.

Sources

• • Trademarks Act, s. 48 — marginal notes Trademark transferable (48(1), quoted in full above) and Transfer of trademark (48(4)). Confirms a mark is transferable separately from goodwill and that the Registrar registers a transfer on request, subject to the regulations.
• • Trademarks Act, s. 50 — marginal note Licence to use trademark. s. 50(1) is the provision that makes a licensee’s use count as the owner’s use only where the owner controls the character or quality — the point the original draft of this file left out.
• • CIPO practice notice — Transfers and change of name — the Registrar’s own procedure under s. 48: a transfer is recorded on request of the applicant, registered owner or transferee, on payment of the prescribed fee, with “evidence satisfactory to the Registrar” where the transferee asks. The notice says nothing about the consequences of not recording — that point comes from the practice source below, not from CIPO.
• • Treadstone Law — Assigning a trademark in Canada: what to include — source of both quoted passages: the assignment agreement’s standard elements, and “Until the assignment is recorded, the public record can still show the previous owner, which creates real practical problems if the new owner later needs to enforce the mark, license it, or sell the business again.”
• • Treadstone Law — Confirming trademark and domain ownership on a business purchase (Ontario) — the diligence step that produces this fact pattern — it names “the mark registered to an individual rather than the operating corporation” as a thing to look for. It does not cover s. 50 licensing control; that comes from the Act.