assignment or ownership

Assignment of Interest In LLC: Everything You Need to Know

Assignment of interest in LLCs happens when a member communicates to other members his/her intention to transfer part or all of his ownership rights in the LLC to another entity. 3 min read updated on February 01, 2023

Updated October 28, 2020:

Assignment of interest in LLCs happens when a member communicates to other members his/her intention to transfer part or all of his ownership rights in the LLC to another entity. The assignment is usually done as a means for members to provide collateral for personal loans, settle debts, or leave the LLC. The member (assignor) and the person assigned (assignee) sign a document called the Membership Assignment of Interest.

Why a Member May Want to Assign Interest

A member may choose to assign interest for a number of reasons.

• The assignment of interest may happen as collateral to a loan to one of the members.
• Some members can assign interest to settle debts. The assignment will be effective until the debt is cleared.
• An assignment of interest can also' be done  to a member's legal heirs , going into effect upon the death of a member. 

The Rights and Limitations of the Assignee

The laws governing LLC membership interest assignments vary considerably from one state to another. 

• Most states prohibit the assignee from participating in the LLC's operations or decisions unless the Articles of Organization have this provision.
• An assignee is protected from liability from the assignor until the assignee becomes a member in most states. However, the law in a few states, including California and Florida, states that the assignee does get the assignor's liability.
• Should the assignee become a member after the assignment, he is only entitled to the rights and restrictions the assignor had.
• The assignment usually gives the assignee the right to receive the assignor's share of the profits — but not necessarily the other rights.

The Rights and Limitations of the Assignor

• In many states, all LLC members have the right to assign membership interest.
• In most states, assigning interest does not necessarily lead to forfeiting of voting and management rights and can be temporary. Texas law, on the other hand, states that the assignor ceases to be a member of the LLC after the assignment.

The Rights and Limitations of Other Members

• All members of the LLC have to be notified of any type of assignment.
• Some states require the assignment of interest to be approved by all members.
• The new person who has been assigned interest does not necessarily become a member even if the assigner has decided to leave the LLC. The other members can decide whether to admit the assignee as a member or not. Should a member assign interest without the input of other members, the interest is normally limited to financial benefits.
• In a two-member LLC, one member can easily transfer the interest to the other. 

The Membership Interest Assignment Document

The LLC's operating agreement should explain the rights of members on issues of transfer of interest, and the agreement should be followed during the assignment process. The Membership Interest Assignment acts as a record of the agreement, and the LLC normally keeps a copy of the document. The law in most states does not provide a formal template of the Membership Interest Assignment document but lists what should be included in the document. The document should have the following details:

• Percentage of interest that will go to the assignee 
• Whether the assignee will have voting rights
• The signatures of the assignor and the assignee

Assignment of Interest Versus Selling Ownership Stake

The assignment of interest is typically different from selling the ownership stake . Selling a member's ownership stake in the LLC requires unanimous approval by the other members. A departing member may also assign his membership to another member.

If a member is being paid to transfer interest, this is treated for tax purposes as a sale, and the selling member's gains might be liable to capital gains tax. Even if a departing member is not paid for his interest, if the departure results in the assignee getting the departing members' share of liability, the departure is seen as an exchange or sale.

Assignment of Interest Versus Abandoning an LLC

If a member wants to withdraw interest in an LLC, he/she can choose to simply legally abandon the LLC in most states. The abandoning member should give some kind of notice to the other members explaining that he is abandoning membership. Abandoning membership does not usually require the approval of other members.

Abandoning an LLC does not absolve the member of liability he/she may have incurred when still a member.

If you need help with the assignment of interest in LLCs, you can  post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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What Happens to a Contract When a Business Changes?

Can a Contract Survive a Name Change or Other Change?

• Contracts and Business Changes
• When a Business Changes its Name
• When a Business is Bought or Sold
• When a Business Declares Bankruptcy

What if you have a contract with another business or with a person, and there is a significant change in one of the businesses?

Some business changes are small, like a location change, and some are large, like bankruptcy or a name change or one of the parties to the contract being bought by another business.

You might work for a business as an independent contractor and you have a contract with that. Or your business might have a license agreement to sell the licensed products of another business. Or your company may be  leasing commercial space  from someone.

The simple answer to what happens to a contract when a business changes is, "it depends on the contract."

Contract Sections and Business Changes

Many business contracts include sections dealing with what happens if there is a change in the business. Two contract principles that might affect the need to make a change in the contract are novation and assignment.

Novation is a substitution, including the substitution of one party or obligation for another in a contract. Here's how that works: Party A and Party B are the original signers of the contract. Party A has been bought by Party C, Parties A and B must agree to the novation and sign a novation agreement stating that Party C has been substituted for Party A. Party A is excused from liability by the novation agreement, and Party A gives up any rights against Party B.    

A novation agreement may be part of an original contract, or it may need to be signed at the time of the change. In the case of a name change, for example, a novation agreement might be needed in order to make a new contract with the newly named business.

Assignment is a transfer of some property or ownership to someone else, including duties and rights. For example, some independent contractor contracts state that the duties of the contractor can't be assigned or transferred to someone else. Ownership of intellectual property (copyrights, trademarks, or trade secrets) are sometimes transferred to someone else. A contract might include the right to transfer the responsibilities of one of the parties of a contract to another business entity, which might include the assignment to a successor (new) company.  

Another option for changing a contract for a business change is to create aletter of agreementthat refers to the specific change and have both parties sign it.

Here's an example of an assignment agreement by which the assignor (the party who does the assigning) assigns a stock purchase agreement to an assignee (new owner). The assignee gains all the assignor's rights and interest in the property, and the assignee agrees to perform all "obligations, duties, liabilities and commitments" of the assignor under the agreement.

Contract if a Company Changes its Name

Here is an example of what might happen to a contract if a business changes its name:

 "I have an employment contract with a business. I was informed this morning that the company has changed its name and legal entity. They even have a new sign on the building. Does this mean the contract is void? More to the point, does that mean I don't have to abide by the non-compete agreement?"

In these types of situations, a lot depends on the wording of the contract. Some contracts plan for the possibility of changes. 

Some contracts specifically state that the parties "now known as XYZ Corporation" or "by any other name" or " by which the party may be titled." or something to that effect. Even if the possibility of a name change isn't specifically mentioned in the contract language, the business doesn't get out of contracts just by changing its name and legal type. 

If you think about it, that would be a neat way to avoid debts, by just changing the name of the business. So, no, a name/entity type change doesn't mean a contract is void.

An Example of a Name Change Agreement

You can also sign a separate agreement to acknowledge the name change of a company. In this case, the change-of-name agreement includes:

• A document proving that the name has officially been changed with the state where the business is registered,
• The opinion of an attorney that the change of name was legally done,
• A list of contracts and purchase orders between the two parties,
• The agreement that all rights and obligations of both parties to these contracts are not affected by the change, and
• A statement that all contracts covered by the agreement are amended by substituting the name.  

Contracts When a Business is Bought or Sold

If a business has a major change in ownership, (the sale of a business, for example), part of the terms of the sale may be the assignment of the contract to the new owner. If the business sale documents don't specify, you might have to look at the contract itself. 

As part of the buy/sell process, a new contract may be substituted for a previous contract, with the agreement of both parties. This is the novation section discussed above.

Contracts When a Business Declares Bankruptcy

The bankruptcy judge in a bankruptcy process decides what happens to active ongoing contracts during the bankruptcy process. You can hire an attorney to protect your interest in the process, including making the debtor (the company in bankruptcy) specifically affirm or reject your contract. 

The amounts owed to you under a contract also fall into the bankruptcy process and you become a creditor of the company in bankruptcy. In Chapter 11 (reorganization), the debtor agrees to a plan, which creates new contract rights that replace or supersede pre-bankruptcy contracts.

You should know that if you and the debtor have an ongoing contract that obligates you both to certain requirements (buying and payment, for example), you can't stop doing what the contract requires during the bankruptcy risking being in default. 

Disclaimer : If you have a contract with a business and something changes, consult your attorney before you make any decisions, sign a new contract, or make statements that might compromise your status in the contract. 

SEC EDGAR. " EX-4.130 24 d316138dex4130.htm Form of Novation Agreement. Dated December 30, 2011. " Accessed April 10, 2020.

Cornell Legal Information Institute. " Novation ." Accessed April 10, 2020.

Cornell Legal Information Institute. " Assignment. " Accessed Apr. 10, 2020.

Acquisition.Gov. " 42.1205 Agreement to Recognize Contractor's Change of Name. " Accessed April 10, 2020.

United States Courts. " Chapter 11 – Bankruptcy Basics ." The Discharge. Accessed April 10, 2020.

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Assignment of Membership Interest: The Ultimate Guide for Your LLC

LegalGPS : May 9, 2024 at 12:00 PM

As a business owner, there may come a time when you need to transfer ownership of your company or acquire additional members. In these situations, an assignment of membership interest is a critical step in the process. This blog post aims to provide you with a comprehensive guide on everything you need to know about the assignment of membership interest and how to navigate the procedure efficiently. So, let's dive into the world of LLC membership interest transfers and learn how to secure your business!

Table of Contents

Necessary approvals and consent, impact on ownership, voting, and profit rights, complete assignment, partial assignment.

• Key elements to include

Step 1: Gather Relevant Information

Step 2: review the llc's operating agreement, step 3: obtain necessary approvals and consents, step 4: outline the membership interest being transferred, step 5: determine the effective date of the assignment, step 6: specify conditions and representations, step 7: address tax and liability issues, step 8: draft the entire agreement and governing law clauses, step 9: review and sign the assignment agreement.

• Advantages of using a professionally-created template
• How our contract templates stand out from the rest

Frequently Asked Questions (FAQs) about Assignment of Membership Interest

Do you need a lawyer for this.

What is an Assignment of Membership Interest?

An assignment of membership interest is a document that allows a member of an LLC to transfer their ownership share in the company to another person or entity. This can be done in the form of a sale or gift, which are two different scenarios that generally require different types of paperwork. An assignment is typically signed by the parties involved and delivered to the Secretary of State's office for filing. However, this process can vary depending on where you live and whether your LLC has members other than yourself as well as additional documents required by state law.

Before initiating the assignment process, it's essential to review the operating agreement of your LLC, as it may contain specific guidelines on how to assign membership interests.

Often, these agreements require the express consent of the other LLC members before any assignment can take place. To avoid any potential disputes down the line, always seek the required approvals before moving forward with the assignment process.

It's essential to understand that assigning membership interests can affect various aspects of the LLC, including ownership, voting rights, and profit distribution. A complete assignment transfers all ownership rights and obligations to the new member, effectively removing the original member from the LLC. For example, if a member assigns his or her interest, the new member inherits all ownership rights and obligations associated with that interest. This includes any contractual obligations that may be attached to the membership interest (e.g., a mortgage). If there is no assignment of interests clause in your operating agreement, then you will need to get approval from all other members for an assignment to take place.

On the other hand, a partial assignment permits the original member to retain some ownership rights while transferring a portion of their interest to another party. To avoid unintended consequences, it's crucial to clearly define the rights and responsibilities of each party during the assignment process.

Types of Membership Interest Transfers

Membership interest transfers can be either complete or partial, depending on the desired outcome. Understanding the differences between these two types of transfers is crucial in making informed decisions about your LLC.

A complete assignment occurs when a member transfers their entire interest in the LLC to another party, effectively relinquishing all ownership rights and obligations. This type of transfer is often used when a member exits the business or when a new individual or entity acquires the LLC.

For example, a member may sell their interest to another party that is interested in purchasing their share of the business. Complete assignment is also used when an individual or entity wants to purchase all of the interests in an LLC. In this case, the seller must receive unanimous approval from the other members before they can transfer their entire interest.

Unlike a complete assignment, a partial assignment involves transferring only a portion of a member's interest to another party. This type of assignment enables the member to retain some ownership in the business, sharing rights, and responsibilities proportionately with the new assignee. Partial assignments are often used when adding new members to an LLC or when existing members need to redistribute their interests.

A common real-world example is when a member receives an offer from another company to purchase their interest in the LLC. They might want to keep some ownership so that they can continue to receive profits from the business, but they also may want out of some of the responsibilities. By transferring only a partial interest in their membership share, both parties can benefit: The seller receives a lump sum payment for their share of the LLC and is no longer liable for certain financial obligations or other tasks.

How to Draft an Assignment of Membership Interest Agreement

A well-drafted assignment of membership interest agreement can help ensure a smooth and legally compliant transfer process. Here is a breakdown of the key elements to include in your agreement, followed by a step-by-step guide on drafting the document.

Key elements to include:

The names of the assignor (the person transferring their interest) and assignee (the person receiving the interest)

The name of your LLC and the state where it was formed

A description of the membership interest being transferred (percentage, rights, and obligations)

Any required approvals or consents from other LLC members

Effective date of the assignment

Signatures of all parties involved, including any relevant witnesses or notary public

Before you begin drafting the agreement, gather all pertinent data about the parties involved and the membership interest being transferred. You'll need information such as:

The names and contact information of the assignor (the person transferring their interest) and assignee (the person receiving the interest)

The name and formation details of your LLC, including the state where it was registered

The percentage and value of the membership interest being transferred

Any specific rights and obligations associated with the membership interest

Examine your LLC's operating agreement to ensure you adhere to any predetermined guidelines on assigning membership interests. The operating agreement may outline specific procedures, required approvals, or additional documentation necessary to complete the assignment process.

If your LLC doesn't have an operating agreement or if it's silent on this matter, follow your state's default LLC rules and regulations.

Before drafting the assignment agreement, obtain any necessary approvals or consents from other LLC members as required by the operating agreement or state law. You may need to hold a members' meeting to discuss the proposed assignment and document members' consent in the form of a written resolution.

Detail the membership interest being transferred in the Assignment of Membership Interest Agreement. Specify whether the transfer is complete or partial, and include:

The percentage of ownership interest being assigned

Allocated profits and losses, if applicable

Voting rights associated with the transferred interest

The assignor's rights and obligations that are being transferred and retained

Any capital contribution requirements

Set an effective date for the assignment, which is when the rights and obligations associated with the membership interest will transfer from the assignor to the assignee.

This date is crucial for legal and tax purposes and helps both parties plan for the transition. If you don’t specify an effective date in the assignment agreement, your state's law may determine when the transfer takes effect.

In the agreement, outline any conditions that must be met before the assignment becomes effective. These could include obtaining certain regulatory approvals, fulfilling specific obligations, or making required capital contributions.

Additionally, you may include representations from the assignor attesting that they have the legal authority to execute the assignment. Doing this is important because it can prevent a third party from challenging the assignment on grounds of lack of authority. If the assignor is an LLC or corporation, be sure to specify that it must be in good standing with all necessary state and federal regulatory agencies.

Clearly state that the assignee will assume responsibility for any taxes, liabilities, and obligations attributable to the membership interest being transferred from the effective date of the assignment. You may also include indemnification provisions that protect each party from any potential claims arising from the other party's actions.

For example, you can include a provision that provides the assignor with protection against any claims arising from the transfer of membership interests. This is especially important if your LLC has been sued by a member, visitor, or third party while it was operating under its current management structure.

In the closing sections of the assignment agreement, include clauses stating that the agreement represents the entire understanding between the parties concerning the assignment and supersedes any previous agreements or negotiations. Specify that any modifications to the agreement must be made in writing and signed by both parties. Finally, identify the governing law that will apply to the agreement, which is generally the state law where your LLC is registered.

This would look like this:

Once you've drafted the Assignment of Membership Interest Agreement, ensure that all parties carefully review the document to verify its accuracy and completeness. Request a legal review by an attorney, if necessary. Gather the assignor, assignee, and any necessary witnesses or notary public to sign the agreement, making it legally binding.

Sometimes the assignor and assignee will sign the document at different times. If this is the case, then you should specify when each party must sign in your Assignment Agreement.

Importance of a Professionally-drafted Contract Template

To ensure a smooth and error-free assignment process, it's highly recommended to use a professionally-drafted contract template. While DIY options might seem tempting, utilizing an expertly-crafted template provides several distinct advantages.

Advantages of using a professionally-created template:

Accuracy and Compliance: Professionally-drafted templates are designed with state-specific regulations in mind, ensuring that your agreement complies with all necessary legal requirements.

Time and Cost Savings: With a pre-written template, you save valuable time and resources that can be better spent growing your business.

Reduced Legal Risk: Legal templates created by experienced professionals significantly reduce the likelihood of errors and omissions that could lead to disputes or litigations down the road.

How our contract templates stand out from the rest:

We understand the unique needs of entrepreneurs and business owners. Our contract templates are designed to provide a straightforward, user-friendly experience that empowers you with the knowledge and tools you need to navigate complex legal processes with ease. By choosing our Assignment of Membership Interest Agreement template, you can rest assured that your business is in safe hands. Click here to get started!

As you embark on the journey of assigning membership interest in your LLC, here are some frequently asked questions to help address any concerns you may have:

Is an assignment of membership interest the same as a sale of an LLC? No. While both processes involve transferring interests or assets, a sale of an LLC typically entails the sale of the entire business, whereas an assignment of membership interest relates to the transfer of some or all membership interests between parties.

Do I need an attorney to help draft my assignment of membership interest agreement? While not mandatory, seeking legal advice ensures that your agreement complies with all relevant regulations, minimizing potential legal risks. If you prefer a more cost-effective solution, consider using a professionally-drafted contract template like the ones we offer at [Your Company Name].

Can I assign my membership interest without the approval of other LLC members? This depends on your LLC's operating agreement and state laws. It's essential to review these regulations and obtain any necessary approvals or consents before proceeding with the assignment process.

The biggest question now is, "Do you need to hire a lawyer for help?" Sometimes, yes ( especially if you have multiple owners ). But often for single-owner businesses, you don't   need a lawyer to start your business .

Many business owners instead use tools like  Legal GPS for Business , which includes a step-by-step, interactive platform and 100+ contract templates to help you start and grow your company.

We hope this guide provides valuable insight into the process of assigning membership interest in your LLC. By understanding the legal requirements, implications, and steps involved, you can navigate this essential task with confidence. Ready to secure your business with a professionally-drafted contract template? Visit our website to purchase the reliable and user-friendly Assignment of Membership Interest Agreement template that enables your business success.

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29 Jan 2024

Patent Assignment: How to Transfer Ownership of a Patent

By Michael K. Henry, Ph.D.

• Intellectual Property
• Patent Prosecution

This is the second in a two-part blog series on owning and transferring the rights to a patent. ( Read part one here. )

As we discussed in the first post in this series, patent owners enjoy important legal and commercial benefits: They have the right to exclude others from making, selling, using or importing the claimed invention, and to claim damages from anyone who infringes their patent.

However, a business entity can own a patent only if the inventors have assigned the patent rights to the business entity. So if your employees are creating valuable IP on behalf of your company, it’s important to get the patent assignment right, to ensure that your business is the patent owner.

In this post, we’ll take a closer look at what a patent assignment even is — and the best practices for approaching the process. But remember, assignment (or transfer of ownership) is a function of state law, so there might be some variation by state in how all this gets treated.

What Is a Patent Assignment and Why Does it Matter?

A patent assignment is an agreement where one entity (the “assignor”) transfers all or part of their right, title and interest in a patent or application to another entity (the “assignee”). 

In simpler terms, the assignee receives the original owner’s interest and gains the exclusive rights to pursue patent protection (through filing and prosecuting patent applications), and also to license and enforce the patent. 

Ideally, your business should own its patents if it wants to enjoy the benefits of the patent rights. But  under U.S. law , only an inventor or an assignee can own a patent — and businesses cannot be listed as an inventor. Accordingly, patent assignment is the legal mechanism that transfers ownership from the inventor to your business.

Patent Assignment vs. Licensing

Keep in mind that an assignment is different from a license. The difference is analogous to selling versus renting a house.

In a license agreement, the patent owner (the “licensor”) gives another entity (the “licensee”) permission to use the patented technology, while the patent owner retains ownership. Like a property rental, a patent license contemplates an ongoing relationship between the licensor and licensee.

In a patent assignment, the original owner permanently transfers its ownership to another entity. Like a property sale, a patent assignment is a permanent transfer of legal rights.

U sing Employment Agreements to Transfer Patent Ownership

Before your employees begin developing IP,  implement strong hiring policies  that ensure your IP rights will be legally enforceable in future.

If you’re bringing on a new employee, have them sign an  employment agreement  that establishes up front what IP the company owns — typically, anything the employee invents while under your employment. This part of an employment agreement is often presented as a self-contained document, and referred to as a “Pre-Invention Assignment Agreement” (PIAA).

The employment agreement should include the following provisions:

• Advance assignment of any IP created while employed by your company, or using your company’s resources
• An obligation to disclose any IP created while employed by your company, or using your company’s resources
• An ongoing obligation to provide necessary information and execute documents related to the IP they created while employed, even after their employment ends
• An obligation not to disclose confidential information to third parties, including when the employee moves on to a new employer

To track the IP your employees create, encourage your employees to document their contributions by completing  invention disclosure records .

But the paperwork can be quite involved, which is why your employment policies should also include  incentives to create and disclose valuable IP .

Drafting Agreements for Non-Employees

Some of the innovators working for your business might not have a formal employer-employee relationship with the business. If you don’t make the appropriate arrangements beforehand, this could complicate patent assignments. Keep an eye out for the following staffing arrangements:

• Independent contractors:  Some inventors may be self-employed, or they may be employed by one of your service providers.
• Joint collaborators:  Some inventors may be employed by, say, a subsidiary or service company instead of your company.
• Anyone who did work through an educational institution : For example, Ph.D. candidates may not be employees of either their sponsoring institution or your company.

In these cases, you can still draft contractor or collaborator agreements using the same terms outlined above. Make sure the individual innovator signs it before beginning any work on behalf of your company.

O btaining Written Assignments for New Patent Applications

In addition to getting signed employment agreements, you should  also  get a written assignments for each new patent application when it’s filed, in order to memorialize ownership of the specific patent property.

Don’t rely exclusively on the employment agreement to prove ownership:

• The employment agreement might contain confidential terms, so you don’t want to record them with the patent office
• Because employment agreements are executed before beginning the process of developing the invention, they won’t clearly establish what specific patent applications are being assigned

While you  can  execute the formal assignment for each patent application after the application has been filed, an inventor or co-inventor who no longer works for the company might refuse to execute the assignment.

As such, we recommend executing the assignment before filing, to show ownership as of the filing date and avoid complications (like getting signatures from estranged inventors).

How to Execute a Written Patent Agreement

Well-executed invention assignments should:

• Be in writing:  Oral agreements to assign patent rights are typically not enforceable in the United States
• Clearly identify all parties:  Include the names, addresses, and relationship of the assignor(s) and assignee
• Clearly identify the patent being assigned:  State the patent or patent application number, title, inventors, and filing date
• Be signed by the assignors
• Be notarized : If notarization isn’t possible, have one or two witnesses attest to the signatures

Recording a Patent Assignment With the USPTO

Without a recorded assignment with the U.S. patent office, someone else could claim ownership of the issued patent, and you could even lose your rights in the issued patent in some cases. 

So the patent owner (the Assignee) should should record the assignment through the  USPTO’s Assignment Recordation Branch . They can use the  Electronic Patent Assignment System (EPAS)  to file a  Recordation Cover Sheet  along with a copy of the actual patent assignment agreement.

They should submit this paperwork  within three months  of the assignment’s date. If it’s recorded electronically, the USPTO  won’t charge a recordation fee .

Need to check who owns a patent?  The USPTO website  publicly lists all information about a patent’s current and previous assignments.

When Would I Need to Execute a New Assignment for a Related Application?

You’ll need only one patent assignment per patent application, unless new matter is introduced in a new filing (e.g., in a  continuation-in-part , or in a non-provisional application that adds new matter to a  provisional application ). In that case, you’ll need an additional assignment to cover the new matter — even if it was developed by the same inventors.

What If an Investor Won’t Sign the Written Assignment?

If you can’t get an inventor to sign an invention assignment, you can still move forward with a patent application — but you’ll need to document your ownership. To document ownership, you can often rely on an   employee agreement ,  company policy ,  invention disclosure , or other employment-related documentation.

D o I Need to Record My Assignments in Foreign Countries?

Most assignments transfer all rights, title, and interest in all patent rights throughout the world.

But in some countries, the assignment might not be legally effective until the assignment has been recorded in that country — meaning that the assignee can’t enforce the patent rights, or claim damages for any infringement that takes place before the recordation. 

And there might be additional formal requirements that aren’t typically required in the United States. For example, some countries might require a transfer between companies to be signed by both parties, and must contain one or both parties’ addresses.

If you’re assigning patents issued by a foreign country, consult a patent attorney in that country to find out what’s required to properly document the transfer of ownership.

N eed Help With Your Patent Assignments?

Crafting robust assignment agreements is essential to ensuring the proper transfer of patent ownership. An  experienced patent professional  can help you to prepare legally enforceable documentation.

Henry Patent Law Firm has worked with tech businesses of all sizes to execute patent assignments —  contact us now  to learn more.

GOT A QUESTION? Whether you want to know more about the patent process or think we might be a good fit for your needs – we’d love to hear from you!

Michael K. Henry, Ph.D.

Michael K. Henry, Ph.D., is a principal and the firm’s founding member. He specializes in creating comprehensive, growth-oriented IP strategies for early-stage tech companies.

10 Jan 2024

Geothermal Energy: An Overview of the Patent Landscape

By Michael Henry

Don't miss a new article. Henry Patent Law's Patent Law News + Insights blog is designed to help people like you build smart, scalable patent strategies that protect your intellectual property as your business grows. Subscribe to receive email updates every time we publish a new article — don't miss out on key tips to help your business be more successful.

• Collections

Who Owns What: Assignment and Ownership of Patents and Applications

Why does ownership of a patent/patent application matter?

A patent is a government-granted property right that can be used to exclude others from making, using, selling, offering to sell, and importing an invention for a specified time. Patents provide important commercial benefits (discussed in detail in our companion piece What You Need To Know About Patents ) — but only for patent owners.

So who owns a patent/patent application?

In the US, the inventor is presumed to be the initial owner of a patent or patent application. If there is more than one inventor, there may be more than one owner. Ownership can be transferred or reassigned. If your company values intellectual property and has employees who are encouraged to innovate, here are a few important strategies to ensure that your company can benefit from patents generated through employee inventions.

• Agreements with employees and service providers (Automatic Assignment) : Companies should have all employees sign confidential information and inventions assignment agreements before employees start generating intellectual property. Having employees sign these agreements at the beginning of their employment, before any work is done, is the best course of action. Likewise, failure to correctly structure IP provisions in agreements with third parties such as service providers and consultants prior to the execution of any work has caused serious issues for many companies. A form of confidential information and inventions assignment agreement for California employees is available , and a form of consulting agreement for US consultants (which contains IP assignment provisions) is available.
• Obligation to Assign : In some situations, even if your employees have not signed an agreement, they may still be obligated, either by contract or local law, to assign patent/patent application ownership to your company. For example, this could occur if the invention was developed on the job, the employee was hired specifically to invent for the company, and/or the inventor is an officer of the company.
• Explicit Assignments : Even when employees have signed appropriate agreements, your company should execute new patent-specific assignments whenever patent applications are filed. These assignments name the specific invention, patent, and/or patent application, and can have additional legal weight if the ownership of a patent is disputed.

Joint ownership of patent/patent application rights can be complicated. As with any property right, multiple owners can make for multiple legal scenarios. For example, co-owners would have to join together to bring a patent infringement lawsuit. By contrast, the opposite is true for licensing: a co-owner can license its patent/patent application rights to a third party, independent of the other co-owner(s), unless they have an agreement otherwise. Co-owners can also independently sell, mortgage, transfer, and will their rights to a patent/patent application. To avoid these kinds of issues, most attorneys recommend that a single entity be the patent/patent application owner, whenever possible. If this is not possible, then it is important to correctly structure IP provisions in an agreement, for example, ideally where one party exclusively licenses back all rights in the co-owned patent/patent application.

How do I make sure my company owns these patents/patent applications? 

Well-structured ownership assignments are legally binding, but what does “well-structured” mean? Patent/patent application assignments have several formal requirements to be considered valid.  Assignments must:

• Be in writing – unlike some other contracts, oral assignments or oral agreements to assign patent/patent application rights are rarely enforceable;
• Clearly identify all parties – recite names, addresses, and relationship of both the assignor(s) and assignee;
• Identify the property clearly – include the patent/patent application number, title, inventors, and filing date;
• Recite exchange of consideration – this is a standard for almost any contract, and here, even nominal consideration (e.g., $1) is sufficient;
• Execution be notarized or attested to by one, preferably, two non-inventor witnesses – notarization or witnessing serves as evidence that the signatures (and, thus, the assignment) is valid. There is a lot of interest in utilizing an e-signature platform, such as DocuSign, for execution of Assignments.  However, this is still a developing area, and the rules differ significantly around the world. If use of e-signatures is an important consideration for your Company, e.g., your employees are geographically diversified, you should consult with your IP counsel so as to understand the local laws and potential ramifications in countries that are important to your business.

Following these rules is a good practice and is an essential starting place to ensure the validity and enforceability of your assignment.  However, validity does not end here. As with any contract, the legal language is key to eliminating ambiguity in your agreements.

Finally, make sure that any assignment in a patent/patent application is recorded with the US Patent and Trademark Office ( USPTO ) as soon as possible after execution. If an assignment is not  recorded with the USPTO within three months from its effective date, the assignee’s claim to ownership could be at risk. For example, if an assignor were to subsequently improperly assign to another purchaser that was not aware of the previous assignment and the previous assignment had not been recorded with the USPTO, the subsequent purchaser may be able to successfully claim ownership.

You’re the new owner!

A patent is only as valuable as it is enforceable, and ownership is a key element of enforceability. Licensing , manufacturing, distributing, or otherwise making exclusive use of your invention can only be ensured if the patent is both valid and enforceable.  Having ownership protection in place prior to the development of your intellectual property, as well as the correct legal ownership assignment documents executed afterward, can help ensure that you can make the most of your company’s ingenuity.

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LLC Membership Interest Assignment

Rating: 4.8 - 952 votes

An LLC Membership Interest Assignment is a document used when one member of an LLC* wishes to transfer their interest to another party entirely. LLC Membership Interest Assignments are often used where a member in an LLC is leaving or otherwise wants to relinquish the entirety of their interest in the company. Using this document, the current owner of shares in the LLC would transfer their entire interest in the LLC to another person or entity.

A Limited Liability Company, commonly known as an LLC, is a corporate structure that protects its owners from being personally pursued for repayment of debts and liabilities owed by the company. LLCs do not pay taxes on their profits directly. Instead, profits and losses are passed through to the individual members who report them on their personal tax returns.

An LLC Membership Interest Assignment normally happens well after the LLC has already been operating . To form a limited liability company in most states, any party must begin with Articles of Organization (sometimes called Certificates of Formation or other varying names).

How to use this document

This document can be used when any party would like to transfer the ownership of an interest in an LLC or when any party would like a membership interest in an LLC transferred to them, as long as the current owner of the membership interest agrees. It should be used it when both parties understand that the membership interest will be completely assigned and wish to create a record of their agreement, as well as a document that the LLC will likely keep on file.

This document will allow the form-filler to input details of the identities of both parties, as well as the details of the membership interest, such as percentage and whether or not it comes with voting rights . It also has an optional addendum at the end, in case full consent is needed from all the rest of the members of the LLC .

Please keep in mind that this form requires both signatures , from the party assigning the interest and the party receiving it.

Once the LLC Membership Interest Assignment has been completed, all members of the LLC should be notified of the transfer. This notification usually happens by providing a copy of the Assignment and any related documents to the LLC's registered agent or manager. Information about the process is typically specified in the LLC Operating Agreement. In some states, transfer of interest in an LLC requires that formation documents be updated and refiled with the appropriate state office to reflect changes in membership. This may also involve filing an amendment to the Articles of Organization. The LLC should be sure to update its bank accounts, contracts, licenses, and permits as necessary to reflect the membership change. Finally, the LLC should maintain accurate records of the transfer of interest , saving for future reference copies of the Assignment Agreement, amended Operating Agreement , consent of members, and any other relevant documents.

Applicable law

LLC Membership Interest Assignments are subject to the laws of individual states . There is no one federal law covering these documents, because each individual state governs the businesses formed within that state.

How to modify the template

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.

Guides to help you

• How to Sell your Percentage in an LLC
• How to Sell your Business
• How to Transfer Business Ownership

Other names for the document:

Assignment of Interest for LLC Member, Interest Assignment for LLC Membership, LLC Interest Assignment Agreement, Member Interest Transfer for LLC, Membership Assignment for LLC

Country: United States

Business Structure - Other downloadable templates of legal documents

• Articles Of Organization
• Shareholder Agreement
• Articles Of Incorporation
• Partnership Agreement
• Business Sale Agreement
• Corporate Bylaws
• Stock Sale and Purchase Agreement
• LLC Membership Purchase Agreement
• Founders' Agreement
• Business Merger Agreement
• Limited Partnership Agreement
• Other downloadable templates of legal documents

This intellectual property agreement  is between , an individual a(n) (the " Assignor ") and  , an individual a(n) (the " Assignee ").

The Assignor has full interest in the intellectual property listed in Exhibit A and described in section 1 below.

The Assignor wishes to transfer to the Assignee, and the Assignee wishes to purchase and receive from the Assignor, all of its interest in the Intellectual Property.

The parties therefore agree as follows:

1. ASSIGNMENT OF INTELLECTUAL PROPERTY.

The Assignor assigns to the Assignee, and the Assignee accepts the assignment of, all of the Assignor's interest in the following in the United States and its territories and throughout the world:

• (a) the intellectual property rights related to the intellectual property listed in Exhibit A ;
• (b) all precursors, portions, and works in progress with respect to that intellectual property and all inventions, works of authorship, mask works, technology, information, know-how, materials, and tools relating to those or to the development, support, or maintenance of those;
• (c) all copyrights, patent rights, trade dress, trade names, business names, other indicia of origin, trade secret rights, trademark rights, mask works rights, and all other intellectual property rights and all business, contract rights, and goodwill in, incorporated, or embodied in, used to develop, or related to any of those; and
• (d) the registrations and applications for registrations of the foregoing (collectively, the" Intellectual Property ").

2. PURCHASE PRICE.

The Assignee shall pay the Assignor a flat fee of $ as full payment for all rights granted under this agreement. The Assignee shall complete this payment no later than .

3. RECORDATION.  

In order to record this assignment with all relevant government agencies, within hours of the effective date of this assignment, the parties shall sign the form of intellectual property assignment agreement attached as Exhibit B . The is solely responsible for filing the assignment and paying any associated fees of the transfer.

4. NO EARLY ASSIGNMENT.

The Assignee shall not assign or otherwise encumber its interest in the Intellectual Property or any associated registrations until it has paid to the Assignor the full consideration provided for in this assignment. Any assignment or encumbrance contrary to this provision shall be void.

5. ASSIGNOR'S REPRESENTATIONS.

The Assignor hereby represents and warrants to the Assignee that it:

• (a) is the sole owner of all interest in the Intellectual Property;
• (b) has not transferred, exclusively licensed, or encumbered any Intellectual Property or agreed to do so;
• (c) is not aware of any violation, infringement, or misappropriation of any third party's rights (or any claim of those) by the Intellectual Property;
• (d) is not aware of any third-party consents, assignments, or licenses that are necessary to perform under this assignment;
• (e) was not acting within the scope of employment of any third party when conceiving, creating, or otherwise performing any activity with respect to any item of Intellectual Property.

The Assignor shall immediately notify the Assignee in writing if any facts or circumstances arise that would make any of the representations in this assignment inaccurate.

6. INDEMNIFICATION. The Assignor shall indemnify the Assignee against:

• (a) any claim by a third party that the Intellectual Property or its use, manufacture, sale, distribution, or reproduction infringes on or misappropriates any copyrights, trade secrets, patents, or other intellectual property;
• (b) any claim by a third party that this assignment conflicts with, violates, or breaches any contract, assignment, license, sublicense, security interest, encumbrance, or other obligation to which the Assignor is a party or of which it has knowledge;
• (c) any claim relating to any past, present, or future use, licensing, sublicensing, distribution, marketing, disclosure, or commercialization of any of the Intellectual Property by the Assignor; and
• (i) the Assignee promptly notifies the Assignor of that claim;
• (ii) the Assignor controls the defense and settlement of that claim;
• (iii) the Assignee fully cooperates with the Assignor in connection with its defense and settlement of that claim; and
• (iv) the Assignee stops all sales, distribution, and public use of the infringing Intellectual Property, if requested by the Assignor.
• (i) obtain the right for the Assignee to continue to use the infringing Intellectual Property;
• (ii) modify the infringing Intellectual Property to eliminate the infringement;
• (iii) provide substitute noninfringing intellectual property to the Assignee pursuant to this assignment; or
• (iv) refund to the Assignee the amount paid under this assignment for the infringing Intellectual Property.
• (c) No Other Obligations. The Assignor shall have no other obligations or liability if infringement occurs, and shall have no other obligation of indemnification or to defend relating to infringement. The Assignor shall not be liable for any costs or expenses incurred without its prior written authorization and shall have no obligation of indemnification or any liability if the infringement is based on (i) any modified form of the Intellectual Property not made by the Assignor, (ii) any finding or ruling after the effective date of this assignment, or (iii) the laws of any country other than the United States of America or its states.

7. GOVERNING LAW.

• (a) Choice of Law. The laws of the state of  govern this agreement (without giving effect to its conflicts of law principles).
• (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in County, .

8. AMENDMENTS.

No amendment to this assignment will be effective unless it is in writing and signed by a party or its authorized representative.

9. ASSIGNMENT AND DELEGATION.

• (a) No Assignment. Neither party may assign any of its rights under this assignment, except with the prior written consent of the other party. All voluntary assignments of rights are limited by this subsection.
• (b) No Delegation. Neither party may delegate any performance under this assignment, except with the prior written consent of the other party.
• (c) Enforceability of an Assignment or Delegation. If a purported assignment or purported delegation is made in violation of this section, it is void.

10. COUNTERPARTS; ELECTRONIC SIGNATURES.

• (a) Counterparts. The parties may execute this assignment in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
• (b) Electronic Signatures. This assignment, agreements ancillary to this assignment, and related documents entered into in connection with this assignment are signed when a party's signature is delivered by facsimile, email, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.

11. SEVERABILITY.

If any one or more of the provisions contained in this assignment is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this assignment, but this assignment will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this assignment to be unreasonable.

12. NOTICES.

• (a) Writing; Permitted Delivery Methods. Each party giving or making any notice, request, demand, or other communication required or permitted by this agreement shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this agreement: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.
• (b) Addresses. A party shall address notices under this section to a party at the following addresses:
• If to the Assignor: 
• If to the Assignee: 
• (c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.

13. WAIVER.

No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this assignment will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.

14. ENTIRE AGREEMENT.

This assignment constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement about the subject matter of this assignment. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this assignment are expressly merged into and superseded by this assignment. The provisions of this assignment may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this assignment by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this assignment. Except as set forth expressly in this assignment, there are no conditions precedent to this assignment's effectiveness.

15. HEADINGS.

The descriptive headings of the sections and subsections of this assignment are for convenience only, and do not affect this assignment's construction or interpretation.

16. EFFECTIVENESS.

This assignment will become effective when all parties have signed it. The date this assignment is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this assignment.

17. NECESSARY ACTS; FURTHER ASSURANCES.

Each party shall use all reasonable efforts to take, or cause to betaken, all actions necessary or desirable to consummate and make effective the transactions this assignment contemplates or to evidence or carry out the intent and purposes of this assignment.

[SIGNATURE PAGE FOLLOWS]

Each party is signing this agreement on the date stated opposite that party's signature. 

[PAGE BREAK HERE] EXHIBIT A LIST OF INTELLECTUAL PROPERTY

[PAGE BREAK HERE] EXHIBIT B FORM OF RECORDABLE INTELLECTUAL PROPERTY ASSIGNMENT For good and valuable consideration, the receipt of which is hereby acknowledged, an individual a(n) (the " Assignor ") hereby assigns to an individual a(n) (the " Assignee ") all of the Assignor's interest in the Intellectual Property identified in Attachment A to this assignment, and the Assignee accepts this assignment.

Each party is signing this agreement on the date stated opposite that party's signature.

[PAGE BREAK HERE]

ATTACHMENT A INTELLECTUAL PROPERTY

Free Intellectual Property Assignment Agreement Template

Safeguard the sale or purchase of assets with an intellectual property assignment agreement. transfer the ownership of patents, trademarks, software, and other critical assets easily..

Complete your document with ease

How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.

Intellectual property assignment agreement: How-to guide

In the dynamic realm of commerce and innovation, the notion of property extends far beyond physical boundaries. Just as one might transfer ownership of a house or a car, the exchange of intellectual property (IP) rights is a critical component of modern business transactions. For instance, if you're launching a startup, acquiring product rights, or even purchasing an entire company, in each scenario, the seamless transfer of intellectual property ownership is essential for ensuring a smooth transition and protecting your interests.

So what constitutes intellectual property? Intellectual property encompasses creations of the mind, such as inventions, software, and hardware programs, literary and artistic works, designs, symbols, names, and images. As businesses grow and evolve, the need to manage and protect these valuable assets becomes increasingly important. One crucial aspect of managing intellectual property is through intellectual property assignment agreement, otherwise known as IP assignment agreement. These agreements facilitate the transfer of IP rights from one part to another.

In this article, we’ll explore the nuances of intellectual property assignment agreements, including their definitions, benefits, types, and considerations.

What is an intellectual property assignment agreement?

An intellectual property assignment agreement, also known as an IP assignment agreement, is a written contract that transfers intellectual property rights from one party (the assignor) to another (the assignee). Intellectual property covers a broad spectrum of intangible assets, including patents, copyrights, trademarks, trade secrets, and more.

For instance, a software developer might have created a groundbreaking algorithm while employed at the company. Through an IP assignment agreement, the developer transfers the rights to this algorithm to the employer, ensuring that the company has exclusive ownership and control over its use and commercialization.

Benefits of IP assignment agreement

IP assignment agreements are crucial in a company’s business and provide multiple benefits for the assignor and assignee.

Clear ownership

By executing an IP assignment agreement, the assignor unequivocally transfers all rights and interests in the intellectual property to the assignee. This clarity of ownership and proprietary rights helps to avoid disputes and potential litigation over the ownership of the IP in the future.

Legal protection

By formally transferring the IP rights through a written agreement, both parties are legally protected. This protection can be essential in case of any infringement or misuse of intellectual property.

Assured compensation or price guarantee

When transferring IP ownership rights for patents, trademarks, copyrights, etc., the original owner gets compensated by the party buying the ownership. The buyer will also pay the IP owner an agreed-upon price for the IP, which will be paid on the date as decided by the involved parties. 

No future obligations

The party selling the IP won’t be responsible for meeting any future obligations. For instance, if there is an existing trademark that requires constant monitoring to know whether the trademark is used by any other competitors, the seller won't bear the charges incurred for  trademark monitoring . The buyer has to bear these and any future trademark maintenance costs.

Commercialization opportunities

Assigning intellectual property rights can enable businesses to commercialize the intellectual property more effectively. This could involve licensing the IP to third parties, selling it outright, or using it as collateral for financing.

Facilitates collaboration

In cases where multiple parties are involved in creating intellectual property, an assignment agreement can facilitate collaboration by clearly defining each party's rights and responsibilities.

Risk mitigation

For businesses acquiring ownership rights to intellectual property, an assignment agreement mitigates the risk of third parties claiming rights to the IP. It provides a legal basis for defending against infringement claims and protects the assignee's investment in the IP.

Enhanced value

Clear ownership of intellectual property assets can enhance the value of a business, especially during mergers, acquisitions, or fundraising activities. Investors and stakeholders are more likely to perceive a business positively when it has secure ownership of valuable IP assets. For example, let’s say your start-up company holds sole intellectual property rights to an automatic house-locking system. When your company gets acquired by another company, the new company will also evaluate the value of the IP owned.

Understanding IP assignment agreements: Considerations for sellers

While intellectual property assignment agreements offer various benefits, as a seller of the IP you need to keep in mind what it entails for you when you sell your IP.

Choosing between an IP assignment and a licensing agreement

In an IP assignment agreement, the seller transfers all ownership rights to the intellectual property for a predetermined fee. Here the seller gets a fair market value for their IP as a one-time payment. However, if they had opted for an  IP licensing arrangement , they could have retained the ownership of their IP while giving certain usage rights to the interested party. For instance, let’s say you have written and composed a song. A music company wants your song under their label. Here you have two options. You can sell your song completely to the music label, where they’ll have the right to use or alter your song as they deem fit. Or you can license your creation for an agreed-upon fee or price and set the terms and conditions for using your song. Here you’re getting paid for your creation while retaining ownership of your creation. Whichever option works best for you can be opted and respective agreements can be drawn.  

Value uncertainty

The value of intellectual property can fluctuate over time due to changes in market demand, technological advancements, or legal developments. Sometimes an intellectual property’s future value can increase tremendously, impacting the fairness of the negotiated price. Hence, while deciding the price of such assets, the seller should calculate the future valuation and decide the price of IP.

Limited future opportunities

Once intellectual property rights are assigned, the assignor may be restricted from using or further developing the intellectual property in the future. This limitation could hinder the assignor's ability to explore new business ventures or pivot their existing strategies.

In conclusion, while an intellectual property assignment agreement offers significant benefits in terms of clarity, protection, and commercialization of intellectual property assets, parties must carefully weigh these advantages against the limitations. Consulting with legal professionals experienced in intellectual property law is essential to navigate these considerations effectively.

What are the types of IP assignment agreements?

Intellectual property assignment agreements are comprehensive in nature, outlining the terms and conditions under which the transfer of IP ownership occurs. Here's an overview of the types of IP assignment agreements:

Patent assignment agreement or assignment of patents

A  patent assignment agreement is a written agreement whereby the owner of a patent transfers or assigns their ownership rights to the other party. This agreement ensures that the assignee gains full legal rights to the patent, including the right to exclude others from making, using, or selling the patented invention, innovations, and processes. Patent assignment agreements typically include details about the patented invention, including patent numbers, descriptions, and any related rights or obligations. 

Copyright assignment agreement or assignment of copyrights

Copyright assignment agreements transfer ownership of creative works, such as literary works, music, art, and other creative expressions. By signing a copyright assignment agreement, the creator relinquishes their rights to reproduce, distribute, and display the copyrighted work to the assignee.

Trademark assignment agreement or assignment of trademarks

Trademark assignment agreements transfer ownership of trademarks, which are used to identify and distinguish goods or services in the marketplace. Through this agreement, the assignor relinquishes their exclusive rights to use the trademark in commerce, allowing the assignee to use and enforce the mark for their business or products.

Trade secret assignment agreement or assignment of trade secrets

Trade secret assignment agreements are used to transfer ownership of confidential information or trade secrets from one party to another. These agreements outline the specific trade secrets being transferred and impose obligations of confidentiality on the assignee to protect the secrecy of the information. 

By signing such an agreement, the assignee gains the rights to use and protect the trade secrets for their own benefit. It can be any proprietary information like formulas, processes, customer lists, and business strategies. These agreements typically include provisions to maintain confidentiality and prevent unauthorized disclosure or use of trade secrets.

Design assignment agreement or assignment of design

An assignment of design agreement involves the transfer of ownership rights related to industrial designs or product designs. It ensures that the assignee gains exclusive rights to reproduce, distribute, and modify the design according to their business needs. This agreement is crucial for companies involved in product development and manufacturing.

Employee or contractor IP assignment agreement

These agreements transfer ownership of intellectual property created by employees or contractors during their employment or engagement. They are essential for employers to secure ownership of IP developed by their personnel. They often include provisions related to confidentiality, non-competition, and non-disclosure, which are mostly included in an employment agreement. Sometimes, employers even ask employees to sign separate non-disclosure agreements whenever an employee comes up with an invention.  

Assignment of IP in a joint venture  

In cases where multiple parties jointly create intellectual property, a joint ownership agreement may establish each party's rights and responsibilities. These agreements detail the terms of joint ownership, including each party's share of the IP, decision-making authority, and rights to exploit the IP.

It's essential to choose the appropriate type of IP assignment agreement based on the specific intellectual property rights being transferred and the circumstances of the transaction. Consulting with legal professionals knowledgeable in intellectual property law can help ensure that the agreement adequately protects the interests of all parties involved.

Who uses intellectual property assignment agreements?

IP assignment agreements are utilized across a spectrum of industries and scenarios. These agreements are crucial tools for businesses and individuals seeking to define and transfer intellectual property rights.

Corporations and businesses

Employment agreement : Companies frequently incorporate IP assignment clauses into their employment contracts. This ensures that any intellectual property created by employees during the course of their employment is automatically assigned to the company.

Consulting agreement : Similar to employment agreements, consulting contracts may include provisions requiring consultants to transfer any intellectual property they develop while working for the company.

Transactions contemplated : In mergers, acquisitions, or other business transactions, IP assignment agreements are employed to transfer ownership of intellectual property assets between parties.

Joint ventures : Partners in joint ventures often use these agreements to clarify ownership rights and facilitate the sharing or licensing of intellectual property developed during the collaboration.

Individuals and inventors

Prior inventions : An individual with a prior invention may use IP assignment agreements to transfer ownership rights to a new employer or business partner.

Consultants and contractors : Freelancers, consultants, and independent contractors may be required to sign an IP or invention assignment agreement as part of their contractual arrangement with clients.

Startups : Startup founders commonly use these agreements to consolidate ownership of intellectual property created before or during the company's establishment.

In essence, assignment agreements are utilized by parties across various sectors and contexts to facilitate the transfer of valuable intellectual property rights, ensuring legal protection and compliance while fostering innovation and business growth.

Key provisions of an intellectual property assignment agreement

Introduction.

Begin the agreement by formally introducing the parties involved to the agreement. In an intellectual property assignment agreement, the party selling the IP is called the “assignor,” and the other party who buys it is called the “assignee.” Here, along with providing the details of the intellectual property, the assignor explicitly agrees to transfer intellectual property rights to the assignee according to the agreed-upon terms of the agreement.

Assignment of IP

This section specifies the intellectual property being transferred. It identifies the specific patents, trademarks, copyrights, trade secrets, or other intellectual property referenced in the agreement. Additionally, it outlines the scope of the transfer and any limitations on the assigned IP rights.

Purchase price

The agreement details any monetary compensation involved in the transfer of intellectual property rights. In this section, clearly outline the payment terms of the agreement. Detail whether the parties hereto agree to pay the assignor as a lump sum or in installments. If the payment is made in installments, you must also provide the schedule for such payment.

Recordation

To formalize the transfer of intellectual property rights, recordation with relevant authorities may be necessary. This provision addresses the requirement and process for recording the assignment with the appropriate governmental authority, ensuring compliance with legal formalities. 

No early assignment

This clause states that the assignment of IP rights cannot occur before certain conditions are met, such as before the completion of a project or the fulfillment of payment obligations. This section prevents premature transfers of IP.

Assignor’s representations

In this part, the assignor provides assurance that they have the sole right to the IP created and it hasn’t been licensed to any third-parties. They also affirm that they have the legal authority to transfer ownership of the IP and there are no undisclosed encumbrances or infringements.

Indemnification

This provision outlines the parties' obligations to indemnify each other against any losses, damages, or liabilities arising from a breach of the agreement or the assertion of third-party claims related to the transferred IP.

Governing law

This section specifies the jurisdiction whose laws will govern and interpret the agreement. It provides clarity in the event of legal disputes.

This clause outlines the procedures for making changes or modifications to the intellectual property assignment agreement. To make any changes pertaining to the terms of the agreement requires written consent from both parties.

Assignment and delegation

This provision addresses the transferability of rights and obligations under the IP assignment agreement. They stipulate whether parties can assign their rights or delegate their duties to third parties.

Counterparts; electronic signatures

This section permits the IP assignment agreement to be executed in multiple counterparts, facilitating convenience in signing. It also recognizes the legal validity of electronic signatures, ensuring compliance with modern technological practices.

Severability

The severability clause states that if any provision of the agreement is found to be invalid or unenforceable, the remaining provisions will remain in full force and effect. This ensures that the invalidity of one provision does not invalidate the entire agreement.

This provision details the methods and addresses for official communication between the parties regarding the intellectual property assignment agreement. They ensure that important correspondence is properly delivered and acknowledged.

Waiver provision addresses instances where a party chooses not to enforce its rights under the agreement. For instance, if certain provisions are waived off on a one-time basis regarding the agreement, this doesn’t mean that the provision is waived for the entire term of the agreement. Take the case where the assignee is paying for the IP in installments. If the assignee is not able to pay the installment for a month, then the assignor can waive that default and continue the agreement upon prior written consent.

Entire agreement

This part of an intellectual property assignment agreement explains that the parties agree to the specific terms and conditions mentioned in the agreement. Any verbal negotiations or other terms that are even stated via email or otherwise are not part of this agreement.

This section states that the headings used in the agreement are for convenience only and do not affect the interpretation of the provisions.

Effectiveness

The effectiveness provision specifies the date on which the agreement becomes effective. This ensures clarity regarding when the rights and obligations outlined in the agreement take effect.

Necessary acts; further assurances

Requires the parties to take any additional actions necessary to carry out the terms of the agreement fully. This may include signing additional documents or cooperating with each other as needed.

How does an online template facilitate drafting intellectual property assignment agreements?

There are various advantages of using an online template for IP such as.

Simplified drafting process

Online templates streamline the drafting process of IP assignment agreements. By providing a structured framework, these templates guide users through the essential elements required for such agreements. Users can efficiently input pertinent details specific to their arrangement, ensuring comprehensive coverage of the subject matter assigned.

Ease of customization

Some  online template providers, like LegalZoom , allow you to easily customize the templates to suit specific circumstances. With editing options available, users can modify clauses and provisions to reflect their agreed-upon terms and conditions of the arrangement

Clarity and consistency

These templates offer clear and standardized language, enhancing understanding and minimizing ambiguity. Consistent formatting and terminology throughout the agreement contribute to its readability and effectiveness.

Time and cost efficiency

Utilizing an online template can minimize the need for extensive document research and costly legal consultations. It allows parties to draft a comprehensive IP assignment agreement efficiently and affordably, saving valuable time and resources.

Accessibility and convenience

Online templates are readily accessible from anywhere with an internet connection, enabling parties to initiate and complete the drafting process conveniently. This accessibility promotes collaboration and facilitates the timely execution of agreements.

As you can see, using online templates provides numerous benefits. Since there are a multitude of templates available online, choosing the right template is key. To streamline this process, LegalZoom offers a comprehensive intellectual property assignment agreement template that is simple and easy to use. Just answer the guided questions, complete the form, and download the document for free.

Frequently asked questions

What's an intellectual property assignment agreement.

When your business needs to sell or buy intangible assets, use an intellectual property assignment agreement to protect both parties. It enables the transfer of ownership of intangible items legally. Intellectual property includes everything from patents to trademarks to software and more.

What key details are required to complete your assignment agreement?

Here's the information you'll need to complete your intellectual property assignment agreement:

• Who owns the intellectual property : Keep the information of the assignor ready while drafting your agreements 
• Who's buying the intellectual property : Have the name and contact details of the assignee ready
• How much it costs : Know what the buyer pays for the intellectual property

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Sale and Assignment of LLC Membership Interests

Transfers from Member to Member or to Non-Member Third Parties by David J. Willis J.D., LL.M.

Introduction

This article addresses legal points to consider when conveying a membership interest in a limited liability company from one individual to another. It does not address the initial issuance of such interests when the LLC is formed, nor sales of membership interests by an existing LLC to incoming members.

Additionally, this article addresses absolute assignments (full and final transfers) rather than collateral assignments (made only as security for a loan) which are a different topic entirely.

Assignments of this type may follow the execution of a letter of intent which provides for a due-diligence period. This article does not cover the contents of such an LOI but does address issues that should be considered by a prospective assignee in conducting due diligence. An LOI will often make reference to specific due diligence steps that a buyer will be permitted to take.

After covering definitions and applicable law, we will turn to principal points that should be considered in negotiating and drafting an assignment of LLC membership interest.

APPLICABLE LAW

Relevant statutory definitions.

Applicable law is found in the Business Organizations Code (BOC):

Bus. Orgs. Code Section 1.002. DEFINITIONS

(7) “Certificated ownership interest” means an ownership interest of a domestic entity represented by a certificate issued in bearer or registered form.

(32) “Fundamental business transaction” means a merger, interest exchange, conversion, or sale of all or substantially all of an entity’s assets.

(35)(A) “Governing authority” means a person or group of persons who are entitled to manage and direct the affairs of an entity under this code and the governing documents of the entity, except that if the governing documents of the entity or this code divide the authority to manage and direct the affairs of the entity among different persons or groups of persons according to different matters, “governing authority” means the person or group of persons entitled to manage and direct the affairs of the entity with respect to a matter under the governing documents of the entity or this code.

(41) “Interest exchange” means the acquisition of an ownership or membership interest in a domestic entity as provided by Subchapter B, Chapter 10. The term does not include a merger or conversion.

(46) “Limited liability company” means an entity governed as a limited liability company under Title 3 or 7. The term includes a professional limited liability company.

(53) “Member” means: (A) in the case of a limited liability company, a person who has become, and has not ceased to be, a member in the limited liability company as provided by its governing documents or this code. . . .

(54) “Membership interest” means a member’s interest in an entity. With respect to a limited liability company, the term includes a member’s share of profits and losses or similar items and the right to receive distributions, but does not include a member’s right to participate in management.

(64) “Ownership interest” means an owner’s interest in an entity. The term includes the owner’s share of profits and losses or similar items and the right to receive distributions. The term does not include an owner’s right to participate in management.

(69-b) “Person” means an individual or a corporation, partnership, limited liability company, business trust, trust, association, or other organization, estate, government or governmental subdivision or agency, or other legal entity, or a protected series or registered series of a domestic limited liability company or foreign entity.

(87) “Uncertificated ownership interest” means an ownership interest in a domestic entity that is not represented by an instrument and is transferred by: (A) amendment of the governing documents of the entity; or (B) registration on books maintained by or on behalf of the entity for the purpose of registering transfers of ownership interests.

A well-drafted assignment of LLC membership interest will be mindful of and consistent with these statutory terms.

Statute Authorizing LLC Membership Assignments

Foundational to the idea of a sale and assignment of LLC membership interest is the legal authority to enter into such a transaction in the first place:

Bus. Orgs. Code Sec. 101.108. ASSIGNMENT OF MEMBERSHIP INTEREST

(a) A membership interest in a limited liability company may be wholly or partly assigned.

(b) An assignment of a membership interest in a limited liability company: (1) is not an event requiring the winding up of the company; and (2) does not entitle the assignee to: (A) participate in the management and affairs of the company; (B) become a member of the company; or (C) exercise any rights of a member of the company.

Consent by other members is required. BOC Section 101.103(s) states that a “person who, after the formation of a limited liability company, acquires directly or is assigned a membership interest in the company or is admitted as a member of the company without acquiring a membership interest becomes a member of the company on approval or consent of all of the company’s members.” BOC Section 101.105 states that a “limited liability company, after the formation of the company, may: (1) issue membership interests in the company to any person with the approval of all of the members of the company. . . .”

An additional consent requirement is found in BOC Section 101.356(c) which provides that, for the most part, “a fundamental business transaction of a limited liability company, or an action that would make it impossible for a limited liability company to carry out the ordinary business of the company, must be approved by the affirmative vote of the majority of all of the company’s members.”

Accordingly, it is advisable to accompany an assignment of membership interest with a special meeting of members that approves and ratifies the change. One or more LLC resolutions may be produced as well. All affected parties (and their spouses, even if non-members) should sign off.

What category of property is an LLC membership interest?

Regardless of the type of property owner by a limited liability company, a membership interest in the LLC is personal property:

Bus. Orgs. Code Sec. 101.106. NATURE OF MEMBERSHIP INTEREST

(a) A membership interest in a limited liability company is personal property.

(a-1) A membership interest may be community property under applicable law.

(a-2) A member’s right to participate in the management and conduct of the business of the limited liability company is not community property.

(b) A member of a limited liability company or an assignee of a membership interest in a limited liability company does not have an interest in any specific property of the company.

The characterization of an LLC membership interest as personal property is important because it also signifies what it is not . For instance, it is not a real property interest even though the LLC may own real estate. It is not a negotiable instrument subject to the Uniform Commercial Code (found in Texas Business & Commerce Code Section 3.201 et seq.). Nor is a small-business LLC membership interest usually considered to be a security subject to state and federal securities laws: “An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, [and the company agreement] expressly provide[s] that it is a security . . . or it is an investment company security.” Tex. Bus. & Com. Code Sec. 8.103(c).

The foregoing applies regardless of whether the membership interest is considered certificated or uncertificated.

Statutory Qualifications for LLC Membership

Qualifications and requirements for membership in an LLC are found in the BOC:

Bus. Orgs. Code Sec. 101.102. QUALIFICATION FOR MEMBERSHIP

(a) A person may be a member of or acquire a membership interest in a limited liability company unless the person lacks capacity apart from this code.

(b) A person is not required, as a condition to becoming a member of or acquiring a membership interest in a limited liability company, to:

(1) make a contribution to the company; (2) otherwise pay cash or transfer property to the company; or (3) assume an obligation to make a contribution or otherwise pay cash or transfer property to the company.

(c) If one or more persons own a membership interest in a limited liability company, the company agreement may provide for a person to be admitted to the company as a member without acquiring a membership interest in the company.

Rights and Duties of an Assignee

BOC Sec. 101.109. RIGHTS AND DUTIES OF ASSIGNEE OF MEMBERSHIP INTEREST BEFORE MEMBERSHIP

(a) A person who is assigned a membership interest in a limited liability company is entitled to:

(1) receive any allocation of income, gain, loss, deduction, credit, or a similar item that the assignor is entitled to receive to the extent the allocation of the item is assigned; (2) receive any distribution the assignor is entitled to receive to the extent the distribution is assigned; (3) require, for any proper purpose, reasonable information or a reasonable account of the transactions of the company; and (4) make, for any proper purpose, reasonable inspections of the books and records of the company.

(b) An assignee of a membership interest in a limited liability company is entitled to become a member of the company on the approval of all of the company’s members.

(c) An assignee of a membership interest in a limited liability company is not liable as a member of the company until the assignee becomes a member of the company.

BOC Sec. 101.110. RIGHTS AND LIABILITIES OF ASSIGNEE OF MEMBERSHIP INTEREST AFTER BECOMING MEMBER

(a) An assignee of a membership interest in a limited liability company, after becoming a member of the company, is:

(1) entitled, to the extent assigned, to the same rights and powers granted or provided to a member of the company by the company agreement or this code; (2) subject to the same restrictions and liabilities placed or imposed on a member of the company by the company agreement or this code; and (3) except as provided by Subsection (b), liable for the assignor’s obligation to make contributions to the company.

(b) An assignee of a membership interest in a limited liability company, after becoming a member of the company, is not obligated for a liability of the assignor that:

(1) the assignee did not have knowledge of on the date the assignee became a member of the company; and (2) could not be ascertained from the company agreement.

It is important to note that these statutory rights and duties are subject to “restrictions and liabilities” that may be imposed by the company agreement.

PRELIMINARY CONSIDERATIONS

The company agreement.

When considering a transfer of LLC membership, it is important to first check the company agreement (operating agreement) to determine if there are buy-sell provisions or a right-of-first-refusal clause that must be worked through before the membership interest can be assigned. company agreements often require that before a sale and assignment of a membership interest can occur, the interest must first be offered pro rata to the other members, and/or to the company itself, before a transfer may be made to a person who is not currently a member. Unless waived, such provisions may be accompanied by an offer period of (for example) 10, 30, or 60 days.

Buy-sell and right-of-first-refusal provisions exist so that existing LLC members do not unwillingly find themselves in business with someone they do not know.

Non-Member Spouses

Are non-member spouses involved? Like real estate, personal property in Texas is presumed to be community property. A frequent error in transfers of LLC membership interest is failure to secure the signature of an assignor-seller’s non-member spouse. The result is that the entire interest may not have been conveyed, at least not in Texas. This is no different than if a grantee in a deed accepts the conveyance without requiring execution by the grantor’s spouse; since community property is presumed, the transfer may be incomplete if the spouse does not sign off, at least in a pro forma capacity.

To say that omitting the signature of a non-member spouse can drive subsequent disputes would be an understatement. Even though BOC Section 101.108 provides that a non-member spouse of an assignee may not assert control over the company, the potential for awkward and potentially disastrous disruption remains. Consider the case of a withdrawing member who is contemplating divorce but has not yet revealed this to other members who may want to buy his LLC membership interest. Will the assignment get tangled up in the parties’ divorce?

As is the case in transfers of real estate, it is common for sellers of an LLC membership interest to argue that the spouse should not be required to sign the assignment because the property transferred is a business asset rather than a part of the homestead. Real estate lawyers hear such excuses all the time. Other reasons may be given (“My wife is in China”). None of these excuses should be allowed to carry any weight unless the membership interest has been lawfully converted into separate property by a written partition agreement according to Section 4.102 et seq. of the Family Code.

What will be the accounting consequences? Is timing an issue?

There will likely be accounting consequences as a result of transferring an LLC membership interest. BOC Section 101.201 partially addresses this issue, stating “The profits and losses of a limited liability company shall be allocated to each member of the company on the basis of the agreed value of the contributions made by each member, as stated in the company’s records. . . .” This rule will apply unless the members collectively agree otherwise.

Attention should be given to the effective date of the assignment, since the transfer date may have more than one level of significance. It is advisable to select an effective date or record date for the assignment that facilitates easier calculation of profits and losses, or at least does not unduly complicate that calculation.

Will the membership interest pass a due-diligence inspection?

The issues referred to above are part of a larger group of due-diligence considerations that may concern a prospective buyer, which brings us to the due-diligence checklist in the next section.

DUE DILIGENCE BY THE ASSIGNEE-BUYER

Due diligence checklist.

The following is a partial list of items that should be of concern to a prospective assignee-buyer of an LLC Membership Interest:

(1) Valuation . Most small-business assignments of LLC membership interest occur among insiders who are already acquainted with the company’s assets, liabilities, management, and operations. For potential assignees who do not fall in this category, the question of valuation arises—not just valuation of the membership interest itself but valuation of the LLC as a whole, since the two are effectively inseparable.

Several articles could be written on how to evaluate and appraise a business; suffice it to say that there should be some rational basis for the asking price that can be independently confirmed by looking at the company’s finances and assets. Certain numbers will be hard (real property and bank accounts) and others will be soft (marketing strategy, proprietary information, and value of the brand).

If assets include real properties, an evaluation of value may include appraisals by licensed appraisers or the less-formal alternative of a broker price opinion (BPO). It is impressive if a real estate investment firm has an inventory of 30 rental properties; it is less so if half the properties are drowning in deferred maintenance. Numbers guys may be satisfied with financials and a spreadsheet; traditionalists will want to physically inspect the properties as part of the due-diligence process.

(2) Good Standing . It is important to verify that the LLC and the assignor (if a registered entity) are in good standing with the secretary of state and the comptroller. If not, they do not have the legal capacity to do business, which could potentially make execution of an LLC membership assignment invalid.

(3) Core LLC Documents . A prospective assignee-buyer will want to see core LLC documents including the certificate of formation; the certificate of filing (the secretary of state’s approval); the minutes of the first organizational meeting of members along with subsequent minutes of special meetings (if any) and annual meetings; company resolutions or grants of authority; the company agreement, as currently amended or restated; and any membership certificates that may have been issued (or at least a record of same).

Also: where are the official LLC records kept? Who is responsible for keeping them, and is access readily available? Is there a company book, i.e., a binder containing these? Failure of an LLC to keep organized and complete records is a warning sign for a potential assignee. This is true regardless of and aside from any statutory requirements for LLC record keeping.

A vital object of an assignee’s investigation should be the company agreement. The company agreement is essentially a partnership agreement among LLC members, so it will directly bind a prospective assignee . Is it valid? Is it a legal document of substance or is it a three-page printout from the internet that is not even relevant to Texas? Are provisions of the company agreement compatible with the intentions and goals of the assignee? What limitations does the company agreement impose (for example, restrictions on transfer of membership interests)? Can one easily re-sell the membership interest or are there hoops to jump through?

(4) Managers . It is operationally important to determine if the LLC is member-managed or manager-managed and, if the latter, to identity of the managers. Can the assignee work with these persons? Are they professional and competent? What is their track record?

(5) Member List . LLCs are required to keep current lists of members, their respective interests in the company, and a list of all contributions to the company. BOC Sections 101.501(a)(1)-(7). Fellow members of a smaller LLC are effectively your partners in the enterprise. It is good to know to know something about them.

(6) Contracts and Agreements with Third Parties . Any agreements with third parties that affect control, management, or operation of the LLC should be examined. Examples would be contracts with vendors or a property management agreement with a third-party management company. Is the LLC currently part of a joint venture with a different group of investors?

(7) Voting Agreements . These may or may not exist. Any one or more of the members may enter into voting agreements (including but not limited to proxies and pledges) that can affect control of the entity.

(8) Federal Tax Returns. Tax returns are important to verify how the LLC is taxed and how ownership is reported to the IRS. Tax returns and LLC records should be consistent in this respect. It is a good idea for a prospective assignee to have a CPA review the company’s tax returns.

(9) Texas Annual Filings . A prospective assignee should review the franchise tax returns and public information reports (PIRs) that must be annually filed with the comptroller’s office. Do these accurately reflect the LLC’s affairs? Are they diligently prepared and timely filed?

(10) Transactional Records . What property does the LLC own? Are warranty deeds in the name of the LLC duly recorded in the real property records? How are properties managed and who is responsible for doing so? What do the files and records look like—are they orderly or are they a mess? And what about completeness? Do files for rental properties contain all essential documents like warranty deeds, notes and loan agreements, deeds of trust, leases, appraisals, maintenance records, and so on? A specific person should be responsible for keeping such records at a designated location.

(11) Salaries, Draws, and Distributions. These should be examined to discover if there is a pattern of excessive or erratic compensation to managers or distributions to members. Is there a coherent schedule or plan? Are measures in place to insure that the LLC maintains sufficient working capital to fund existing and planned operations?

(12) Bank and Depository Accounts . Current and recent copies of account statements should be examined. Look for any unusual withdrawals or capital flows. Is the LLC adequately capitalized? Does it have an adequate capital reserve? Inadequate capitalization is the number one cause of small business failure.

(13) Records of Pending, Prospective, and Resolved Legal Actions . Is the LLC being sued? Has it been sued in the past? Do the managers have a history of shoddy or deceptive dealings? Is the LLC continually receiving DTPA notice letters from attorneys? Default letters from HOAs or appraisal districts? Does the company charter get periodically revoked (and then have to be reinstated) because the LLC fails to timely file its franchise tax return or PIR? Consider meeting with the LLC’s attorney and CPA. Require that confidentiality be waived in order to get a frank assessment of the situation.

(14) Best Practices Generally . It is important to ascertain whether or not the LLC is run with diligence, integrity, and in compliance with applicable law. What is the company culture with regard to best practices? Does the LLC have a regular business attorney and CPA to advise the managers? Or do the managers wing it on a DIY basis most of the time, counting on a surging market to cover their mistakes?

(15) Reputational Evidence . A prospective assignee may want to do some digging in order to evaluate the business and personal reputations of the managers and members. What is their professional history? The personal lives of the existing members may also be relevant: are any of them getting a divorce from a spouse who might turn into a hostile party? Was one of them just expelled from the country club for non-payment of dues? An internet search is, of course, the bare minimum but it may also be prudent to consider a private investigator (These are not just for the movies).

(16) Company Performance . How have the LLC’s investments fared, particularly over the last three years? What do the company accounts show and are these numbers verifiable? Does the spreadsheet match up with the checkbook?

Trends are an important part of value analysis. Try to reduce the LLC’s quarterly and annual results to line graphs for income and costs. Which way are these factors trending?

(17) Business Plan . Do the managers and members have specific goals or is their strategy more built around finding targets of investment opportunity? Is their plan realistic or pie-in-the-sky? What will the company likely look like in three years? Five years? Is a change in direction required?

The importance of thorough due diligence conducted during an adequate inspection period cannot be understated. Knowledge, as they say, is power. If one must sign a confidentiality or non-disclosure agreement in order to get relevant information on the LLC and its members, then that is what should be done.

CLAUSES AND PROVISIONS OF THE ASSIGNMENT

Assignments of interest generally.

All assignments of interest (regardless of the interest assigned) include—or should include—certain common clauses and provisions. After identifying the parties and the exact interest to be assigned, the document should state the consideration being paid; whether the consideration is nominal, cash, or a financed amount (secured or unsecured); recite both transfer and acceptance language; state whether the assignment is made entirely “as is” or instead with representations and warranties; state whether the assignee will have any recourse in the event certain post-assignment conditions are not met and identify the recourse mechanism; recite covenants and agreements of both parties that will result in the implementation of the transfer along with remedies for default if these measures are not carried out; a mutual indemnity clause; any special provisions agreed to by the parties; an alternative dispute resolution (mandatory mediation) clause; and conclude with various miscellaneous provisions that identify applicable law and venue, advise all parties to consult an attorney, set an effective date, and so forth.

A “Consent of Non-Member Spouses” should be appended if applicable. Exhibits to the assignment (pertaining to company assets and liabilities, for instance) may also be needed.

Representations and Warranties

An assignment may include a full set of representations and warranties (“reps and warranties”), limited reps and warranties, or no reps and warranties at all—in which case the assignment is made entirely as is and (in such cases) is almost always without recourse, meaning there is no defined remedy against the assignor-seller if the LLC membership goes sour for some reason. Representations and warranties may be made by assignor, assignee, both, or neither.

Core reps and warranties are basic assurances to which no reasonable party should object. Reps and warranties can get much more detailed and extensive from there. If attorneys are involved, the reps and warranties section of a contract may be heavily negotiated.

The assignor-seller’s goal is to minimize post-closing liability by transferring the membership interest “as is” to the maximum extent by including only a minimum number of reps and warranties. It should be noted that inclusion of the above-mentioned core items does not impair the ability of an assignor to assign an interest “as is.” For this reason, it is always somewhat suspicious when an assignor refuses to give any reps or warranties at all.

The assignee-buyer instead prefers a longer and more specific list of reps and warranties on the part of the assignor-seller. One of the goals of the assignee in the due diligence process is to ascertain, to the greatest extent practicable, the accuracy of reps and warranties that have been or will be made by the seller.

Examples of Reps and Warranties

Examples of basic reps and warranties would include assurances that each party, if a registered entity, is in good standing; the party has power and authority to enter into the transaction without joinder of others; and there exists no condition or circumstance that would render the transaction illegal or invalid or place the party in breach of an existing contract. Additional near-core items would include assurances that each party has performed adequate due diligence and has consulted an attorney before signing.

Both assignor and assignee should also want to include a statement that neither party is making or relying upon any reps or warranties that are not expressly set forth in the assignment. The goal is to prevent anyone from assuming anything or alleging that certain assurances were oral or implied.

Reps and Warranties: Duration and Default

Once reps and warranties are negotiated, it must be determined how long they will survive closing—if at all. 30 days? 90 days? Indefinitely?

A final issue in this area has to do with remedies for default in the event of breach. Attorneys frequently include a clause requiring that such default be a material (rather than a trivial) breach in order to be legally actionable. The issue is then raised, how does one define material ? One method is to impose a monetary floor, e.g., by confining assignor liability to issues that result in a loss or cost of (say) $10,000 or more.

Assignments Made “As Is”

As noted, an assignor-seller can include basic (limited) representations and warranties and still convey an LLC membership interest “as is.” Many business persons, including lawyers, do not adequately understand this. For example, stating that one has sufficient power and authority to enter into a transaction does not suggest any representation or warranty as to the item being conveyed. It is a core representation that should probably be included in every assignment.

The key to protecting the assignor is a thorough “as is” clause. Just as is true with real estate conveyances, the more thorough and extensive the “as is” clause, the better. One-liners will generally not do. This is particularly true if there have been oral or email negotiations over a period of weeks or months. The goal should be not only to convey the interest “as is” but also to entirely exclude any statement that cannot be expressly found in writing within the four corners of the assignment instrument.

Covenants and Agreements of the Parties

Covenants and agreements address the legal obligations of the parties going forward—specifically what actions they are required to take in order to implement the assignment. Covenants and agreements of the assignor-seller would include, for example, an obligation to promptly endorse and deliver to the assignee-buyer any certificates evidencing the membership interest in question.

The assignee-buyer should also covenant and agree to abide by the company agreement and other governing documents. Since Texas is a community property state, the spouse of a new assignee should also be asked to sign off on this commitment. The best practice is to secure the signatures of both the new assignee and any non-member spouse not only on the assignment but on the company agreement itself.

Additional covenants and agreements of the parties may be (and usually are) included. This is another area that is subject to extensive negotiation and customization to the circumstances.

Recourse by Assignee upon Occurrence of Specified Conditions

The option for some form of limited or conditional recourse may be included in any assignment of interest. In the case of an LLC membership interest, the assignment could provide that, upon occurrence of certain conditions, the assignee would have the right to re-convey the membership interest and receive return of all or part of the consideration. Examples of such conditions would be any adverse event—a negative outcome in a pending lawsuit or zoning proceeding; condemnation of certain LLC property; failure of a pending joint venture; or the discovery that any representations or warranties of assignor were materially false or deceptive when made. The availability of a recourse mechanism is generally time-limited, say for 90 days after closing. Some assignments might also refer to this recourse mechanism as a right to rescind.

In any assignment instrument, the alternative to full or limited recourse is no recourse at all by the assignee-buyer. For example, real estate notes are often sold without (either full or limited) recourse against the assignor-seller in the event that the borrower on the note defaults. In such a case, absent any provision for recourse, the assignee-buyer of the note would then be in possession of a non-performing asset. The remedy is not against the assignor, but to pursue the debtor directly.

Mutual Indemnity

Ideally, and unless there are special circumstances, the assignor and assignee should release and indemnify one another for LLC-related actions, claims, liabilities, and obligations occurring before and after (respectively) the effective date of the assignment. Indemnity provisions are useful and worthwhile, but one needs to clearly understand their limitations. They are not a covenant not to sue.

Non-Compete and Non-Disclosure Provisions

Sale by a departing LLC member to another member may raise concerns that the departing member will utilize proprietary and confidential information in order to compete with the company in the same line of business within the same geographical area. Agreements regarding intellectual property and non-competition are typically stand-alone full-length contracts; nevertheless, it is possible to include compact and enforceable IP and non-compete provisions that fit smoothly and purposefully into a sale and assignment of LLC membership interest. Failing to do this can be an error with serious consequences.

Corporate Transparency Act and FinCEN Reporting

The Financial Crimes Enforcement Network (FinCEN), an arm of the Treasury Department, is charged with rulemaking to enforce the Corporate Transparency Act which was passed in 2021. The CTA contains sweeping requirements regarding the reporting of beneficial interests in LLCs and corporations.

To the extent that a sale and assignment of LLC membership interest constitutes a change in beneficial ownership, then a report to FinCEN will likely be required. The assignment instrument should expressly address the applicability of the CTA and designate which party (usually the assignee) will be responsible for filing a supplemental FinCEN report.

If the burden of FinCEN reporting falls on the assignee, then the assignor may want to include an indemnity clause for added protection. The assignor may also want to limit liability for past FinCEN reporting.

Alternative Dispute Resolution: Mandatory Mediation

Since we live in a litigation nation, it is highly advisable to include a provision that requires mediation prior to commencing legal action. Approximately 80% of mediations result in a settlement. In other words, mediation works, at least most of the time.

A mediation clause should require the conflicting parties to first confer in good faith and attempt to resolve the dispute in a way that accommodates the legitimate interests of both sides. If agreement is reached, it should be reduced to a signed writing and implemented. If not, the parties should then agree to formally mediate the dispute before a certified mediator prior to resorting to litigation or filing any complaint with a governmental or administrative agency.

A mandatory mediation provision should also state where the mediation will be held (which city or county) and for how long (mediations are usually either a half-day or a full day). Each party should commit to bearing its own fees and costs until the mediation is concluded.

Special Provisions and Stipulations

It is useful to include a catch-all special provisions section that allows room for terms that may be specific to the subject transaction and its unique circumstances. These special agreements and provisions frequently arise and this is the place to insert them.

Stipulations are a slightly different concept. For example, an assignment of LLC membership interest may involve a new list of members. It may also require a re-allocation of percentage interests among the remaining members. So it may be beneficial to include a stipulation that after conclusion of the assignment, the new membership list (with accompanying revised percentage interests) will be as described in Exhibit A. This usefully erases any doubt as to the overall final outcome of the transaction.

As previously noted, a special meeting of members is an important companion document to the assignment of LLC membership interest. The meeting, signed by all affected parties, can not only approve the assignment but mention issues such as record date, a general ratification of the assignment and the new member list, and also authorize issuance of new membership certificates.

No Reliance and No Representation Clauses

The assignor-seller (in particular) may want to make it clear that the assignment is made and accepted by the assignee-buyer only after a proper due-diligence investigation and without reliance on any statements or assurances (especially oral ones) made by the assignor-seller or its agents.

Wrap-Up Provision Relating to Execution and Delivery of Documents and Records

It would be an oversight if an assignment of LLC membership interest failed to mention possession and delivery of company books and records, an omission that has resulted in more than a few lawsuits. An agreement to execute and deliver such additional and further documents as may be reasonably necessary to effectuate the purposes of the assignment should cover and include any affected LLC records, including the company book and accounting records. These may need to be transferred to a new assignee-owner or returned to the assignor-seller after due-diligence inspection.

Clients often do not understand why a sale and assignment of LLC membership interest cannot be a simple, one-page document. It is hoped that this article will clarify the answer to that question.

Information in this article is provided for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. The law changes. No attorney-client relationship is created by the offering of this article. This firm does not represent you unless and until it is expressly retained in writing to do so. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well.

Copyright © 2024 by David J. Willis. All rights reserved. Mr. Willis is board certified in both residential and commercial real estate law by the Texas Board of Legal Specialization. More information is available at his website, www.LoneStarLandLaw.com .

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Assignment of Ownership definition

Examples of assignment of ownership in a sentence.

Faculty using such volunteer, non-employed students in their scholarly work projects should have the students sign a “Student Assignment of Ownership and Nondisclosure Agreement” form.Significant Use of College ResourcesSignificant use of College resources in generating creative works is defined as use of College facilities, equipment, personnel, and one’s time in excess of that needed to fulfill the required purpose of one’s position, occupation, job description, appointment, and/or association with VGCC.

Grantor has executed this Assignment of Ownership Interests as of the date first above written.

Transfer or Assignment of Ownership ARM 17.8, Subchapter 12, Operating Permit Program §1225(2)&(4) 1.

Faculty using such volunteer, non-employed students in their scholarly work projects should have the students sign a “Student Assignment of Ownership and Nondisclosure Agreement” form.

With the exception of the Agent’s exercise of its rights in relation to the Interests pledged pursuant to each Assignment of Ownership Interests (as defined in the Loan Agreement), any Transfer or purported Transfer of an Interest in the Company not made in accordance with this Agreement (a “Void Transfer”) shall be null and void and of no force or effect whatsoever.

EXHIBIT C Assignment of Ownership Interest The undersigned Transferor hereby transfers and assigns an Ownership Interest representing a ___________% Equity Interest in The Alaska Wireless Network, LLC, a Delaware limited liability company, to ________________________, as Transferee.

For instance, Assignment of Ownership is often problematic, especially if there is no clear owner of the seemingly buggy code.

Will deliver the existing contract(s) and the Beneficiary Designation and Assignment of Ownership form to FCL.

Upon the payment in full of the Secured Obligations, the Secured Party shall take any actions reasonably necessary to terminate and release the security interest in and security title to the Ownership Interest granted to the Secured Party hereunder, and to cause the Assignment of Ownership Interest to be returned to the Debtor, all at the cost and expense of the Debtor.

Faculty using students, whether volunteer, non-employed, or employed, in their scholarly work projects should have the students sign a "Student Assignment of Ownership and Nondisclosure Agreement" form, available from Intellectual Property Services.

Related to Assignment of Ownership

Assignment of Contracts shall have the meaning provided in Section 5.07.

Assignment of Lease means the Assignment of Lease to be executed by the Seller at the Closing with respect to each parcel of Leased Real Property listed on Section 3.16(b) of the Disclosure Schedule, in a form to be mutually agreed by the Seller and the Purchaser.

Assignment of Leases With respect to any Mortgaged Property, any assignment of leases, rents and profits or similar agreement executed by the Mortgagor, assigning to the mortgagee all of the income, rents and profits derived from the ownership, operation, leasing or disposition of all or a portion of such Mortgaged Property, in the form which was duly executed, acknowledged and delivered, as amended, modified, renewed or extended through the date hereof and from time to time hereafter.

Assignment of Leases and Rents means each certain Assignment of Leases and Rents dated of even date herewith, by the Borrower in favor of the Agent on behalf of Lenders, as the same may be amended, restated, supplemented or otherwise modified from time to time.

Lease Assignment has the meaning set forth in Section 3.6(d).

Assignment of Rents means an instrument that transfers the beneficial interest under a deed of trust from one lender/entity to another.

IP Assignment a collateral assignment or security agreement pursuant to which an Obligor grants a Lien on its Intellectual Property to Agent, as security for the Obligations.

Assignment and Conveyance An assignment and conveyance of the Mortgage Loans purchased on a Closing Date in the form annexed hereto as Exhibit 4.

Assignment of Proprietary Lease With respect to a Cooperative Loan, the assignment of the related Cooperative Lease from the Mortgagor to the originator of the Cooperative Loan.

Lease Assignments means the assignments of real property leases and subleases by and between a member of the Nuance Group, as assignor, and a member of the SpinCo Group, as assignee, in each case as set forth on Schedule XII under the caption “Lease Assignments.”

Assignment of Rents and Leases means, with respect to the Mortgaged Property, an Assignment of Rents and Leases (and, if there are more than one, each and every one of them), dated as of the Closing Date, granted by the Borrower to Lender with respect to the Leases, as same may thereafter from time to time be supplemented, amended, modified or extended.

Assignment of Agreements means that certain Assignment of Agreements, Licenses, Permits and Contracts, dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee.

Assignment and Conveyance Agreement As defined in Subsection 6.01.

Assignment of Claims Act means the Assignment of Claims Act of 1940 (41 U.S.C. Section 15, 31 U.S.C. Section 3737, and 31 U.S.C. Section 3727), including all amendments thereto and regulations promulgated thereunder.

Assignment of Mortgage An assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage to the Purchaser.

Intellectual Property Assignment has the meaning set forth in Section 3.02(a)(iii).

Assignment of Management Agreement means the Assignment of Management Agreement and Subordination of Management Fees, dated the same date as this Loan Agreement, among Borrower, Lender and Property Manager, including all schedules, riders, allonges and addenda, as such Assignment of Management Agreement may be amended from time to time, and any future Assignment of Management Agreement and Subordination of Management Fees executed in accordance with Section 6.09(d).

Intellectual Property Assignment Agreement means, with respect to each Specified Business, an agreement in form and substance reasonably acceptable to Seller and Buyer, providing for the assignment of the Transferred Intellectual Property Related to such Specified Business.

IP Assignment Agreement has the meaning set forth in Section 3.2(a)(iii).

Trademark Assignment shall have the meaning specified in Section 3.2(c).

Intellectual Property Assignments has the meaning set forth in Section 3.02(a)(iv).

Assignment Agreements The following Assignment, Assumption and Recognition Agreements, each dated as of March 29, 2006, whereby certain Servicing Agreements solely with respect to the related Mortgage Loans were assigned to the Depositor for the benefit of the Certificateholders:

Assignment of Insurances shall have the meaning provided in the definition of “Collateral and Guaranty Requirements”.

Assignment of Recognition Agreement With respect to a Cooperative Loan, an assignment of the Recognition Agreement sufficient under the laws of the jurisdiction wherein the related Cooperative Unit is located to reflect the assignment of such Recognition Agreement.

Qualified assignment agreement means an agreement providing for a qualified assignment within the meaning of section 130 of the Internal Revenue Code.

Transfer ownership

What you need to know.

This page provides vital information about:

• Transferring a vehicle from a deceased family member
• When and where to take an emissions test
• What the Passports to the Parks fee is and associated fees
• Transferring a vehicle from one immediate family member to another
• The process for selling a vehicle and related tax information

Important notice on Passports to the Parks fee

Beginning in 2018, Connecticut began offering all residents with Connecticut license plates on their vehicles free parking at all state parks and beaches.

Connecticut wants to make state parks, forests, trails, historic sites, and beaches more available to our residents so they can enjoy the many attractions and beauty they offer. A $15 fee, which amounts to $5 per year, will be included in all three-year non-commercial vehicles with new registrations, renewals, and plate transfers. These are passenger cars and vehicles with combination plates  as well as motorcycles, campers/motor homes, and vehicles with antique car plates. In addition, seniors age 65 and older with a one-year registration renewal will have only an additional $5 fee each year. The new program allows the Connecticut to give more to the public that has now invested in our park system:

• Increased lifeguards
• Improved park maintenance
• Shoulder season camping for opening day of fishing and into the fall foliage
• Longer hours at our museums and nature centers

When people visit our state parks and other sites they visit local restaurants, shops, and local farms. This program brings many economic benefits for our state.  Click to learn more about Connecticut state parks . 

Related resources

• Update your registration Learn how to change, add, or remove a name from a vehicle title and/or registration.
• Transferring a vehicle from a deceased member of immediate family
• Other transfers

How to transfer a vehicle from deceased member of immediate family

Essential information

Vehicle transfer process, emissions requirements, tax exemption information, additional information.

When an immediate family member dies, their vehicle may be able to be passed on to an immediate family member (designated as the purchaser) by the executor or administrator of the deceased family member’s estate (designated as the seller). This happens by updating the vehicle’s title and/or registration to be in the purchaser’s name. If the vehicle is titled in the state of Connecticut, the seller needs to assign the Certificate of Title to the purchaser. If there are two executors of the estate, both executors are required to reassign ownership to the purchaser.  Required forms If the vehicle is registered in Connecticut but doesn’t require a Certificate of Title , the seller needs to request and complete a supplemental assignment of ownership (Form Q-1) assigning ownership to the purchaser. This form is required, as well as a copy of the vehicle’s most recent registration certificate. Learn how to reprint a vehicle registration certificate online for free . A certified version of the original probate document naming the administrator or executor of the estate is required at the time the vehicle is being registered. The following probate court documents are acceptable for this purpose:

• PC-160 decree. 
• PC-212B petitioner's probate certificate. This document must state that transfer of ownership is allowed. 
• PC-260 decree granting administration of probate will. 
• PC-264 or PC-264S decree/transfer of personal property without probate proceedings.
• PC-450 fiduciary's probate certificate.

In certain cases where the estate of the decedent falls within certain monetary limits, the court may authorize the transfer of the decedent’s vehicle by issuing a transfer of personal property without probate proceedings (Form PC-264 or PC-264S).

To transfer a vehicle from the estate of a deceased immediate family member to another family member (“you”), you must make an appointment at a DMV hub office or branch office .

• Make an appointment

Bring the following documents to your appointment:

• The Certificate of Title . The title must be assigned to the new owner by the executor or the administrator of the estate (“seller”). If the vehicle is registered in Connecticut but doesn’t require a title, then the seller will need to complete a supplemental assignment of ownership (Form Q-1) and provide the most recent registration certificate.
• If the estate of the decedent falls within certain monetary limits, the court may authorize the transfer of the decedent’s vehicle by issuing a transfer of personal property without probate proceedings (Form PC-264 or PC-264S).
• If the transfer is tax exempt (see list of tax exemptions in Form H-13B) please additionally fill out section 5 (as long as the vehicle had been previously registered in the immediate family member's name for a period of at least 60 days).
• A current Connecticut Insurance Card in your name for the vehicle. Learn more about minimum insurance requirements .
• The most recent registration certificate . Learn how to reprint a vehicle registration certificate online for free .
• Identification required—see list of acceptable forms of identification for registration .
• The Certificate of Title showing assignment of ownership   and indicating release of all liens (if any). A title is not required for vehicles with a model year more than 20 years prior to the current year. In that case, a supplemental assignment of ownership (Form Q-1) can be used; you would be designated as the purchaser, and your immediate family member would be designated as the seller.
• The most recent registration certificate (if available). Learn how to reprint a vehicle registration certificate online for free .
• Completed application for registration and title (Form H-13B). For registration purposes, you will be designated as the purchaser and your immediate family member as the seller.
• A permission letter from the immediate family member is required to keep the same plates .

Note: If the vehicle was previously registered out of state, please see purchase of a used vehicle previously registered out of state  for additional requirements.

If the vehicle was previously registered in Connecticut and isn’t compliant with emissions testing , you may register it first. However, you will need to have the vehicle’s emissions tested within 30 days of the date of registration or you will get a late fee. Note: You will not receive a notice for testing.

To find out if the vehicle you are buying is compliant, check the date online . Please have the Vehicle Identification Number (VIN) ready.

The vehicle must have been registered in the previous immediate family member’s name for at least 60 days in order to qualify for the sales tax exemption . Section 7 on the application for registration and title (Form H-13B) must be completed to obtain this exemption.

A vehicle exempt from sales tax by a family* or business relationship can’t be registered if it has delinquent property tax  or parking tickets are owed, or if the registration is under suspension. Learn more about resolving suspensions .

*No sales tax is due on a vehicle received through the transfer or sale to a member of the immediate family. Immediate family is defined as one’s mother, father, sister, brother, son, daughter, husband or wife. Refer to transfer/sale between immediate family members. Delinquent property tax restrictions apply.

Gift process

The vehicle must have been registered in the previous immediate family member’s name for at least 60 days in order to qualify for the sales tax exemption. Section 7 on the application for registration and title (Form H-13B) must be completed to obtain this exemption. Vehicles (and/or vessels) received as gifts have several special requirements. Review the following: Forms A completed motor vehicle or vessel gift declaration (Form AU-463), signed by the donor, is required. Note: The donor can’t receive any consideration (cash, property, service, assumption of debt, etc.) in return. Taxes

• No sales and use tax are due on a vehicle or vessel received as a gift.
• The donor of a vehicle or vessel may be subject to Connecticut gift tax. Generally, the gift tax is imposed on the transfer of property by gift during each calendar year. The tax is measured by taxable gifts, as defined for federal gift tax purposes. For more information on tax exemption, please contact the CT Department of Revenue Services .
• Learn more about resolving suspensions .
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Chapter 0300

Ownership and assignment.

• 301.01-Accessibility of Assignment Records
• 302.01-Assignment Document Must Be Copy for Recording
• 302.02-Translation of Assignment Document
• 302.03-Identifying Patent or Application
• 302.04-Foreign Assignee May Designate Domestic Representative
• 302.05-Address of Assignee
• 302.06-Fee for Recording
• 302.07-Assignment Document Must Be Accompanied by a Cover Sheet 
• 302.08-Mailing Address for Submitting Assignment Documents
• 302.09-Facsimile Submission of Assignment Documents
• 302.10-Electronic Submission of Assignment Documents
• 303-Assignment Documents Not Endorsed on Pending Applications
• 304‑305-[Reserved]
• 306.01-Assignment of an Application Claiming the Benefits of a Provisional Application
• 307-Issue to Non-Applicant Assignee
• 308-Issue to Applicant
• 309-Restrictions Upon Employees of U.S. Patent and Trademark Office
• 310-Government License Rights to Contractor-Owned Inventions Made Under Federally Sponsored Research and Development
• 311-Filing of Notice of Arbitration Awards
• 312-[Reserved]
• 313-Recording of Licenses, Security Interests, and Documents Other Than Assignments
• 314-Certificates of Change of Name or of Merger
• 315-Indexing Against a Recorded Certificate
• 316-[Reserved]
• 317.01-Recording Date
• 317.02-Correction of Unrecorded Returned Documents and Cover Sheets
• 317.03-Effect of Recording
• 318-Documents Not to be Placed in Files
• 319-[Reserved]
• 320-Title Reports
• 321‑322-[Reserved]
• 323.01(a)-Typographical Errors in Cover Sheet
• 323.01(b)-Typographical Errors in Recorded Assignment Document
• 323.01(c)-Assignment or Change of Name Improperly Filed and Recorded by Another Person Against Owner’s Application or Patent
• 323.01(d)-Expungement of Assignment Records
• 324-Establishing Right of Assignee To Take Action in Application Filed Before September 16, 2012
• 325-Establishing Right of Assignee To Take Action in Application Filed On or After September 16, 2012

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How to Transfer Ownership of a Trademark?

• Post author: Sachin Jaiswal
• Post published: May 20, 2024
• Post category: Trademark

A trademark is a distinct image, word, or style that marks and distinguishes a product or service from others in the marketplace. Transferring trademark ownership involves the legal process of transferring or selling trademark rights from one party to another. Understanding this method in India is crucial for companies to protect their intellectual property and ensure compliance with legal requirements.

Properly transferring brand ownership can protect against abuse, secure exclusive rights, and ease business growth. Therefore, understanding the details of trademark transfer in India is important for companies looking to maintain control over their brand assets and leverage them successfully in the market.

Understanding Trademark Transfer

The legal system governing trademark transfer in India is mainly based on the Trademark Act of 1999. This Act allows brand owners to transfer their rights through assignment or licensing.

Trademark assignment involves the full or partial transfer of ownership rights from the assignor to the recipient. In a full assignment, the receiver becomes the sole owner, while in a partial assignment, the rights are limited to specific goods or services. The sale can be with or without the transfer of value related to the brand.

Trademark licensing, on the other hand, allows the licensor to offer limited rights to a licensee to use the mark. The licensor keeps ownership, and the licensee pays fees for the uses.

Transferring trademark ownership has important effects for businesses. It can enable strategy adjustments, market growth, or business deals. However, it also includes significant paperwork, including a signed assignment agreement, proof of consideration, and compliance with legal requirements. Proper due research and discussion are crucial to ensure a smooth transfer process.

Types of Trademark Assignment

The complete assignment includes moving full ownership of a trademark from the original owner to a new party, making the new owner the sole holder of the mark. In contrast, partial assignment involves giving ownership of specific goods or services, leaving the original owner to keep rights for other products or services.

Scenarios leading to brand title change can vary. Businesses may opt for full assignment when selling an entire product line or brand, ensuring a smooth transfer of all related rights and responsibilities. Partial transfer is common when a company wants to keep control over certain parts of the brand while sharing rights for specific goods or services. Changes in business structure, mergers, acquisitions, or strategic partnerships can also cause trademark ownership changes, requiring clear agreements and legal paperwork to ensure an easy shift of rights and responsibilities.

Process of Trademark Transfer

The process of changing trademark rights in India includes the following key steps:

• Due Research: Conduct a thorough study on the brand, including its licensing status, related goods/services, and any outstanding legal issues. Verify the assignor’s legal rights and ensure the mark is free from encumbrances.
• Negotiation and Agreement: Negotiate the terms of the contract, including the scope of rights being moved, payment, and any specific conditions. Draft a thorough Trademark Assignment Agreement describing these details.
• Execution of Agreement: The assignor and receiver must execute the Assignment Agreement, ensuring it is properly signed and sealed as per legal requirements.
• Compliance with Legal Requirements: File an application for trademark transfer with the Registrar of Trademarks using Form TM-P, along with the signed Agreement and necessary fees. The application must be made within six months of the posting date.
• Transfer of Rights and Responsibilities: Upon acceptance by the Registrar, the assignee becomes the new registered owner of the brand, with all related rights and responsibilities. The assignor relinquishes all claims to the mark.
• Post-Assignment Actions: The receiver should update their records, tell important parties, and actively watch and protect the passed brand rights. The assignor should ensure they have no further claims or liabilities linked to the given mark.

It is crucial to stick to all legal rules, keep proper paperwork, and file the assignment application within the stated time frame to ensure an easy and legally acceptable transfer of brand ownership in India.

Filing Requirements for Trademark Assignment

To successfully finish a trademark assignment in India , specific papers are important to meet with legal processes and ensure a proper transfer of ownership.

Necessary Documents for Trademark Assignment:

• Trademark Assignment Agreement outlining the transfer of legal rights from the assignor to the assignee.
• Brand Certificate: Proof of the original brand filing.
• No Objection Certificate (NOC) from the Assignor: Confirmation from the present owner accepting the move.
• Identified papers of Assignor and Assignee: Valid identification papers of both parties involved in the contract.

Application Process and Registrar’s Role:

• Filing the Application: The assignor or recipient can file the application for trademark transfer using Form TM-24 or Form TM-23 for joint requests.
• Submission of papers: Along with the application form, all relevant papers linked to the name assignment must be presented to the Registrar of Trademarks within six months of the title transfer.
• Registrar’s Review: The Registrar studies the application and papers to ensure compliance with law requirements and the Trademark Act of 1999 .
• Advertisement of Assignment: The Registrar may define the advertisement of the trademark assignment, requiring the application to post the assignment information.
• Approval and Registration: Upon happiness with the application and papers, the Registrar accepts the assignment. The assignee’s name is then entered as the new holder of the brand, finishing the title transfer.

By following these steps and giving the necessary papers, businesses can ensure an easy and legally valid transfer of trademark ownership in India, with the Registrar playing a crucial role in directing the process and ensuring compliance with trademark laws and regulations.

Common Reasons for Trademark Transfer

Common reasons for trademark transfer often revolve around important business events and legal considerations:

• Sale of Business and Associated Intellectual Property: When a business changes hands, the transfer of rights is crucial to keeping brand identity and trust. The new owner gets the brands along with the business assets, ensuring stability and recognition in the market.
• Death of the Trademark Owner and Inheritance Issues: In cases of the trademark owner’s demise, proper transfer methods are important to address inheritance issues. Transferring trademarks ensures that the rights and responsibilities connected with the intellectual property are passed on according to legal requirements and the dead owner’s wishes.
• Division of Business and Distribution of Assets: During business restructuring or division, trademark transfer simplifies the distribution of assets. Dividing brands among different companies or partners ensures clarity in ownership and usage rights, supporting the smooth shift of business operations and asset management.

Challenges and Best Practices

Common challenges during the trademark transfer process include ensuring proper paperwork, meeting legal requirements, and keeping brand legitimacy. Challenges may come from difficulties in writing the Trademark Assignment Agreement, meeting form and content requirements, and completing the transfer correctly to avoid jeopardising the mark’s validity.

Best practices to ensure an easy transfer involve conducting thorough due research, involving law pros, and recording the transfer quickly. Best practices include studying the brand’s status, hiring trademark lawyers for legal compliance, and making the contract with the relevant trademark office within the stipulated time frame.

In summary, trademark transfer involves a careful process spanning due research, discussion, legal compliance, and post-assignment actions, allowing for full or partial ownership changes based on specific business needs or scenarios like mergers. Proper paperwork and obedience to legal requirements are important for a proper transfer. Ensuring the right transfer of brand ownership is vital for companies as it protects intellectual property, stops abuse, and allows strategic growth possibilities. By performing ownership changes correctly, businesses can protect their brand assets, keep their uniqueness, and effectively leverage their trademarks in the market, boosting their competitive edge and fostering long-term success in the dynamic business landscape.

Related Services:

• Trademark Registration Online
• Copyright Registration Online

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Governor Parson accepts Conway High School student’s invitation to visit school as part of teacher’s assignment

CONWAY, Mo. (KY3) - Wednesday (May 15) marked a historic occasion in Conway, Missouri, and it was all because a high school student took a teacher’s assignment and ran with it.

Christen Wilson teaches Civics at Conway High School, and little did she know that a simple assignment about the Constitution would spark a momentous occasion in the small Laclede County town of just over 700 people, thanks to junior student Kolby Wicker.

“I gave the class an assignment that they had to symbolize the Preamble,” Wilson explained. “And I told them to play to their strengths. So, if they’re a great woodworker, make symbols of the Preamble out of wood. And Kolby says, ‘I don’t really know what to do. What if I write to an elected official?’ I told him that was fine, and when he told me he was going to write the governor, I said, ‘Sure! Think big. Think outside the box.’ But never in a million years did I think the governor would accept the invitation.”

“I wrote a letter and sent in a formal request through his website,” Wicker said of his longshot attempt. “When I wrote the letter, I was thinking, it was never going to happen but I’ll do it anyway because I’m stubborn. It’s like Wayne Gretzky, who once said, ‘You miss 100 percent of the shots you don’t take.’”

So Wicker took a shot and scored as during the school’s spring break in late March, he heard back from Governor Mike Parson’s office that Missouri’s top state official would love to accept the invitation.

Kolby then notified his teacher that his homework assignment had been completed.

“The message actually said: ‘Mrs. Wilson, Governor Parson has agreed to roll up at Conway,’” Wilson recalled with a laugh.

And sure enough, Governor Parson and his staff did roll up to Conway High School at 9:30 Wednesday morning.

Kolby Wicker was among the first in the receiving line to shake Parson’s hand.

“You’re the one who sent me that request,” Parson said as he greeted Wicker. “You made it happen for everybody here.”

Parson toured the school’s agricultural center, met with the Civics class, and was greeted by a packed house of students and adults in the gym. Wicker was in the seat right next to Parson as Principal Kathryn Taylor explained the historical significance of the occasion.

“Thanks for helping us celebrate what we believe to be the first time a governor has visited Conway,” she said as Parson smiled.

Parson made it clear why he decided to make the trip. A native of Wheatland and long-time resident of Bolivar, where he still owns and operates a family farm, the governor holds a special place in his heart for rural communities.

“My staff has a meeting every week to discuss my schedule, and as they were running through all the requests for appearances, I said, “Whoa, whoa, whoa. Let’s go back to Conway,’” Parson recalled. “I said to them, ‘I come from the kind of people who live in Conway. I grew up like the kids from Conway. I want to go there.’ And that’s the main reason I’m here today. I want all of you to understand that all things are possible. I’m standing here in front of you as one of those people who never dreamed I’d be in the position I am today.”

Parson told the crowd about his childhood growing up on a farm.

“There were four of us boys, and my mom and dad were sharecroppers,” he said. “So we moved from farm to farm when I was a kid just trying to scratch out a living. And I will tell you that mom and dad knew nothing about child labor laws. They didn’t even know what that meant. When you were old enough to get out there and drive a tractor or a truck, they put you to work. But one thing you learn by being out on the farm is a good work ethic.”

Parson explained that his life experiences, including his time in the military and law enforcement, prepared him for his most challenging days in the governor’s office when the COVID-19 pandemic hit and no one knew exactly what would happen.

“As students, you know that when you have a question, you can go to your teacher, head to the library, or go to the internet to find out the answers,” he said. “But here’s the challenge I had that you might have someday. When COVID first hit, there was nobody to ask. There was no playbook on what to do. You are the only one to decide what’s going to be best for the people of this state, and you have to live with that responsibility. But what prepares you for that moment is everything that’s happened to you before that moment. How you grew up, where you got your schooling, what your parents are like, what your grandparents are like, what common sense means, and what faith means. All that goes into making those decisions and those are the things that really influence your life more than you’ll ever know. Because at a difficult time, you’ll always go back to the foundation of where you came from. The vast majority of people don’t know where Wheatland or Conway is, but don’t you ever think that because you come from a small school, you’re at a disadvantage? I say it’s more of an advantage because of all the skill sets you learned and the way you were brought up.”

Parson concluded his message to the crowd by telling the students they had the responsibility to uphold the rights and freedoms outlined in the Declaration of Independence, Bill of Rights, and Constitution.

“The only way that the American Dream stays alive is through you,” he said to the students. “Someday, somebody’s going to open a door for you, and you are going to make the decision about whether you walk through the door or not. If you don’t walk through it, somebody else will, and you’ll be standing there scratching your head and wondering why you didn’t go through the door. When opportunity comes, you need to be ready for it.”

Afterward, the teacher and student who had made it all possible expressed relief and appreciation for what they’d just witnessed.

“This will be one of those stories I’ll tell my children and grandchildren,” Wicker said.

“Our town doesn’t get a lot of recognition, but I think this was such a proud moment for our community and our school,” Wilson said.

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