When a business changes hands, its trademarks may also be transferred. However, a trademark does not properly change hands unless the goodwill associated with the trademark is also transferred. This does not happen automatically, and trademark owners must take proper steps to ensure that ownership of the trademark has properly transferred to the new trademark owner and is not deemed void on a legal technicality.

What is Trademark Goodwill?

Trademark goodwill represents the accumulated reputation, customer loyalty, and market recognition that a brand has built over time. For example, there is tremendous goodwill associated with the Nike swoosh for sneakers and Apple’s Apple logo for tech products. 

This goodwill is inextricably linked to the trademarks themselves, creating significant economic value that buyers of a business often seek to acquire along with the underlying business. Simply put, goodwill is what gives a trademark its value.

The Legal Framework

Under trademark law, goodwill typically transfers with the trademark when there’s a legitimate business transfer, but several conditions must be met. 

The key principle is that trademark rights follow the goodwill of the business.

• The transfer must include the associated business operations or product lines—you can’t simply sell a trademark as a standalone asset without the underlying business goodwill. 
• The written transfer should include language regarding the transfer of goodwill in the trademarks. 

Trademarks serve as indicators of source and quality, so maintaining the connection between the trademark and its goodwill is essential for the transfer to be legally valid.

When a company sells its operations, the associated trademarks and their accumulated goodwill generally transfer to the buyer, allowing them to continue using the marks without interruption. However, if goodwill isn’t properly transferred, the trademark rights may be deemed abandoned or invalid.

Practical Considerations

For business owners, it is important to know that trademark transfers require more than just signing over intellectual property rights. Due diligence should include documenting the goodwill transfer, ensuring continuity of product quality and business operations, and properly notifying customers and regulatory bodies when necessary. 

Buyers should verify that they’re receiving not just the legal rights to use a trademark, but also the valuable goodwill that gives those rights their commercial meaning. The transfer of trademark goodwill represents a critical intersection of intellectual property law and business operations, where legal technicalities meet real-world commercial value. Getting it right ensures that valuable brand equity continues to serve its intended purpose in the marketplace. Buyers and sellers of businesses should consult with experienced IP counsel to ensure that trademarks are properly transferred with goodwill.