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IP recordals: An administrative burden for in-house teams

15-02-2017

The transfer of IP ownership due on the acquisition of a brand or business can be a time-consuming and costly exercise. However, there are steps that a company can take to facilitate the process and take the pressure off in-house teams, as Novagraaf’s Tom Farrand explains.

In our previous looks at the IP transaction and assignment process, we set out best practice advice and procedures for smoothing the transition from sales agreement to completion during a company sale or merger, for recording the change of ownership of registered IP rights, and for managing the transfer of unregistered IP rights,  ‘hybrid’ or ‘merged’ IP rights, and pending applications. This time, we look at one of the key questions at the heart of the recordal process: should you tackle the updates straight away or delay/defer to take the pressure off in-house teams?

Decisions as to cost and timing
The larger the IP portfolio being transferred, the longer and more expensive the process of recording the change of ownership will be. Best practice is always is to record changes to title as soon as possible after completion of the transaction, as delay in recordal can have an adverse effect on validity and enforceability of rights in some jurisdictions and in some circumstances.

For example, in the UK, if change of ownership is not recorded within six months, a claimant can lose the right to damages, in any litigation in relation to the right in question, incurring after the six-month cut-off point (until the date of recordal). Further, any litigation needs to be brought in the name of the owner of the right, so the litigation process (including, if necessary, an application for interim relief) could be delayed pending final recordal of ownership.

On the other hand, some businesses choose  to defer some of the cost by delaying recordal until there is a compelling need. This could be, for instance, when a right requires a renewal payment or when litigation/licensing is contemplated.

Pressures on budget and resources usually necessitates such an approach – the theory being that it will spread the overall cost and administration of recordal over potentially several years. However, the absolute total cost of the exercise will usually end up being significantly higher than a single mass recordal project. There are economies of scale and the ability to negotiate reduced fees with local agents/law firms for attending to the recordal process. In addition, in most jurisdictions, local official fees are lower for multiple recordals than for piecemeal recordals.

By not updating ownership changes in a systematic way, IP owners also face increased portfolio management costs, as well as exposure to business and legal risk, including the inability to enforce their valuable IP rights and /or benefit for IP-related royalties.

A prompt approach to IP record management also forms part of sound IP portfolio management in general, and that means updating all changes to ownership records (whether assignments, name changes, mergers or address updates) in a timely manner.

Few recordals are simple
Of course, restrictions on budgets and resources are not the only reasons why a company might fall behind in updating IP asset ownership details. It is more than possible that a company finds, after taking on the rights, that there is a backlog of changes from previous transactions not yet recorded. This may mean recording several changes of ownership prior to the rights being updated, and this may present a challenge in obtaining all the supporting documents in order to perfect the change of title.

Recordal work is almost always time-consuming and heavy in administration. Even in cases where companies have filed the requisite paperwork in the relevant jurisdictions within the timescales allocated, it is not uncommon for that original paperwork to be found incomplete or flawed, leaving the IP owner exposed to portfolio management risk.

Similarly, many companies report that although they may start title update work in good time, they often struggle to finish due to a lack of available resources, expertise and time. It is here that third-party specialists, such as Novagraaf, are able to play a supporting role.

Whatever your approach, it is important to be alive to the potential risks and pitfalls of a failure to record changes in a timely manner. Ultimately, it will be a commercial decision based on a cost-benefit analysis, but there are adverse implications that can stem from a failure to record. We will be looking at potential risks and pitfalls in more detail in the next article in this series. For further information and future updates, sign up to our ezine or contact one of our experts.