August 22, 2025 by Amit Kumar
While many trademark assignments and transfers are straightforward, some transactions raise significant risks of consumer confusion, anticompetitive practices, or misleading use of marks.
To safeguard the integrity of the marketplace and protect consumers, the Trade Marks Act, 1999 imposes specific restrictions under Sections 40 and 41, read with Rule 83 of the Trade Marks Rules.
In such cases, assignments are not valid unless the Registrar of Trade Marks issues a certificate or approval.
This process is critical for businesses engaging in M&A, restructuring, franchising, licensing, or cross-sector assignments, where multiple owners or non-goodwill transfers are involved.
Section 40 prohibits assignments that would create multiple exclusive owners of identical or similar trademarks for the same or similar goods/services in the same market. Such duplication could mislead the public and dilute brand value.
Registrar’s Role: Assignment may still proceed if the Registrar certifies that no public confusion will arise, provided adequate restrictions (territory, class of goods, or market segmentation) are imposed.
Example: A clothing brand “URBAN STYLE” is proposed to be assigned to two different fashion companies, both operating in India. Without territorial or product-line limitations, consumers would assume both are from the same source. The Registrar can refuse or impose conditions.
Section 41 addresses assignments without the transfer of goodwill—often called gross assignments. These may mislead the public if the mark is detached from its original reputation.
Registrar’s Approval: Such assignments require the Registrar’s prior approval and, under Rule 80, directions for advertisement.
Example: If a juice company assigns “FRESH SIP” to another entity selling energy drinks, without goodwill, consumers may be misled into believing both products are connected. The Registrar may mandate advertisement with disclaimers before approval.
When a transaction falls under Section 40 or 41, the following procedure (Rule 83) applies:
Filing Form TM-P with the Trade Marks Registry.
Submission of a statement of case in duplicate, explaining circumstances.
Filing of certified copy of assignment deed or proposed deed.
Providing supporting evidence, clarifications, or affidavits.
The Registrar may:
Call for further documents or amendments to the statement of case.
Conduct a hearing if necessary.
Issue:
A certificate of approval (for Section 40 cases), or
A notification of approval/disapproval (for Section 41 cases).
The final order is recorded, and the sealed statement of case is attached to the certificate.
Avoids Nullity: Without Registrar’s certificate, such assignments are void and unenforceable.
Market Clarity: Prevents consumer confusion caused by parallel ownership.
M&A Transactions: Corporate mergers and restructuring often involve partial assignments that may trigger Section 40 scrutiny.
Franchising & Licensing: Gross assignments or shared rights need Registrar’s oversight to remain valid.
Cross-Border Deals: Transfers involving multiple jurisdictions must factor in both Indian restrictions and foreign regulatory approvals.
When negotiating complex IP transactions—whether splitting rights by territory, assigning marks without goodwill, or allocating rights among group companies—factor in Rule 83 compliance at the structuring stage itself. Failure to obtain the Registrar’s certificate can:
Derail mergers and acquisitions,
Delay franchise or licensing agreements, and
Render assignments legally invalid.
Trademark assignments under Sections 40 and 41 are subject to Regulatory oversight for good reason—they protect consumers from confusion and ensure trademarks are not misused as mere tradable commodities. By carefully complying with Rule 83 procedures, businesses can safeguard the enforceability of their trademark rights while achieving commercial objectives.