IP transactions: Managing unregistered or associated IP rights
Few IP ownership transfers solely concern registered IP rights. Unregistered rights and other forms of intangible assets also play a crucial role in mergers and acquisitions (M&A), and other forms of IP transactions. We set out the process for managing the transfer of such rights.
In the first parts of our in-depth look at the IP assignment process, we set out best practice advice and procedures for smoothing the transition from sales agreement to completion, and recommended preparations for recording the change of ownership of registered IP rights. This time, we look at the management and transfer of unregistered and licensed IP rights.
Unregistered trademarks and goodwill
Businesses have different policies on the registration and protection of IP rights. In some jurisdictions, including the UK, it is possible to rely on unregistered rights in trademarks, utilising the common law principle of passing off or similar unfair competition rights.
Most transaction documents will include catch-all phrases and clauses by which the goodwill in the business associated with the trademarks – registered or unregistered – will pass to the purchaser.
It should be noted that one of the challenges in enforcing these unregistered rights is providing evidence to satisfy a court that the plaintiff is the rightful owner of the rights. Thus, it is advisable to ensure that the vending company provides information and evidence to show the existence and ownership of its unregistered rights.
It may be that the purchasing company has a different policy on the registration of trademarks and will wish to take steps to registered those trademarks that were previously left unregistered by the vendor. Again, it is important that that the transaction documents include the right to register and commit the vendor to provide assistance to the purchaser as required. It may be that one of the reasons why such trademarks were unregistered was because they lacked inherent distinctiveness and thus required evidence of use to secure registration. If so, the vendor should be afforded the opportunity to correct matters by providing evidence of use, the bulk of which would have been use in the vendor’s business.
Some trademarks, notably those consisting of or incorporating a logo, will have copyright associated with them. IP rights are not mutually exclusive. In some cases, registered ownership – and thus the ability to enforce rights – will be jeopardised if ownership of copyright does not pass to the purchaser. Copyright is of its nature an unregistered right in most jurisdictions, and can get overlooked in these situations. Logos are often designed by external consultancies and the purchaser should take care to identify ownership issues around their copyright, ensure they are documented and ownership perfected, so that not only is the purchaser the owner of the trademark, but also the other rights that may be present in it. (A good example of this scenario was the expensive fight over the Innocent Smoothie logo.)
As well as the changed in ownership of registered rights, post-completion on the formal change of ownership of licensed rights needs to happen.
For in-bound licences, the licence agreements should be amended or re-executed as appropriate and, where the licences are recorded at the local IP Office, that change should be recorded.
Similar comments apply in the case of out-bound licences, except that it is ownership details that change on the official record and not necessarily the recorded licence, although the local requirements on this point should be checked. Again, local formalities for recordal may apply. As with registered rights, it is important to be aware of these as soon as possible.
These details are important. In some jurisdictions, recordal of a licences is required in order to maintain full enforcement rights and/or to be able to collect royalties.Tweet