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IP transactions: How to manage pending applications

14-11-2016

The transfer of IP ownership due on the acquisition of a brand or business will inevitably include a number of applications for the registration of trademarks, patents or designs that have yet to be granted. A different approach to transfer is required in such instances, 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,  for managing the transfer of unregistered IP rights and other forms of intangible assets and of ‘hybrid’ or ‘merged’ IP rights. This time, we look at the process for managing the transfer of pending IP assets.

Why do pending IP rights have to be treated differently?
In some jurisdictions, a change of ownership recordal for an IP asset may not be possible until after the completion of the registration process. In these situations, it is necessary for the purchaser and/or its representatives to be empowered to take over the prosecution of pending applications so that the process can be completed.

In some cases, the application to record a change of ownership will be in its pendency at the same time as the application for registration of the right itself. This can add to the complexity of the prosecution of both, but should not prevent either happening correctly.

More complicated is the situation where there are ongoing opposition proceedings before an IP office, or litigation before the courts. In this situation, it will normally be necessary to seek leave of the tribunal or court to change the parties involved in the proceedings (for example, in the UK, the UK IPO’s tribunal section has issued practice guidance based on its judgment in Pharmedica [2000] RPC 536). It may be necessary for the vendor to remain involved and for the purchaser to be added as a party to proceedings.

Again, the purchase agreement should place sufficient obligations on the vendor to ensure cooperation, and the pre-transaction due diligence and disclosures should reveal any such ongoing proceedings. (Find out more about how to approach the due diligence process here.)

In the case of ongoing litigation, where remedies such as damages are sought, it should be made clear which party is entitled to them post-transaction. If the damage was done pre-transaction then, logically perhaps, damages should be to the benefit of the vendor, but this should be made clear by agreement.

This is part 5 of our in-depth look at the IP assignment process. For further information and future updates, sign up to our ezine or contact one of our experts.