The trademark plays a role of helping the customers recognize the goods or services of a company. Moreover, it is a promise of the company for the quality of their goods and services to the customers. Hence, once the company can’t control the quality and keep the promise with their customers over the goods or services’ quality, they are likely to lose their trademarks.

In the intricate landscape of mergers and acquisitions, the importance of thorough trademark due diligence often gets overlooked. While the focus may be on larger financial and operational aspects, a comprehensive review of brand assets is crucial to mitigate risks and maximize the value of the deal.
To ensure a comprehensive review, consider the following:

Review the portfolio:

Portfolio of IP assets of a company is comprised of trademark applications and registrations that includes basic information such as application and registration numbers, filling date, registration date, goods and services, and country.

You must review this carefully. Verify the information with each country’s trademark database. Pay close attention to any upcoming deadlines to maintain registrations. It can be easy for filing deadlines to fall through the cracks during this time.

Status of pending applications

If you find out the marks in the portfolios aren’t registered yet, please check the status of the pending applications. Regarding the registered marks, ascertain you don’t miss the filing deadlines. If there are pending office actions (which are the formal inquiries from the local IP office, review them carefully.

Ownership

It is a nightmare scenario is that a company goes through the entire M&A process only to find out there are parts of the brand that aren’t owned by the acquired company. A start-up may obtain early registrations in the individual owner’s name and forget, until an acquisition, that they never assigned the marks to the business. In addition, it is relatively common for international distributors to apply for trademark registration in the name of the distributor rather than the brand owner.

Ownership and transfer of IP assets also can have tax consequences that should be discussed with an attorney who is an expert in tax law.

If any application or registration is owned by a different entity, make sure to understand the relationship. Also check whether the chain of title to the correct entity is clear.

Equipped with this information, an acquiring company can understand whether additional transactions may be necessary to make sure it owns all trademarks in the end.

Agreements affecting rights

Another important aspect to consider is whether the trademark owner has any existing agreements that could potentially impact their rights in the marks. This includes licenses and coexistence agreements, which can significantly influence the scope and limitations of trademark ownership.

In instances where the company has granted trademark licenses, it is imperative to scrutinize the licensee’s utilization of the marks and the licensor’s oversight of the quality of goods and services produced under the license. A trademark serves as a guarantee of quality to consumers, and failure to enforce quality control measures may result in the erosion of trademark rights.

For any agreement, check restrictions on assignment for a mark. For example, if the trademark owner must seek advance authorization to assign its rights in an agreement, this should be taken care of prior to closing.

Related assets

Trademark transactions involve more than just registrations and applications. Online assets, such as domain names and social media accounts, frequently registered in the name of individuals, should be assessed for transferability.

Early and consistent review and coordination among the parties and their trademark attorneys around the world can help avoid pitfalls in mergers and acquisitions and ensure a smooth process.