assignment of goodwill uk

Our partners and attorneys are highly qualified and highly experienced to advise you in all areas of Intellectual Property law. We advise start-ups, SMEs, and multinational corporations and ensure that your inventions, brands and designs are expertly protected.

• Corporate Social Responsibility
• Diversity in IP
• Testimonials

An assignment in gross, or not?  What happened to the goodwill?

Trademark assignments and the transfer of the goodwill seem, well, oh-so dull, until they are not. ian gill  reports on a recent cautionary tale from the uk., this is an expanded version of an article that was written by the author and  first published in ipkat  in february 2021.

Scott Hallsworth (‘SH’) is a renowned Australian chef who worked his way up to be the Head Chef at the Michelin starred Park Lane restaurant of Nobu .  SH created and opened a chain of London based restaurants in 2013 under the mark KUROBUTA.   The business floundered and administrators were appointed on 21 April 2017 which eventually resulted in the assignment of the goodwill in the business being assigned to a new entity, Kurobuta Ltd (‘KL’), which had no connection with SH.

On 31 March 2017, shortly before the administrators were appointed, SH filed a UK trade mark application to register the mark KUROBUTA in relation to a wide variety of goods and services, including restaurant services, and a registration was granted on that application on 1 September 2017.  This application was not dealt with in the administration process and it is clear from later events that SH had no intention of giving it up.  KL therefore applied to invalidate the registration under s.5(4)(a) of the Trade Marks Act 1994, i.e. use of the mark is likely to be prevented by the law of passing off.  Given that KL had taken assignment of the goodwill from companies in which SH was a Director and a substantial shareholder this does not seem to be an unreasonable line of attack.

The essence of the case was the question of which party owned the goodwill.

The decision

KL were successful before the UK IPO in relation to the goods and services relating to restaurants or the like.  Much is made at first instance of SH’s claim to personally own the goodwill – this was not successful as everything he did was for the benefit of the business, not for him personally, and that finding was not the subject of the appeal to the Appointed Person.

In decision O/590/20 Mr Geoffrey Hobbs QC, sitting as the Appointed Person, distilled the appeal down to three contentions:

Contention A : KL were prevented for contractual reasons from making a claim that SH’s registration was invalid;

Contention B : SH’s application was filed before KL took assignment of the goodwill in the KUBOBUTA mark and therefore they were not the proprietor of a relevant “earlier” right; and

Contention C : The assignment to KL was ineffective for being an “ assignment in gross ”.

Contention A is primarily a contractual issue and is dealt with in paragraphs 25 to 30 of the judgement, with Mr Hobbs concluding that KL was entitled to bring the claim.

Contention B is given short shrift by Mr Hobbs, who did not accept that the word “ earlier ” in the expression “ earlier right ” establishes “ a temporal requirement which the objector must satisfy by having been proprietorially entitled to the cited ‘earlier right’ at the date with effect from which the relevant trade mark application / registration stands to be rejected if the objection succeeds” .

Contention C gave Mr Hobbs an opportunity to stretch his legs and take us on a historic tour of judgements relating to the conditions under which a trade mark can be assigned.

An “ assignment in gross ” can take one of two forms – the owner of goodwill purports to grant to a third party the bare right to use a mark, there being no connection between the two which would justify use by the assignee.  Alternatively, an assignor may purport to assign the goodwill without the assignee taking any relevant interest in the business that the goodwill relates to.  These categories of transaction are inherently deceptive and therefore ineffective.

It was this second of these two alternatives that SH relied on.  Mr Hobb’s summarised the thrust of SH’s arguments as “ the Assignment stopped short of transferring to KL the business interest it needed to acquire in order to invest it with proprietorship of KUROBUTA as a trade mark at common law ”.   In support of this position SH refers to Star Industrial Company Ltd v Yap Kwee Kor t/a New Star Industrial Company [1976] FSR 256 where it is stated that “ a purchaser of a mark becomes owner of it only if he becomes at the same time purchaser of the manufactory or the business concerned in the goods to which the mark has been affixed ”.  Mr Hobbs traces this proposition back through various cases to Leather Cloth Co. v American Leather Cloth Co. (1865) H.L.C. 523 “ as the leading authority for the proposition that a purchaser of a mark becomes owner of it only if he becomes at the same time purchaser of the manufactory or business concerned in the goods to which the mark has been affixed ”.

Scandecor Developments AB v Scandecor Marketing AB [2001] UKHL 21 takes us through the changes that have taken place over time to the way trade is conducted and hence the changing conditions that have been applied to the sale of trade marks.  As modern business practices developed from the early days of the 19 th century, when a trade mark was personal and it was not considered to be something that could be sold, to the position where the trade mark was only a representation that the goods were manufactured by a business without any representation of the person or persons who manufactured them.  Customers now realise that the management of a business can change without notice to them or adversely affecting the quality of the goods.

This change was recognised in the UK Trade Marks Act 1938 where it became possible to assign a registered trade mark without the goodwill of the business, although at that time an assignment without the goodwill had to be advertised. This position was further relaxed by the UK Trade Marks Act 1994 which allows the assignment of a trade mark subject to the sanction of the transferred mark being deprived of protection if it becomes a source of deception in the hands of the assignee.

Looking back to the Star Industrial case referred to by SH, the background to which is summarised in paragraphs 58 to 61 of this decision, Mr Hobbs concludes that the claim in that case failed not because of an unallowable “ assignment in gross ” but because the business associated with the goodwill had been abandoned and that did not apply in this case.

Turning to the wording of the assignment from SH to KL, this defined the goodwill as: “ the goodwill, custom and connection of the KUROBUTA trade name in relation to the Kurobuta business and the right to represent itself as carrying on the Kurobuta business” .  Absent any definition of the “ Kurobuta business ”, that was taken to mean the “ business ” which had been conducted under and by reference to the name KUROBUTA before the assignment.

Nevertheless SH maintained that the assignment had not transferred the business itself and did not involve an assignment of the business as a going concern.  Mr Hobbs comments in paragraph 76 that he did not understand SH as suggesting that the assignments were a sham, and there is no evidence of deliberate forethought on SH’s part at the time of the assignment to engineer a position that could be attacked later.  Instead SH was asking the Tribunal to look behind the assignment to find its true effect.   However, Mr Hobbs saw no reason why the assignment should not be held to do what it purported to do and transfer the goodwill in the KUROBUTA trade name to KL.  The assignment left SH with no right, title or interest in the goodwill and the associated business and it was not an “ assignment in gross ”.  The appeal therefore failed.

It seems doubtful that many people would have contested this case as fiercely as SH given that, from the outset, it must have been understood that the chances of success were slim.  The more expansive discussion of the background in the original decision of the Hearing Officer ( O/259/19 ) includes SH’s evidence that he did not know the goodwill was being sold and that if he had known he would have objected – the administration process was dealt with primarily by his business partner – but this position is hard to square with SH’s filing of a trade mark application shortly before the administrator was appointed, and as a Director and substantial shareholder he could not later rely on his own lack of engagement in the administration process.

Ultimately, but unsurprisingly, the conclusion was that even a celebrity chef cannot have his cake and eat it.

If you’d like to discuss this topic on, you can contact the writer , or a member of our top tier trade mark team .

Category: Latest Insights | Author: Ian Gill | Published: March 2021 | Read more

• Latest Insights (287)
• Anti-Counterfeiting (16)
• Automotive & Aerospace (3)
• Clean Tech (1)
• Copyright (19)
• Design Rights (43)
• Domain Names (8)
• Electronics & Electrical Engineering (2)
• IP Due Diligence & Freedom to Operate (5)
• IP Litigation (51)
• IP Portfolio Management (4)
• IP Strategy & Audits (50)
• IP‚ Transactions Ownership & Licensing (2)
• IT & Communications (2)
• Patent Oppositions & Revocations (4)
• Patents (164)
• Trade Mark Oppositions & Cancellations (6)
• Trade Marks (136)
• Agriculture (7)
• Automotive & Aerospace (54)
• Clean Tech (21)
• Copyright (2)
• Cosmetics & Personal Care (34)
• E-Commerce (1)
• Electronics & Electrical Engineering (64)
• Food&Beverages (1)
• IT & Communications (52)
• Medical Devices (38)
• Oil‚ Gas & Petrochemicals (17)
• Patent (39)
• Pharmaceuticals (60)
• Retail (77)
• Knowledge Hub

• Privacy Overview
• Basic Cookie
• Analytics cookies

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

Read more about our policy here .

The basics cookie, when enabled, means that we can save your preferences for the cookie settings panel and you won’t see the banner pop-up again unless you clear your browser’s cookie cache.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to interact with this panel again to enable or disable the cookies.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.

This website uses DoubleClick and Quancast to collect anonymous information such as the number of visitors to the site, and the most popular pages.

Keeping this cookie enabled helps us to improve our website.

Please enable Strictly Necessary Cookies first so that we can save your preferences!

Assignment of Goodwill (Jurisdiction Neutral)

• Unlimited access to our online legal know-how services during the trial period.
• Training and support.

• 0121 786 2555
• 0330 333 8797

Assignment of Goodwill Solicitors

Our property solicitors can advise you on all aspects of conveyancing and property law including assignment of goodwill .

Get Advice From Property Lawyers

Send us a confidential message. Our initial call is always a no-obligation consultation.

Simplify Assignment of Goodwill with Wildings Solicitors

Are you considering assigning goodwill? Whether you’re a business owner looking to transfer goodwill rights or a buyer seeking to acquire an established brand reputation, navigating the legal complexities of goodwill assignments requires expert guidance. At Wildings Solicitors, we specialise in providing comprehensive legal support tailored to your needs, ensuring a seamless and efficient assignment process.

Why Choose Wildings Solicitors for Lease Assignment Services?

Extensive Expertise: Our team of property solicitors brings years of experience in handling goodwill assignments. From small businesses to large enterprises, we have the expertise to assist clients across a wide range of industries and transactions.

Tailored Solutions: We understand that every assignment of goodwill is unique. Whether you’re dealing with the transfer of a business’s reputation, customer base, or brand identity, we take the time to understand your specific objectives and concerns, crafting personalised legal strategies to meet your needs effectively.

Comprehensive Support: From conducting due diligence to negotiating terms and completing the assignment documentation, we provide comprehensive support at every stage of the process. Our services cover legal analysis, contract drafting, regulatory compliance, and more, ensuring all aspects of the assignment are handled with precision and care.

Protecting Your Interests: Your interests are our priority. We work diligently to safeguard your rights and mitigate potential risks throughout the assignment process, offering proactive legal guidance to ensure a smooth and successful transaction while protecting your interests and minimising liabilities.

Transparent Communication: We believe in clear and transparent communication. Our team keeps you informed at every step, providing regular updates, explaining legal terms and processes, and addressing any questions or concerns you may have promptly, ensuring you’re fully informed and empowered throughout the assignment process.

Our Approach to Assignment of Goodwill

Initial Consultation: We start by understanding your objectives and requirements for the assignment of goodwill. During the initial consultation, we assess the goodwill valuation, discuss any potential issues or concerns, and outline the legal process involved in transferring goodwill rights in England.

Negotiation and Documentation: We assist in negotiating terms with the other party involved and drafting the necessary documentation for the assignment of goodwill. Whether it’s drafting assignment agreements, addressing intellectual property rights, or ensuring compliance with relevant regulations, we ensure that all legal requirements are met and the transaction is executed efficiently and accurately.

Completion and Post-Assignment Support: Once the assignment is finalised, we assist with the completion formalities and ensure that all necessary documents are properly executed and filed. We also provide post-assignment support, including updating business records, addressing any outstanding issues, and advising on ongoing contractual obligations, to ensure a seamless transition for all parties involved.

Conveyancing Law Services For Individuals & Businesses

Selling a Property

Purchasing a Property

Re-mortgage

Land Acquisition and New Builds

Buying a New Build House

Deeds of Gift & Transfer of Equity

Right To Buy

Sales of New Build Properties- Developers

Property Auction Sales and Purchases

Looking for a property solicitor?

Award winning.

We are a modern law firm that provides legal services to businesses, organisations and individuals.

Our Mission

To achieve the best possible outcome for our clients by delivering quality legal services.

To continue to develop our reputation for trustworthiness, respect for individuals, families and businesses.

Turn Your Dream into Reality with Confidence

Wildings Solicitors empowers you to navigate the legal aspects of buying a property with confidence. We handle the formalities, advocate for your best interests, and ensure a smooth transition to your new home. Contact us today for a free initial consultation and discover how our expertise can guide you every step of the way towards your dream property.

Request a Callback

• 862-864 Washwood Heath Rd, Ward End, Birmingham, B8 2NG

Get in Touch

0330 333 8797 [email protected]

Opening Hours

Monday to Friday 9.00am - 5.00pm

Accreditations

A modern, forward looking law firm with an extensive range of services delivering Quality Legal Services since 1986

• [email protected]

Quick Links

Wildings Solicitors are authorised and regulated by the Solicitors Regulation Authority (no. 552128). Wildings Solicitors is a trading name of Wildings Solicitors LLP, a limited liability partnership registered in England and Wales.  Registration Number OC360274 registered office 862-864 Washwood Heath Road, Ward End, Birmingham, B8 2NG.   A list of Directors is available from the registered offices.  We do not accept service by email.   

• Privacy Policy
• Cookie Policy
• Complaints Procedure
• Diversity Data

English law assignments of part of a debt: Practical considerations

United Kingdom |  Publication |  December 2019

Enforcing partially assigned debts against the debtor

The increase of supply chain finance has driven an increased interest in parties considering the sale and purchase of parts of debts (as opposed to purchasing debts in their entirety).

While under English law part of a debt can be assigned, there is a general requirement that the relevant assignee joins the assignor to any proceedings against the debtor, which potentially impedes the assignee’s ability to enforce against the debtor efficiently.

This note considers whether this requirement may be dispensed with in certain circumstances.

Can you assign part of a debt?

Under English law, the beneficial ownership of part of a debt can be assigned, although the legal ownership cannot. 1  This means that an assignment of part of a debt will take effect as an equitable assignment instead of a legal assignment.

Joining the assignor to proceedings against the debtor

While both equitable and legal assignments are capable of removing the assigned asset from the insolvency estate of the assignor, failure to obtain a legal assignment and relying solely on an equitable assignment may require the assignee to join the relevant assignor as a party to any enforcement action against the debtor.

An assignee of part of a debt will want to be able to sue a debtor in its own name and, if it is required to join the assignor to proceedings against the debtor, this could add additional costs and delays if the assignor was unwilling to cooperate. 2

Kapoor v National Westminster Bank plc

English courts have, in recent years, been pragmatic in allowing an assignee of part of a debt to sue the debtor in its own name without the cooperation of the assignor.

In Charnesh Kapoor v National Westminster Bank plc, Kian Seng Tan 3 the court held that an equitable assignee of part of a debt is entitled in its own right and name to bring proceedings for the assigned debt. The equitable assignee will usually be required to join the assignor to the proceedings in order to ensure that the debtor is not exposed to double recovery, but the requirement is a procedural one that can be dispensed with by the court.

The reason for the requirement that an equitable assignee joins the assignor to proceedings against the debtor is not that the assignee has no right which it can assert independently, but that the debtor ought to be protected from the possibility of any further claim by the assignor who should therefore be bound by the judgment.

Application of Kapoor

It is a common feature of supply chain finance transactions that the assigned debt (or part of the debt) is supported by an independent payment undertaking. Such independent payment undertaking makes it clear that the debtor cannot raise defences and that it is required to pay the relevant debt (or part of a debt) without set-off or counterclaim. In respect of an assignee of part of an independent payment undertaking which is not disputed and has itself been equitably assigned to the assignee, we believe that there are good grounds that an English court would accept that the assignee is allowed to pursue an action directly against the debtor without needing the assignor to be joined, as this is likely to be a matter of procedure only, not substance.

This analysis is limited to English law and does not consider the laws of any other jurisdiction.

Notwithstanding the helpful clarifications summarised in Kapoor, as many receivables financing transactions involve a number of cross-border elements, assignees should continue to consider the effect of the laws (and, potentially court procedures) of any other relevant jurisdictions on the assignment of part of a debt even where the sale of such partial debt is completed under English law.

Legal title cannot be assigned in respect of part of a debt. A partial assignment would not satisfy the requirements for a legal assignment of section 136 of the Law of Property Act 1925.

If an assignor does not consent to being joined as a plaintiff in proceedings against the debtor it would be necessary to join the assignor as a co-defendant. However, where an assignor has gone into administration or liquidation, there may be a statutory prohibition on joining such assignor as a co-defendant (without the leave of the court or in certain circumstances the consent of the administrator).

[2011] EWCA Civ 1083

• Financial institutions

Recent publications

Publication

Commercial division update: Updated rules for New York’s Commercial Division

The New York Commercial Division recently updated its procedural rules in two material respects.

United States | July 03, 2024

SCOTUS continues to curtail prosecutors

The Supreme Court of the United States held in Snyder v. United States that 18 U.S.C. § 666 does not apply to gratuities—even those that raise eyebrows and ethical concerns.

United States | July 02, 2024

Applying HIPAA to online tracking technologies: Court finds HHS guidance exceeds authority

In American Hospital Association et al. v. Becerra, the Northern District Court of Texas ruled that HHS acted “in clear excess of HHS’s authority under HIPAA”.

Subscribe and stay up to date with the latest legal news, information and events . . .

© Norton Rose Fulbright LLP 2023

• Canada (English)
• Canada (Français)
• United States
• Deutschland (Deutsch)
• Germany (English)
• The Netherlands
• Türkiye
• United Kingdom
• South Africa
• Hong Kong SAR
• Marshall Islands
• Nordic region

• Knowledge Center

Assignment of Goodwill (Deed): A Comprehensive Guide

• Ayodeji Akingbade
• February 25, 2024
• Land , Law and Regulations

Table of Contents

When it comes to business transactions, the assignment of goodwill is a critical aspect that should not be overlooked. Goodwill refers to the intangible value associated with a business, such as its reputation, customer relationships, and brand recognition. Assigning goodwill through a deed allows for the transfer of these intangible assets from one party to another. In this comprehensive guide, we will delve into the concept of assigning goodwill, the process involved, its legal implications, and the importance of conducting due diligence before entering into such agreements.

Understanding Goodwill and its Importance

Goodwill is a vital component of any business, representing the intangible assets that contribute to its overall value. It encompasses factors such as customer loyalty, brand reputation, intellectual property, and favorable supplier relationships. Goodwill plays a significant role in attracting customers, generating revenue, and maintaining a competitive advantage in the market.

Assignment of Goodwill: An Overview

The assignment of goodwill involves transferring the ownership rights of intangible assets from one entity to another. This transfer is typically carried out through a legal document known as a deed. The deed outlines the terms and conditions of the transfer, including the consideration exchanged, rights and obligations of the parties involved, and any restrictions or limitations on the use of the transferred goodwill.

Components of the Assignment Deed

An assignment deed for goodwill typically includes the following components:

1. Parties : The deed identifies the parties involved in the assignment, namely the assignor (the party transferring the goodwill) and the assignee (the party receiving the goodwill).

2. Consideration : The assignment deed specifies the consideration exchanged between the parties. This can be in the form of monetary payment, non-monetary assets, or a combination of both.

3. Rights and Obligations : The deed clearly outlines the rights and obligations of both the assignor and the assignee. It may include provisions related to the use of the transferred goodwill, non-compete clauses, and any ongoing obligations of the assignor.

4. Restrictions and Limitations : The assignment deed may include restrictions and limitations on the use of the transferred goodwill. This can include geographical restrictions, limitations on the type of business activities the assignee can undertake, or any other specific conditions agreed upon by the parties.

5. Termination : The deed may also include provisions for termination, specifying the circumstances under which the assignment can be terminated and the consequences of termination.

Legal Implications and Considerations

Assigning goodwill through a deed has legal implications that should be carefully considered. Here are some key legal aspects to keep in mind:

Contractual Obligations

The assignment of goodwill is a contractual agreement between the assignor and the assignee. Both parties are legally bound by the terms and conditions outlined in the assignment deed. Therefore, it is crucial to ensure that the deed is drafted accurately and comprehensively to avoid any misunderstandings or disputes in the future.

Intellectual Property Rights

Goodwill often includes intellectual property rights, such as trademarks, copyrights, or patents. When assigning goodwill, it is essential to verify that the assignor has the legal right to transfer these intellectual property rights. Conducting a thorough intellectual property search and clearance process can help identify any potential conflicts or infringement issues.

Due Diligence

Before entering into an assignment of goodwill, it is crucial to conduct due diligence on the business and its intangible assets. This may involve reviewing financial records, customer contracts, licenses, and any legal agreements related to the business. Due diligence helps verify the value of the goodwill being transferred and mitigates the risk of undisclosed liabilities or legal issues.

Compliance with Laws and Regulations

Assigning goodwill may be subject to certain laws and regulations, depending on the jurisdiction and nature of the business. It is important to ensure compliance with applicable laws, such as antitrust regulations, consumer protection laws, and intellectual property laws. Seeking legal counsel can help navigate these complexities and ensure a smooth and legally compliant assignment process.

Importance of Due Diligence in Assigning Goodwill

Conducting due diligence is of utmost importance when assigning goodwill. It helps identify any potential risks or issues that could impact the value of the transferred assets. Some key reasons to conduct due diligence include:

1. Assessing Value : Due diligence allows for a thorough evaluation of the value of the goodwill being transferred. This helps both parties understand the potential benefits and risks associated with the assignment.

2. Identifying Liabilities : Through due diligence, any undisclosed liabilities or legal issues can be identified. This prevents the assignee from inheriting any unforeseen problems that could impact the business’s reputation or financial stability.

3. Mitigating Risks : Due diligence helps mitigate risks by ensuring that the assignor has the legal right to transfer the goodwill and that all necessary permissions and licenses are in place. It also helps identify any potential conflicts or infringements on intellectual property rights.

4. Negotiating Terms : The insights gained through due diligence can be used to negotiate the terms and conditions of the assignment. Thiscan include adjustments to the consideration exchanged, additional warranties or indemnities, or specific provisions to address any identified risks or concerns.

5. Building Trust : By conducting thorough due diligence, both parties demonstrate their commitment to transparency and integrity. This helps build trust and confidence in the assignment process, fostering a positive working relationship between the assignor and the assignee.

The assignment of goodwill through a deed is a significant step in transferring intangible assets from one party to another. It involves careful consideration of legal implications, conducting due diligence, and ensuring compliance with applicable laws and regulations. By understanding the concept of goodwill, the components of an assignment deed, and the importance of due diligence, businesses can navigate the assignment process successfully and protect their interests. It is always advisable to seek legal counsel to ensure a smooth and legally compliant assignment of goodwill.

Related Posts:

• Ultimate Guide to Buying Distress Property In Lagos
• Tips for Buying a Property in Lagos if You Live Abroad
• Documents You Need to Have After Buying a Home
• Tips For Buying Family Land in Lagos: Expert Advice…
• How to Buy Encumbrance-Free Property in Lagos
• Ensuring an Effective Transfer of Land Ownership in Lagos

Ayodeji Akingbade is a Content writer /Copywriter with an insatiable thirst for knowledge. He loves researching topics such as real estate investing, technology trends, and personal finance before writing about them. He’s a realtor and real estate investor who connects with readers through real life experiences to bring fresh perspectives and novel ideas in all of his work. As he strives to keep his content up-to-date, he always looks for new ways to stay ahead and learn something new every day. He enjoys football and the traditional game of Monopoly with friends and family when he is not writing or reading.

Get Expert Advice on Lagos Property Market

Are you an home-buyer, new or experienced investor get your tailored success strategy with a free consulation book now and unlock your potential.

Victoria Bay 3 Annex, Meadow Hall Way, Ikate, Lekki.

4-bedroom, Testing Project

Coastal Town, Ibeju Lekki

The Advantage Estate

You may also like:.

How Do Property Management Companies Charge in Nigeria?

The Difference Between Interior Design and Interior Architecture

Renting with a Plan: The Concept of Rent-to-Own Properties

Potential of Commercial Real Estate Investments in Nigeria

Let’s stay in touch, get all of our latest real estate tips delivered straight to your inbox..

GET IN TOUCH

• 18a, Bintu street, off Ajayi road, okeira, Ogba, Lagos
• [email protected]
• +2349135617185
• Communities

LET'S STAY IN TOUCH

• More Blog Popular
• Who's Who Legal
• Instruct Counsel
• My newsfeed
• Save & file
• View original
• Follow Please login to follow content.

add to folder:

• My saved (default)

Register now for your free, tailored, daily legal newsfeed service.

Find out more about Lexology or get in touch by visiting our About page.

Assignments - a brief legal overview and pitfalls to beware!

Many patents will see a change in ownership at some stage in their lives. Assignments are commonplace and occur for a variety of reasons; for example, in the context of a business sale where a buyer purchases all of the assets (including intellectual property assets) of a business from the vendor. Another is in the context of intra-group reorganisations.

Assignments can also occur as part of settlement of a dispute. This article outlines some of the pitfalls of which you should be aware when assigning patents; many of which can be averted by careful drafting of the assignment agreement.

Unless the assignment is intra-group, there will usually be some distance between what the assignee wants (typically, a variety of representations, warranties and indemnities in respect of the assigned rights) and what the assignor is prepared to give. This is a commercial decision and hence no two negotiated patent assignments will be identical.

Consideration

Under English law, to be a valid contract there must be consideration which is either money or money's worth. This is often overlooked but a key point required for the assignment agreement to be legally binding. Whilst the acceptance of mutual obligations may suffice, it is simplest to have a sum of money (even if only for £1). An alternative is to execute the assignment as a deed, though there are specific formalities which must be followed for the agreement to be a deed. Of course, if the parties agree to nominal consideration (eg, £1), it is important that this small amount is actually paid to the assignor.

An assignment of a UK patent (or application) must be in writing and signed by the assignor. It used to be the case that an assignment of a UK patent (or application) would need to be signed by both parties, however the law was changed in 2005. In reality, both parties will usually sign the assignment agreement. Where one or both of the parties is an individual in their personal capacity or a foreign entity, special 'testimonial' provisions are required; for example the signature to the assignment may need to be witnessed.

The assignment

English law distinguishes two types of assignment: legal and equitable. To assign the legal interest in something means that you have assigned simply the title to that property and not the right to exercise the rights inherent in it. This is the equitable (beneficial) interest and if this is not also assigned with the legal title, this can result in a split in ownership. Unless the parties specifically agree otherwise, legal and beneficial ownership should always be assigned together. It is possible to have co-assignees (ie, co-owners) but the terms of the co-ownership will need to be carefully considered.

It is possible to assign the right to bring proceedings for past infringements in the UK, but not in some other jurisdictions. Where non-UK rights are involved, local advice may be required as to whether such an assignment would be enforceable as against a prior infringer. This potential uncertainty makes a robust further assurance clause even more desirable (see below), to ensure the assignor's co-operation after completion of the assignment.

The assignee will also typically argue for (and the assignor will typically resist) a transfer with 'full title guarantee', as this implies as a matter of law certain covenants: that the assignor is entitled to sell the property; that the assignor will do all it reasonably can, at its own expense, to vest title to the property in the assignee; and that the property is free from various third party rights.

In terms of European patents (EP), it is important to remember that ownership of an EP application is determined under by the inventor/applicant's local law, rather than under European patent law. This means that a formal, written assignment agreement should be executed to ensure that the applicant is entitled to ownership of the patent application, for example in cases where the work undertaken was done by a consultant or where local law dictates that the owner is the inventor(s). An assignment should include assignment of the right to claim priority, as well as the right to the invention and any patent applications. This need to obtain an effective assignment of the application (and right to claim priority) is particularly important where a priority application has been made in the name of the inventor. If such an assignment is not executed before applications which claim priority from earlier cases (for example, PCT applications) are filed, the right to ownership and/or the right to claim priority may be lost.

Don't forget tax

Currently, there is no stamp duty payable on the assignment of intellectual property in the UK. However, particularly for assignments which include foreign intellectual property rights, there can be considerable tax implications in transferring ownership of intellectual property rights in some countries and it is always prudent to check that the transfer will not result in excessive tax liabilities for you.

Update the register

Registered rights need to be updated at the patent offices. You will need to decide who pays for this: in the case of one patent, it is a simple process, however in the case of a whole portfolio, the costs can be considerable. Remember, if you ever need to take any action on a patent you own, you need to ensure you are the registered owner of that right at the applicable office.

In the UK, assignments can be registered but there is no statutory requirement to do so. In the case of international assignments, local offices may require recordal of the assignment. In any event, it is desirable for an assignee to ensure that the transaction is recorded. Section 68 of the UK Patents Act provides that an assignee who does not register the assignment within six months runs the risk of not being able to claim costs or expenses in infringement proceedings for an infringement that occurred before registration of the assignment, although recent case-law has reduced this risk somewhat.

Further assurance

The assignee will typically take charge of recordals to the Patents Offices; however they will often need the assignor's help in doing so. A 'further assurance' clause is a key element of the assignment from an assignee's point of view both for this purpose and for assisting in the defence and enforcement of patents or applications for registration. On the other hand, the assignor will typically seek to qualify its further assurance covenant by limiting it to what the assignee may reasonably require, and that anything done should be at the assignee's expense. An assignor should also require that recordals are done promptly to minimise their future correspondence from patent offices.

International transactions

In transactions which involve the transfer of patents in various countries, the parties can execute a global assignment which covers all the patents being transferred, or there can be separate assignments for each country. The former, global assignment, is usually preferred however this will frequently need to be supplemented by further confirmatory assignments in forms prescribed by the relevant international patent registries. As noted above, the preparation and execution of such assignments can be time-consuming and costly, hence the need to decide in advance who bears the cost of such recordals, and the assignee should insist on a further assurance provision.  

Filed under

• United Kingdom
• D Young & Co LLP

Popular articles from this firm

Ukipo opposition decision: stihl got it *, one for all and all for one validity of an opt-out of the upc *, uk high court ai technology infringement challenges: getty images v stability ai *, parallel litigation at the upc: bio-techne keeps pressure on molecular instruments *, a joyous decision: general court provides guidance on evidence of reputation *.

If you would like to learn how Lexology can drive your content marketing strategy forward, please email [email protected] .

Related practical resources PRO

• How-to guide How-to guide: The appointed representatives regime explained - what it means in practice (UK)
• How-to guide How-to guide: How to design a competition law compliance programme (UK)
• Checklist Checklist: Initial response to a report of suspicious activity (USA)

Related research hubs

Top 5 Intellectual Property Mistakes When Buying or Selling A Business

March 31, 2021

Last reviewed: May 30, 2024

Author - Stephens Scown

When buying or selling a business there is a lot to think about and often, the intangible assets such as intellectual property can be overlooked.

This is surprising when you consider that for many businesses intangible assets have a higher value than their tangible assets.

Imagine for example the cost to a business of a capital investment such as replacing a key piece of machinery. This would be significant for the business and that asset is going to feature in any business sale. Imagine by contrast, the fall out if a business needs to change its name because it has failed to obtain a trademark registration. The cost of this re-brand and the impact on future trade would generally be significantly more than the cost of replacing the capital asset.

Despite this, businesses throughout their life-cycle often undervalue the intellectual property (IP) assets, but never more so than during a sale or acquisition process.

Below are some of the key mistakes we see in corporate transactions from an intellectual property perspective. Many of these are easy to avoid and our expert team is well placed to discuss any queries you may have on these topics.

Key intellectual property mistakes that businesses make

#1 – assigning goodwill where there is no trademark registration.

In the absence of a trademark registration a business’s reputation is protected through their goodwill. Goodwill is a way in which the law recognises and offers limited protection to the effort that goes into developing a reputation (whether that reputation is good or bad).

Goodwill is inherently attached to the business that generates it. It is not possible to separate goodwill from the business which underlies that goodwill. Despite this, we frequently see businesses attempting to value and sell goodwill as if it is a standalone asset.

A transfer of goodwill where a business is not being sold as a going concern (e.g. an asset sale) will not be effective at law. Only where the whole business is being sold as a going concern (both the good bits and the bad bits) will goodwill also be assignable.

In order to avoid this risk, businesses should ensure that they have trademark registrations in place. A trademark registration should be basic housekeeping for all UK businesses but is often overlooked. The sale of a business is often one of the first times a business will realise they should have dealt with this important issue. For more information on trademark registrations please read our article here .

#2 – Intellectual property licences without quality controls

Often businesses will attempt to licence intellectual property, such as a trademark registration, for example, across a group of companies. This is a common structure where one company owns the brand name but licences others to use it, perhaps in a particular territory or for a particular market segment.

However, businesses often business neglect to put in place the necessary control provisions needed to make this licence sustainable and to protect the owner’s interest in the brand.

The fundamental issue here is that trademarks serve two key functions.

Business reputation

The first key function is to protect the reputation of the business by enabling it to stop other people from taking advantage of their reputation. It also helps that business to commercialise the value in their brand by for example licencing it or setting up a franchise.

Consumer protection

The second key function, which is often overlooked, is that trademark registration also protects the consumer. In other words, as a consumer making a purchase, the trademark applied to the goods or services you are purchasing, gives re-assurances about the nature and quality of those goods and services.

As soon as a brand owner becomes blasé about the quality of the goods that they are providing, it puts the trademark registration at risk. This is because the mark risks becoming deceptive. It no longer guarantees to the consumer the nature or the quality of the goods and services on offer. That’s not to say that the goods and services have to be of an outstanding quality, just that the quality has to be consistent.

Where a rights owner licenses their trademark to a third party but fails to put in place checks and balance or quality controls to ensure the consistency of that product or service, then their trademark risks becoming deceptive and (in time) invalid. This can see a business losing its most valuable asset.

The solution here is to make sure that any trademarks licenses have in place effective quality control provisions.

#3 – Ownership of intellectual property assets of the business

Many businesses will find when they start doing due diligence for an acquisition or a sale that they do not own the assets they thought they did. Sometimes this is because when the business was set up, the founder registered assets, such as domain names, in their own name rather than in the company name. This situation can be resolved on most occasions by assigning the rights into the relevant company, but this needs to be done effectively at law. There may also be tax and other considerations.

The second area where this commonly arises is where third parties have been involved in the creation of content. Many business do not realise that where they work with third party contactors those contactors will own the intellectual property they create (unless there is a written agreement to the contrary). Take for example a web designer or a logo designer who is contracted to do a piece of work for a company. The contracting party may have told them what to create and have paid them for the work but, unless there is an effective agreement in writing assigning the copyright, the designer will continue to own it.

This will often come to light during a due diligence exercise where an organisation may be required to prove that it owns the rights behind, for example, it’s website or other key assets. If it hasn’t got in place the necessary assignment at the beginning of the process, it may need to go back to developers at this late stage and ask for the assignment to be put in place. There may then be a commercial discussion around the price which needs to be paid to the developer in return for the assignment.

#4 – Breaking IT contracts

All business will have a variety of IT contracts for the software, hardware and services which make their business work. Whether this is for individual programs installed on their own servers or a wider managed service agreement. In all cases there will be a contract governing the relationship.

Many of these IT contracts will contain change control provisions. These change control provisions will enable the IT provider to get out of their obligations under the contract if there is a “change of control” in their client business.

This means that for example, a change in shareholding or other structure could result in the IT contracts being invalidated. This could result in the new owners having to re-negotiate new contacts or being left high and dry without the IT systems which they rely upon.

#5 – Checking the data

Many businesses are familiar with the requirements of the data protection legislation. However, many are not aware of the impact this can have when it comes to the sale of assets such as often occurs on a business sale. For many businesses, a list of current customers will be crucial. Take for example a holiday business where one of the key assets may be future bookings.

Details of customers, future bookings, and historic sales where the same contains personal information will be protected by the data protection legislation.

A buyer will want to be able to see that a seller has complied with the letter of the data protection legislation in the collection, storage and use of that data. Otherwise, a potential purchaser could find that the assets which they are purchasing are not worth the asking price.

Making sure that effective data protection warranties are in place and that contracts with third parties such as IT providers who may be storing personal data are compliant is increasingly becoming essential.

Many of these issues can be easily avoided by making sure that the intellectual property elements of a business are considered early during the sale or acquisition process.

All too often these issues are omitted from the deal altogether which can mean that certain elements of the transfer are void or they are considered too late, in which case they can have a significant and not always positive impact on the asking price.

Another key point to consider is that these issues apply across all sectors. There is a common misconception that concerns around intellectual property are only really for businesses with significant R&D budgets. This is not the case. Almost every business has a website, a brand and other intellectual property which forms key parts of their assets, regardless of which sector they work in.

Regardless of what your business does, your hard won reputation protected by your brand will be one of your key assets. Making sure that it and the other key assets which you rely upon are protected, owned by the right people, and managed in a sustainable fashion, will help make sure you maximise the potential when it comes to a business acquisition or sale.

If you are considering selling or buying a business, our team would be happy to help.

If you are seeking advice or have any questions in relation to this article, you can contact us by calling 0345 450 5558 or by emailing [email protected]

Alternatively fill out the form below and we’ll get in touch right away.

By pressing send and providing your details you are agreeing to our Privacy Notice .

Related Info Hubs

• Brand Protection
• Business Disputes
• Business Law
• Corporate and Commercial
• Data Protection
• Disputes with Businesses
• Intellectual Property

Does a sole trader need a deed of assignment to transfer his business to a limited company?

Does a sole trader need a deed of assignment to...

Didn't find your answer?

Latest any answers, self employed help, traveling for work, struggling with overlap relief, the accountancy franchise post.

I have requested a post transaction valuation check for the value of goodwill on the incorporation of a sole trader's business.  One of the requests from HMRC is to see a copy of the Deed of Assignment transferring the business from the sole trader to the limited company.  The business is a simple one with no property and little in the way of plant and machinery and there is no deed of assignment.  Will this case a problem?

Related resources

Improve audit, tax and advisory in your practice.

Audit challenges and the role of technology

VAT Reverse Charge – A guide for accountants

Replies (2)

Please login or register to join the discussion..

Something is needed to minute the transfer - personally I always draft a simple memorandum of sale,and advise clients to take legal advice if they want anything more complex.

It's not only HMRC, but helps if, for example, the business files, and there is a liquidation / receivership.

Personally, unless the client really wanted it, I never transferred the goodwill. I preferred to leave the goodwill and trading name in the ownership of the vendor and have a simple license in palace. Protects the vendor if the company needed restructuring, But, of course, each set of circumstances are different,

Something is definitely needed...

I agree with "girlofwight" that something is definitely needed.  However - irrespective of what the document is called, if it is a true transfer of the business into the Ltd Co. then it is really important that that legal document transfers both the "rights" in the business (normally - right to receive money from the goods/services being provided by the owner) AND the "obligations" - so that the obligation to provide those goods or services are now being provided by the Ltd Co.

If your client is seeking to transfer the business whilst existing ongoing contracts are still in place - then it will be necessary to seek the consent of the other party to that contract.  This is a simple document (Deed of Novation) and a simple process - albeit it can be a little administrative and tedious!

GirlofWights's sale approach also works nicely.

This way - if there is a problem that occurs after the sale/novation in the future - then it strengthens your clients position since only the Limited Company can be pursued in any legal action that may be brought.

Best wishes

Related posts

Assignment of intellectual property rights and goodwill (for use with asset purchase agreement) | Practical Law

Assignment of intellectual property rights and goodwill (for use with asset purchase agreement)

Practical law uk standard document w-023-6300  (approx. 34 pages).

Deed Of Assignment (Asset Sales)

Notification.

Transfers of goodwill and other IP

Sales or acquisitions of businesses are likely to include the transfer of intangible fixed assets (IFAs) such as goodwill and / or other intellectual property (IP).

This guidance considers some of the relevant tax issues arising on a transaction structured either as a transfer of trade and assets, or as the sale of shares in a company which owns goodwill or other IFAs.

For a discussion of the tax implications generally of a share sale or an asset sale, see the Tax implications of share sale and the Tax implications of trade and asset sale guidance notes respectively.

For details of the intangibles regime generally, see the Corporate intangibles tax regime - overview guidance note.

What is goodwill?

The accounting definition of IFAs (other than goodwill) is set out in FRS 102, s 18.2 and is ‘an identifiable non-monetary asset without physical substance’. IFAs have a continuing use in the company’s trade.

Goodwill is

Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.

Access this article for free with a 7 day trial of tolley ® guidance and benefit from:.

• Expert practical tax guidance
• Ready-made templates, step-by-step-guides, interactive flowcharts and checklists
• The latest news updates, insights and analysis

** Free trials are only available to individuals based in the UK, Ireland and selected UK overseas territories and Caribbean countries. We may terminate this trial at any time or decide not to give a trial, for any reason.

Powered by Tolley ® Guidance

Related documents:.

• Professional valuations
• Treasury shares following a share buy back
• Corporation tax relief for expenditure
• Introduction to management buy-outs (MBO)
• Measures and methods of valuation
• Tax implications of share sale
• Struggling businesses ― closing the company down
• Employee share schemes
• Paper for paper treatment clearances
• Disincorporation
• Transactions in securities clearances
• Demerger clearances
• Transactions in securities and the Phoenix TAAR on a company sale or winding-up
• Preparing group for sale or acquisition
• Valuation of goodwill and other intellectual property (IP)
• Loan notes and qualifying corporate bonds (QCBs) and non-QCBs
• Tax implications of trade and asset sales
• Tax treatment of earn-outs and deferred consideration
• Struggling businesses ― how to ease cash flow
• Summary of company tax matters following an MBO
• Web page updated on 05 Apr 2024 12:50

Home / Tolley Tax Guidance / Corporation Tax / Selling or exiting the business

Popular Articles

Short-term business visitors (stbvs).

Short-term business visitors (STBVs)What is a short-term business visitor?An STBV for UK tax purposes is an individual who performs duties for a non-UK employer and as a part of those duties has been asked to spend a short period working in the UK. There is a common misconception that there is

Supplies of goods and services connected with education

Supplies of goods and services connected with educationThis guidance note provides an overview of the VAT treatment of goods and services provided in connection with supplies of education. This should be read in conjunction with the following guidance notes:•Supplies of education•Local authority

Computation of corporation tax

Computation of corporation taxCompanies pay corporation tax on the taxable total profits (TTP) generated in a chargeable accounting period (CAP).To ascertain whether the entity is within the charge to corporation tax, see the Charge to corporation tax guidance note.For more information on the type

• General Enquiries + 44 (0)33 0161 1234
• Exam Training + 44 (0)20 3364 4500
• About Tolley
• Tolley Knowledge
• Tolley Experts
• Help & Support
• Protecting human rights: Our Modern Slavery Act Statement
• Cookie Settings
• Privacy Policy
• Terms & Conditions

EXAM TRAINING

• Exam Training
• Apprenticeships

RESEARCH AND GUIDANCE

• TolleyGuidance
• TolleyLibrary
• FRC Publications
• eStore (Books)

PROFESSIONAL DEVELOPMENT

• Taxation Magazine
• Tax Journal Magazine
• Online CPD Seminars

+ Clients Back

• Get Free Legal Answers
• Get Fee Estimates

Deeds & Drafts

• Find Lawyers
• Get A Dedicated Legal Assistant
• Office Manager
• Display Boards
• Petitions & Pleadings Templates
• Case Diary & Office Manager
• Post News & Artilces
• Post Jobs & Internships
• Get A Dedicated Legal Secretary

+ Law Students

• Campus Ambassadors
• Find Jobs & Internships
• Post News & Articles
• Resource Sharing

+ Law Schools

• Post Admissions
• Post Opportunities
• Get Law School Rating
• Deeds & Drafts / ASSIGNMENT-OF-A-GOODWILL-BUSINESS

ASSIGNMENT OF A GOODWILL BUSINESS

This Deed of Assignment being executed on this ___________ day of _________. Between Sh. _________, S/o Sh. __________, R/o ____________ (as named "the assignor") which expression shall include his successors, executors and administrators on the one part And Sh. _________, S/o Sh. ___________, R/o _____________ (as named "the assignee") which expression shall include his successors, executors and administrators of the other part. Whereas 1. The assignor is in the trade of manufacturing cloth and so, for the past 32 years. 2. The assignor has by way of the said trade earned goodwill and established a good reputation. The assignor has trade connections with several other firms/persons. 3. The assets liabilities of the said trade are stated in Annexure I enclosed herein. 4. The assignee has for a sum of Rs. ______, consented in taking the trade of the assignor as a running business with its goodwill, liabilities and remaining. Now This Deed Witnesses as Follows: 1. That according the said covenant and in lieu of the sum of Rs.__________ (Rupees ______________only) paid to the assignor (whose receipt is hereby acknowledges) assignor beneficial owner hereby assigns as follow to the assignee— (i) the goodwill trade; (ii) all debts and outstanding stated in the schedule unclose and also other sums as are or may be found due to assignor concerning the trade; (iii) all rights, privileges, benefits, emerging out all pending contractual engagement. (iv) Business -mark in concerning said trade; (v) stock-in-business furniture, fixtures of the trade; The assignee shall take over the said trade completely. The assignor bearing no right /interest of any form as left in the same. 2. The assignor also agrees and guarantees the assignee that help the assistance in claiming and realizing/ getting the debts remaining of the trade. assignor shall also at all period clarify, any item in account books, for claiming any legal claim , concerning the said debts /outstanding. 3. The assignee also consents that for paying and discharging all debts, liabilities and outstanding of the said trade till this day shall, at all times, keep indemnified the assignor /his estate and effects from and against all hearing, costs, claims, expenses/liabilities, whatsoever, relating thereof. In Witness Whereof, the parties to this deed have signed at (Name of place), on day, month and year first above noted, in presence of :

Assignor ___________ Assignee: ____________ Signed ................. Date ................ Witnesses: 1. 2.

Allow Cookies!

By using our website, you agree to the use of cookies

Lawyers Network

Cities Serving

Law Schools Network

Law Students Network

• Practical Law

Transfer of a general partnership to an LLP: deed of assignment of goodwill and intellectual property rights

Practical law uk standard document 6-502-2819  (approx. 9 pages), get full access to this document with a free trial.

Try free and see for yourself how Practical Law resources can improve productivity, efficiency and response times.

About Practical Law

This document is from Thomson Reuters Practical Law, the legal know-how that goes beyond primary law and traditional legal research to give lawyers a better starting point. We provide standard documents, checklists, legal updates, how-to guides, and more.

650+ full-time experienced lawyer editors globally create and maintain timely, reliable and accurate resources across all major practice areas.

83% of customers are highly satisfied with Practical Law and would recommend to a colleague.

81% of customers agree that Practical Law saves them time.

• Partnerships and LLPs