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Trademark Pledge

April 2015 - Intellectual Property. Legal Developments by Baspinar & Partners Law Firm.

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Trademark pledge is one of pledge types on movable assets. Decree Law No. 556 dated 1995 Concerning to the Protection of Trademarks ("TDL") allows pledging the trademark and refers to the Turkish Civil Code ("TCC") for detailed regulations. Although a regulation exists, the trademark pledge is not frequently applied in Turkey and there are some loopholes that need to be clarified during the application of trademark pledge. The applicability will increase in the same direction with the value of the local trademarks of the country.

 

The trademark pledge means movable pledge under the TCC. As mentioned, TDL refers to the TCC for trademark pledge regulations. TCC provides a general rule that the delivery of movable asset is required for the validity of a pledge. However, if a movable asset is required to be registered at a specifically designed registry by law, pledge can be established by registration to such registry without delivery of the movable. The issue here is that the TCC states the movables "can" (not "must") be registered at the registry if there is such registry designed for such purpose but does not impose this registration right as a liability. Since the wording of the law does not mean that registration of a pledge in the relevant registry is not a condition for a valid pledge, then the question rises; "What happens if a bona fide third party purchases a trademark without knowing that there is a valid pledge on it because such pledge was not registered in the registry?" The problems that would occur in this case are evident. In our opinion, to prevent such problems, any pledge on trademarks shall be also registered at the Turkish Patent Institute ("TPI") for the protection of the pledgee's interest.

Furthermore, it is important to mention that the pledger can continue to use the trademark. Loyalty rights cannot be pledged separately and independently from the trademark.

The most important condition of the trademark pledge is the existence of a debt, which need a security. The trademark can be pledged in favor of the creditor or any other third party. The amount of the debt does not need to be specifically stated. It is enough if the debt amount can be determined. It is important to note that the pledge does not automatically cease if a debt ceases because statute of limitations. The pledgee still can apply to forced sale of the trademark.

A written agreement is the condition for validity of the trademark pledge.

The pledger must avoid actions decreasing the economic value of the trademark. For instance, since there is a regulation in Turkey that a trademark may be cancelled if the owner does not use such trademark continuously for 5 years, the trademark owner (pledger), must use the trademark to avoid any invalidity case arising from non-use for continuous 5 years. Besides the pledger has to renew the trademark registry in case of expiration.

Some are in the opinion that trademark pledge on a trademark that is not registered before the TPI is also possible. In such a case the non-registered trademark must have an economic value and brand quality.

Trademark pledge ceases under four circumstances: (1) payment of the debt, (2) pledgee's consent (3) if the pledge depends on any time limitation, the expiration of such term, (4) forced sale of the trademark. An important point: The TCC does not allow automatic transfer of movable assets in case the debt secured with pledge is not paid. Therefore any provisions in a pledge agreement would not be not valid.