When you buy a business these days, you’re going to want to make sure you’re also purchasing the trademark assets from that business. Any good trademark or business attorney will make sure the intellectual property, including trademarks, copyrights, and patents, are included in any purchase agreement. But beyond that, how can you really be sure that the rights you’re buying are actually owned by the company you’re buying them from? That’s the question we’ll try to answer in this post, with a focus on trademark rights and a few helpful tips for making sure the trademark assets are actually owned by who you think they are.
Of course, my standard disclaimer applies. This post is just for general informational purposes only, and while I’m a lawyer, I’m not your lawyer (unless you’re actually a paying client who has signed a retainer agreement with me and you’re reading this). Any time you enter into any kind of deal to purchase intellectual property from another person or company or a deal to purchase a company itself, always consult an attorney (and an accountant at the very least) before you enter into the transaction.
With that out of the way, you’re probably wondering what’s the deal with trademark assets not actually being owned by the company you think you’re buying them from. There’s a couple of common occurrences I’ve seen that leads to ownership issues.
The first is that the trademarks are actually owned by a subsidiary of the company that’s being purchased instead of the company itself—and for whatever reason, the subsidiary is not part of the deal.
The second is that the company acquired the trademark from someone previously and, due to chain of title issues, the prior owner didn’t actually own the rights to use the trademark. There are others, of course, but those are two of the more common reasons why a company may not own the trademark asset you think you’re purchasing.
So what is a purchaser to do to protect themselves? It starts with a list. You (or your attorney) need to create a list of the intellectual property you think you’re going to be purchasing. This should include the following:
- Service Marks
- Trade Dress
- Trade Secrets
- Trade Names
- Domain Names.
And don’t just include those you think are truly owned by the company you’re buying, but include those that are owned by other companies or individuals and are licensed to the company you’re buying. Unless you’re going to completely overhaul the business, you’re going to want to keep using those licenses after you purchase the business.
Once you have your list of expected intellectual property you’re going to receive from the transaction, you’re going to want to cross reference that with the list the seller provides, since their list will be the most up-to-date. They are the current owner of the business, after all.
If both lists match, you’re sitting pretty knowing that at least both parties are contemplating the same IP being transferred during the sale. If not, you’re going to have to do some digging. It’s always best to find that some intellectual property asset will not be transferred beforehand than it is to go back and fix it later by finding the correct owner and entering into additional agreements (at additional cost, of course) to secure the assets.
Aside from the lists, you (again, your lawyer) will also want to take a look at the current states of the company’s intellectual property dockets. This is incredibly important for trademark, service mark, and patent assets, as successfully managing those types of intellectual property require a near-constant watch on upcoming deadlines.
If there are many assets contemplated as a part of the deal, chances are the seller will have a docketing system in place, and you should view the current one-year summary of the docket to see what deadlines are coming up. You don’t want to be the buyer who purchases a valuable trademark only to suddenly realize upon the deal closing that the deadline for renewal lapsed after the deal closed but before you could properly take up management the mark.
Aside from trademarks, there are other things to watch out for when it comes to other intellectual property assets, but those are issues for another post.
I hope this post was useful to you if you’re considering buying (or selling, I suppose) a business. As I often say, a trademark can be one of the most valuable assets of a company, and you want to make sure you’re getting what you’re bargaining for. If you have any questions or comments, please feel free to contact me or leave a comment below.
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