Article 28 of the Saudi Trademarks Law
المادة 28 من نظام العلامات التجارية · الفصل الرابع: نقل ملكية العلامة ورهنها والحجز عليها
The Article provides that a sale of the business includes the marks closely connected with it and that the seller may keep the mark and continue his activity under it, all unless otherwise agreed.
Official text (Arabic)
This article has not been amended since the law was issued.
1 - يتضمن انتقال ملكية المحل التجاري أو مشروع الاستغلال العلامات المسجلة باسم ناقل الملكية والتي يمكن اعتبارها ذات ارتباط وثيق بالمحل التجاري أو المشروع، ما لم يتفق على خلاف ذلك.
2 - إذا نقلت ملكية المحل التجاري أو المشروع دون نقل ملكية العلامة ذاتها، جاز لناقل الملكية الاستمرار في صناعة ذات السلع أو تقديم ذات الخدمات التي سجلت عنها العلامة او الاتجار فيها، ما لم يتفق على خلاف ذلك.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 28 explained in plain English
This Article deals with the relationship between the sale of a business or exploitation project and the trademarks registered in the seller's name.
1. Marks pass with the business: Transfer of ownership of the business or project includes the marks registered in the transferor's name that can be considered closely connected with the business or project, unless otherwise agreed. Marks not closely connected with the business are not automatically covered by this provision.
2. Transfer of the business without the mark: If ownership of the business or project is transferred without transferring ownership of the mark itself, the transferor (the seller) may continue:
- Manufacturing the same goods,
- Or providing the same services for which the mark was registered,
- Or trading in them,
again unless otherwise agreed.
Both provisions can be modified by agreement, which is why it matters to draft the business sale contract clearly: are the marks included in the sale? And may the seller compete with the buyer in the same goods? The text does not define the standard of "close connection", so disagreement may arise over it if the contract is silent.
This Article complements Article 27, which allows transfer of ownership of the mark with the business or exploitation project, and requires, for the transfer to be asserted against third parties, noting it in the trademark register and publicizing it. Before buying or selling a business, it is wise to consult a lawyer who specializes in commercial cases to settle the fate of the marks in the contract.
Practical example
A businesswoman in Riyadh sold her perfume shop, and the contract was silent on the mark registered in her name that carries the shop's name. The mark passes with the shop if it is closely connected with it. But if the contract stated that the mark stays with her, she may continue trading in the same perfumes unless they agreed otherwise.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 28 of the Saudi Trademarks Law
Does the trademark pass when the business is sold?
Transfer of ownership of the business or project includes the marks registered in the seller's name that can be considered closely connected with it, unless otherwise agreed.
Can the business be sold without the trademark?
Yes. In that case the seller may continue manufacturing the same goods, providing the same services or trading in them, unless otherwise agreed.
Can the seller be prevented from continuing the same activity?
Yes, by agreement, since the seller's right to continue is subject to the phrase "unless otherwise agreed".
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The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.