Who Keeps the Brand After Co-Founders Split?
Introduction
When co-founders dissolve an unregistered partnership, disputes may arise over the continued use of the business name, trademark, logo, social-media accounts, customer goodwill, and related brand assets. The dispute is not resolved solely by asking who designed the logo or who first thought of the name.
Philippine law distinguishes between trade names, which may be protected even without registration, and trademarks, ownership of which is generally acquired through valid registration under the Intellectual Property Code. Courts also examine the partnership agreement, the circumstances of the business separation, the parties’ prior use, and the likelihood that the public will be misled.
What Law Governs Brand Ownership?
The principal statute is R.A. No. 8293, or the Intellectual Property Code of the Philippines. Section 165 protects trade names against unlawful use even before or without registration. A subsequent use of the same or a similar trade name or mark is unlawful when it is likely to mislead the public.
Section 149 of R.A. No. 8293 governs the assignment and transfer of trademark applications and registrations. An assignment must be in writing and signed by the parties. It must also be recorded with the Intellectual Property Office to bind third parties.
An assignment is void if it is likely to mislead the public about the nature, source, manufacturing process, characteristics, or suitability of the goods or services. This restriction is important when co-founders divide the business but attempt to use substantially the same name or logo for competing enterprises.
Trade Name Protection Does Not Require Registration
A trade name identifies the enterprise itself. It may be the business name appearing on storefronts, invoices, packaging, social-media pages, permits, and customer communications.
Under Section 165.2 of R.A. No. 8293, a trade name is protected even without registration. The owner may object to a later use by a former co-founder when that use is likely to deceive or confuse the public.
In Kolin Electronics Co., Inc. v. Kolin Philippines International, Inc., G.R. No. 226444 (2021), the Supreme Court recognized that trade names need not be registered to receive protection. The Court also held that a prior user may oppose a later application when registration would cause legally cognizable damage, including confusion with an existing trade name.
Accordingly, the absence of SEC, DTI, or trademark registration does not automatically mean that either co-founder may freely appropriate the business identity. Evidence of prior use and public association with the enterprise remains important.
Trademark Ownership Generally Depends on Registration
Unlike a trade name, a trademark identifies and distinguishes goods or services. Under the present rule of R.A. No. 8293, ownership of a trademark is generally acquired through valid registration in good faith.
In Zuneca Pharmaceutical, et al. v. Natrapharm, Inc., G.R. No. 211850 (2020), and Emzee Foods, Inc. v. Elarfoods, Inc., G.R. No. 220558 (2021), the Supreme Court explained that the Intellectual Property Code shifted the system toward registration. The person or entity that first registers the mark in good faith is generally treated as its lawful owner.
This rule does not eliminate all protection for a prior user. A party that used the mark in good faith before the filing or priority date may, in appropriate circumstances, continue using it for the same business. However, the right cannot ordinarily be separated from the business with which the mark was used.
How Courts Analyze a Co-Founder Brand Dispute
Courts generally consider the following questions:
- Was the disputed asset a trade name, trademark, logo, or merely a business identifier?
- Who registered the mark, if anyone, and when was the application filed?
- Who first used the name or logo in commerce?
- Was the business operated by the partnership or by one co-founder individually?
- Did the partnership agreement address ownership of intellectual-property assets?
- Would continued use by one co-founder mislead customers into believing that the dissolved partnership still operates?
- Was the brand transferred together with the enterprise or business activity it identified?
The court may also examine corporate and partnership records, capital contributions, invoices, permits, advertising materials, packaging, website records, domain registration, social-media history, customer testimony, and communications between the parties.
Partnership Assets May Include the Brand
If the name, logo, goodwill, website, and customer-facing materials were developed and used for the partnership, they may be treated as partnership assets rather than the exclusive property of the co-founder who created them.
The decisive issue is not necessarily authorship. A logo may have been drawn by one founder, but the parties may have contributed money, labor, business contacts, and management to develop the goodwill associated with it. The partnership agreement and the parties’ conduct may therefore show that the brand belonged to the business.
In Torres v. Perez, et al., G.R. No. 188225 (2012), the Supreme Court held that once a partner was fully bought out, the remaining partners became the exclusive owners of the partnership and its assets, including trademarks. Their continued use of those assets did not by itself constitute unfair competition.
The decision illustrates that a partner’s exit or buyout may transfer more than a financial interest. Depending on the agreement and the transaction, it may also affect rights in the business name, marks, goodwill, and other commercial assets.
When Continued Use Becomes Unfair Competition
Unfair competition requires more than the mere fact that two former co-founders use related names. The use must ordinarily involve deception, passing off, or conduct calculated to make the public believe that one business is connected with, sponsored by, or the same as another.
A former co-founder may face liability where the business is represented as continuing under the old partnership, customers are led to believe that the former partner remains involved, or the new venture deliberately adopts the same distinctive name, logo, packaging, online identity, and customer-facing presentation.
In Torres v. Perez, the Court found no probable cause for unfair competition because the respondents acted in good faith as exclusive owners after the buyout. The case shows that the surrounding circumstances and the presence or absence of fraud are material.
How Courts Determine Confusing Similarity
When the dispute involves two marks, the Supreme Court applies the Dominancy Test. The inquiry focuses on the dominant visual, aural, and connotative features of the competing marks and whether ordinary purchasers are likely to be confused.
In Strauss v. Sevilla, et al., G.R. No. 219744 (2021), the Court stated that the Holistic or Totality Test had been abandoned and that the Dominancy Test controls under Section 155 of R.A. No. 8293.
In Kolin Electronics Co., Inc. v. Kolin Philippines International, Inc., the Court also discussed a broader assessment of damage, including resemblance between the marks, the relationship between the goods or services, and the effect of registration on rights acquired in good faith.
For co-founders, this means that changing the color or adding a minor design element may not be enough. If the dominant word, sound, or commercial impression remains substantially similar, the later use may still create confusion.
Effect of the Partnership Agreement
The partnership agreement should be examined first. It may expressly identify who owns the trade name, trademarks, logos, domain names, social-media accounts, customer lists, and other intangible assets upon dissolution.
If the agreement is silent, evidence of the parties’ conduct becomes important. Relevant evidence may include:
- who paid for registration, design, advertising, and branding;
- whose name appeared in applications and official records;
- whether expenses were charged to the partnership;
- whether the brand was consistently presented as belonging to the partnership; and
- whether a buyout or dissolution document transferred the business and its goodwill.
A written settlement should specifically state who receives the brand, whether the departing co-founder may use a modified name, how online accounts will be transferred, and whether a transition period will apply.
Typical Scenarios
One founder registered the trademark personally. Registration is strong evidence of trademark ownership, but the surrounding agreement and the manner of registration must still be considered. A registration obtained in breach of a fiduciary or contractual obligation may generate separate disputes between the co-founders.
The business name was never registered. The absence of registration is not conclusive. The party asserting rights should prove prior commercial use, public association, goodwill, and likely deception from the other party’s continued use.
Both founders use the same name after dissolution. Continued simultaneous use may confuse customers and expose both parties to injunctive proceedings. The safer course is a written allocation of the brand or a planned rebranding arrangement.
The departing founder designed the logo. Design authorship does not automatically decide ownership of the business identity. The parties must distinguish copyright in the artwork from trademark or trade-name rights used to identify the enterprise.
Recommended Steps Before Filing a Case
- Collect the partnership agreement, dissolution or buyout documents, invoices, permits, advertisements, product packaging, and registration records.
- Determine whether the dispute concerns a trade name, a registered trademark, copyright in artwork, domain-name control, or business goodwill.
- Check the Intellectual Property Office records for the mark’s applicant, registrant, filing date, registration status, and covered goods or services.
- Send a carefully worded demand that identifies the confusing conduct and proposes a transition, coexistence, assignment, or rebranding solution.
- Preserve evidence of actual confusion, including misdirected payments, customer messages, mistaken orders, online reviews, and supplier communications.
- Consider administrative opposition or cancellation proceedings, civil infringement or unfair-competition claims, and provisional remedies where justified.
Conclusion
When co-founders separate, the brand ordinarily follows the legally established ownership of the relevant intellectual-property asset and, where applicable, the business and goodwill identified by that asset. A trade name may be protected without registration, while trademark ownership generally turns on valid registration under R.A. No. 8293.
Co-founders should avoid unilateral appropriation of the old identity, especially where customers may believe that the dissolved partnership continues to operate. A written dissolution agreement, a documented transfer or assignment, proper recording with the Intellectual Property Office, and a clear transition plan provide the best protection against later disputes.
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