Intellectual Property (“IP”) refers to intangible creations of the human mind. These are categorised and protected according to the type of creation. In South Africa, the main categories of IP include Trade Marks, Copyright, Patents, Designs and Trade Secrets.
Each form of IP affords the owner thereof an exclusive right or monopoly in respect of that creation. IP rights are intangible assets and can be extremely valuable to the owner. A company’s IP could be what sets it apart from its competitors, therefore, before concluding certain commercial transactions it is essential for IP to be properly valued and transferred (if applicable).
When a company is incorporated, one of the most common forms of IP which the incorporators will consider are Trade Marks as these are indicators of the origin of the goods and services of a company. Trade Marks can comprise of a name, a number, a symbol or any sign that is capable of graphic representation. Depending on the commercial transaction, it may be necessary to ensure that Trade Marks are properly transferred and recorded at the Trade Marks registry.
The Trade Marks Act, No. 194 of 1993 (“the Trade Marks Act”) provides two avenues for the transfer of a Trade Mark. The first is by way of assignment which is defined in the Trade Marks Act as “assignment by act of the parties concerned”. An assignment agreement is an agreement whereby ownership of a Trade Mark is transferred from the proprietor of the Trade Mark (“the assignor”) to the next proprietor thereof (“the assignee”). Application must be made to the registry to record that transfer on the register. Failure to do so would result in the transfer being valid between the assignor and the assignee only and the assignment would not be binding on third parties.
The second way to transfer a Trade Mark is by way of transmission which is defined in the Trade Marks Act as “transfer by operation of law, not being assignment”. In such cases, a separate agreement transferring ownership need not be concluded because ownership of the Trade Mark has passed automatically under the law.
Both avenues of transfer may be encountered in commercial transactions. For example, in a sale of business transaction, the assets and liabilities of one company are sold to another and the assets and/or liabilities of the seller will be transferred to the buyer. It is common practice for parties to conclude a Sale of Business Agreement together with a separate Assignment Agreement whereby the seller transfers ownership of the Trade Marks to the buyer, and the Assignment Agreement is then recorded at the Trade Marks registry.
Transmission may arise, for example, from Section 113 of the Companies Act, No. 71 of 2008 (“the Companies Act”) which governs Statutory Mergers and Amalgamations. The result of a transaction in terms of that section is that either:
(a) two or more companies combine to form a completely new company and the combining companies terminate; or
(b) one company merges with one or more other companies, and at least one company survives, and the other(s) terminate.
In terms of Section 116(7) of the Companies Act ,“(w)hen an amalgamation or merger agreement has been implemented – (a) the property of each amalgamating or merging company becomes the property of the newly amalgamated, or surviving merged, company or companies”. The transfer of assets and liabilities occurs by operation of law, therefore, separate agreements transferring such need not be concluded.
Section 116(8) further states that “(i)f, as a consequence of an amalgamation or merger, any property that is registered in terms of any public regulation is to be transferred from an amalgamating or merging company to an amalgamated or merged company, a copy of the amalgamation or merger agreement, together with a copy of the filed notice of amalgamation or merger, constitutes sufficient evidence for the keeper of the relevant property registry to effect a transfer of the registration of that property”.
This correlates with Sections 39 and 40 of the Trade Marks Act, which allow for Trade Mark(s) in the name of a merging company to be transferred to the newly amalgamated or surviving merged company if an application is made to the registrar and proof of title to the registrar’s satisfaction is provided being a copy of the amalgamation or merger agreement, together with a copy of the filed notice of amalgamation or merger. A separate assignment agreement is not required as the transfer is automatic by virtue of the underlying amalgamation or merger agreement.
Our Intellectual Property Department can assist with the transfer of IP rights in a variety of commercial transactions. Should you require any further information or assistance with the preparation of the transfer documents, please contact us on mailur@gb.co.za or info@gbcape.co.za.
Tel: +27 21 023 4262, Email: annelisa.bansi@gb.co.za
