The Importance of Clean Chain of Title in Buying, Selling or Licensing Trademarks and Copyrights

Chain of title in intangible rights? Yes, you heard it here first. Chain of title is just as applicable to trademarks and copyrights as to real property (such as a home or plot of land). Accordingly, buyers and sellers, as well as licensors and licensees, of the rights encompassed by trademarks or copyrights must ensure the chain of title establishes they are dealing with the "right" party. This is sometimes referred to as a "clean" chain of title because a sequence of documents without gaps in time or parties establishes ownership of rights. 

Copyrights Chain of Title

Now for some examples. Let’s say you are a filmmaker and want to purchase (or option the purchase of) literary rights in a book to make a screenplay and then sell your film based on that screenplay. First you must make sure you are contracting with the copyright owner in the book and that the film rights haven’t already been sold to another party. Then you have to make sure that if you are not writing the screenplay yourself, you secure a copyright assignment or work made for hire agreement from your screenwriter(s) ensuring that you own the copyright in the screenplay. (You can read more about work made for hire here.) And finally, you must negotiate work made for hire agreements with your camera crew/editors.

That’s how chain of title (your ownership of the rights in and to the film) is established. Whoever buys your film will be sure to want evidence of clean chain of title, just as you would want to make sure the seller has clean chain of title before you close on a home. Recording all the contracts that establish your chain of title with the U.S. Copyright Office is one way to make the purchaser of your film (or other creative work) feel comfortable, as all the records are publicly accessible on the Copyright Office website. But if you are the seller, you will certainly be asked to represent and warrant that you own the rights to show and exploit the film, free and clear, before the purchaser will buy those rights.

Trademarks Chain of Title

The same principles apply to trademarks. Let’s say you want to license rights to make cookware from a famous restaurant brand. First, you must check to make sure the restaurant owner has exclusive rights in the brand. One way to do this is to check the U.S. Trademark Office website. Then you will want to ensure there are no other "exclusive" licenses --- by asking the trademark owner (the restaurant). And finally, you will want the restaurant/brand owner to represent and warrant that it has the rights it is granting to you to make the cookware and brand it with its trademark, as part of a comprehensive license agreement. 

So remember, when buying, selling, or licensing intangible rights, be sure to make sure the chain of title is clean. If you have any questions about buying, selling, or licensing rights under copyright or trademarks, please feel free to contact me at jhamburg@norris-law.com.