IP Holding Companies for Trademark Registrations
If your business plans to separate branding from operations, you may form an IP holding company. (“IP” means “intellectual property: trademarks, copyrights, patents.) The tricky part: proving “use in commerce” when the holding company doesn’t itself sell goods or services. In this article, I walk you through why licensing the mark to an affiliate works — and how to do it right.
First, let’s discuss some basic questions and principles.
Why Use an IP Holding Company for Trademarks?
Not every business needs to form an IP Holding Company. For smaller businesses or solo entrepreneurs, this is largely an unnecessary complication. You would consider forming an IP holding company only when your business scales to the point where it encompasses multiple legal entities, franchises, or may be subject to a sale or buy-out.
Outside of those circumstances, however, creation of an IP holding company has the following advantages:
- It isolates valuable assets from operating risks (e.g. lawsuits or liabilities).
- It centralizes control of your brand and copyright/royalty flows.
- It lays the groundwork for global and tax-efficient IP structures.
- It strengthens brand consistency across affiliates through a single owner.
That said, US trademark law imposes specific requirements for registration of a trademark in particular. Improper structuring of an IP holding company and lax supervision of the trademark’s use can result in denial of registration, cancellation, and loss of the right to the registration.
Core Legal Principle: Licensed Use Counts as Owner Use
Under U.S. trademark law, use of a mark by a licensee can be treated as use by the licensor — if the licensor controls the nature and quality of that use.
Thus, when the operating affiliate uses the mark under a proper license, the holding company can submit those specimens in its trademark application.
What is use? It is use in interstate commerce. Read more here about the use in commerce requirement for trademark registration.
Long story short, the US Patent and Trademark Office (USPTO) only has the jurisdiction as a Federal agency to grant a trademark registration if it is being used across state lines. Otherwise, if the use is internal to Michigan or another state, it is intra-state use only and can be registered only under state law.
Michigan or other state trademark registrations do not offer national protection against infringement and are of limited benefit.
Step-by-Step: Setting Up a Trademark via an IP Holding Company
Here’s a practical timeline you can adapt:
| Step | Action | Why It Matters |
| 1. Form the IP holding company | Establish and capitalize the entity (e.g. “XYZ IP Holdings, LLC”). | You need a legal entity in place to own the mark. |
| 2. Retain a trademark attorney to draft the intercompany license | License the mark from holding to affiliate before any use or filings. | It ensures that affiliate’s use qualifies for the holding company. |
| 3. Affiliate begins use in commerce | Start using the mark in packaging, ads, website, etc. | You’ll collect specimens for the USPTO filing. |
| 4. File trademark application | File in the holding company’s name with affiliate’s specimens. | The holding company becomes the registrant. |
| 5. Maintain documentation | Keep license agreements, quality control records, and specimen files. | These protect you against challenges. |
| 6. Monitor, enforce, and update licenses | Watch third-party use, and revise licenses for new affiliates or products. | You preserve the strength of your mark across growth. |
| 7. Renew and maintain the registration | Submit use statements and renewals in the holding company’s name using affiliate specimens. | Ensures the registration remains active. |
What About Intent-to-Use Applications?
An Intent-to-Use (ITU) trademark application lets an applicant stake a claim to trademark rights before actually using the mark. Can a holding company file an ITU when the plan is for an affiliate to be the user? Yes — with proper structuring.
Key points:
- The holding company must have a bona fide intent to use the mark in commerce, directly or through a controlled licensee.
- The license to the affiliate should be executed before the Statement of Use is filed, so the affiliate’s first commercial use is properly attributed back to the holding company.
- If no license exists when the affiliate begins use, the application risks being challenged for lack of a valid ownership chain.
In practice:
- File the ITU in the holding company’s name.
- Once the affiliate is ready to launch products or services, sign and date the intercompany license agreement.
- Submit the affiliate’s use specimens with the Statement of Use, relying on the license to establish valid use.
Done correctly, this makes ITU filings a powerful tool for IP holding companies planning future brand launches.
Key Provisions in Your License That Protect You
The best way to ensure that the trademark license stands up to scrutiny in litigation is to retain an experienced trademark attorney to draft it for you. Avoid internet form documents that may not be compliant with the US Trademark Act or your state’s law (which always governs contracts). A good trademark license may include the following provisions:
- Grant clause: Precisely state which marks, goods/services, and territory are covered.
- Quality control: The holding company retains inspection rights and approval authority.
- Ownership clause: Licensee acknowledges licensor’s ownership and that goodwill accrues to the licensor.
- Record/Specimen access: Licensee must share use samples and records to the holding company to support filings and enforcement.
- Term & termination: Provide clear terms and a right to terminate if standards aren’t met.
- Royalty terms: May or may not be relevant to an intra-company agreement. However, where appropriate, this clause will govern any payment for use of the trademark.
These clauses help avoid “naked license” issues that can cost you your trademark registration.
Pitfalls to Avoid
- Waiting to execute the license: If you file first and only sign the license later, a challenger could argue the holding company never truly controlled the mark.
- Skipping quality control: Without scrutiny, the license is vulnerable to attacks (this is the “naked license” Issue).
- Poor documentation: If you lack records, you may lose the ability to defend the registration. In litigation, documentary evidence is crucial!
- Using inconsistent marks across affiliates — that can undermine your central ownership.
- Ignoring foreign jurisdictions: Some countries scrutinize license arrangements more strictly.
Considering Forming an IP Holding Company? Talk to a Michigan Trademark Attorney.
Using an IP holding company to own and license trademarks is a smart strategy for asset protection and brand consistency. Done right, this structure protects your IP portfolio while giving your operating companies the freedom to grow.
If you need to register a trademark with or without an IP holding company, Noble Path Legal PLLC specializes in trademark registration, business contracts and transactions, trademark renewal, and USPTO Office Action responses.
Click the button below to schedule your initial trademark conversation.