Data Verification And Role In IP Due Diligence

Question 1

What is due diligence?

Answer 1

The process of investigation into the business, legal and financial affairs of a company, sufficient to permit parties to make informed decisions about that company.

E.g. in acquisitions - process where buyer is able to verify claims made with respect to the business, so they can make informed decisions about acquiring business

Question 2

Why do we do due diligence?

Answer 2

Best way to assess value of a business and associated IP, and also the risks with buying a business. Gives access to important and confidential information.

Question 3

Where do trademarks fit in with due diligence?

Answer 3

Significant value in a business is represented by its intangible assets, largely good will in the business and IP rights. Trademarks play a key role in activities of any business and are a key asset. Therefore, a detailed analysis of a company’s trademarks is frequently a precursor to the total or partial sale of a business.

Question 4

What will TM due diligence find?

Answer 4

1. Identification of trademarks (and other IP)
2. Assessing scope of trademarks (geographical, goods/services)
3. Are there any charges on the register? (I.e security interests)
4. Ownership - including a review of historic chain of title to ensure the business has the rights it purports to have
5. Any third party challenges e.g opposition/cancellation actions
6. Any litigation action brought on basis of trademark
7. Vulnerabilities in the mark in terms of validity/enforceability e.g late renewals, marks not used and vulnerable to cancellation etc
8. Review of inbound and outbound licensing agreements
9. Assessment of non registered rights
10. Assessing contracts or contractual obligations involving IP a rights
11. Identifying gaps in protection of the IP
12. Considering domain names

Question 5

What is the role of a paralegal in trademark due diligence?

Answer 5

Typically working alongside the buyer, therefore - cross checking information with what is provided by the seller.

Status - Checking TM rights still in force and have not lapsed/been abandoned. Are any cases due to be renewed soon? Is non-use cancellation possible? Are there any charges on register (e.g security interests - as these usually prevent assignment without permission), any ongoing disputes?

Ownership - are the TM rights owned by the seller, have all recordals been filed? Any licenses? If there have been recordals, are there copies of all relevant documentation?

Class/Spec - what is covered, what are the goods/services?

Question 6

How do we do due diligence? (Check)

Answer 6

Rights often identified through searches and checks on relevant trademark registers e.g. UKIPO database, EUIPO, WIPO, USPTO, other national and regional databases