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What is Goodwill in the Context of a Trade Mark?

Wednesday, 28 March 2012

Goodwill is a concept familiar to professionals and business people alike. When a trade mark is bought and sold the transfer normally includes the transfer of goodwill at the same time, so it is important for buyers and sellers to understand what this entails.

Goodwill - Common Definitions

Most commonly accountants use goodwill to mean the value of an entity over and above the fair value of its net assets, typically when a company buys another company. This definition may encapsulate any number of intangible assets including goodwill in trade marks belonging to the business. Landlords and tenants use it with reference to the value that a particular tenant may bring to a building. Tax specialists also have a slightly different usage again and trade mark lawyers have a narrower definition all of their own.

Goodwill in Trade Marks

Goodwill in a trade mark is the value of the attraction of a business or product to customers that the trade mark possesses. It is the benefit and advantage of the good name, reputation and connection of a business. It is the thing that attracts customers to a business and is one of the factors that separates old businesses from new businesses. It may consist of a number of elements but one attribute it must possess is locality. What is meant by this is that the goodwill must attach to a business - it is inseparable from the business to which it adds value and it cannot subsist by itself.

The Property in Goodwill

In English law goodwill appears to be a species of personal property capable of being sold, charged or bequeathed in a will. For a trade mark to have goodwill in England it is not necessary for the owner to have a place of business in England but there must be some customers or some business in England.

Protection of Goodwill in a Trade Mark

There is case law that suggests a vendor of goodwill in his business may not destroy the goodwill in the business afterwards by soliciting former customers. However, any purchaser should seek contractual restraints for a reasonable period to prevent the vendor from damaging goodwill in a business or a trade mark in this way.

If you would like more information on goodwill in the context of trade marks or other intellectual property matters Rollingsons has experienced lawyers who can help you. For more information please contact James Crighton via e-mail or by phone on 0207 611 4848.