Attendees will get a chance to find out best practices during mergers and acquisitions (M&A) in tomorrow’s panel “Working Trademarks into the M&A Process: Tips for Spotting Issues and Working Collaboratively in a High-Pressure, Short-Deadline World”. The panel features a blend of in-house and external counsel, with Christopher Turk from US apparel firm VF Corporation, Joseph Nabor from Fitch Even Tabin & Flannery in the US, and Joel Smith from Herbert Smith Freehills in Australia. Christopher George from US computer chip firm Intel was also involved in planning the session.
The INTA Daily News caught up some of the panelists to identify five of the best practices for trademark practitioners during an M&A process.
Understand your role in the process“One of the biggest mistakes is not understanding where the trademarks fit into the overall deal,” said Intel’s George. “How important are the different parts of the IP to the deal? That requires pretty early and consistent communication with the deal team and the unit buying the company. One mistake is for the trademark team not to understand where the trademark fits into the deal. That is one area that in-house counsel should be aware of early on.”
Be proactive“The guiding message to everybody whether you are outside counsel or inside counsel is to figure out who is doing the M&A deal for the company or the clients and reach out to them proactively ahead of time,” said George. “The earlier you get involved in the deal the better. Since I have been here I have never seen a deal go south because of trademarks. That is not to say there haven’t been issues with trademarks but unless you are buying specifically for the trademark, rarely is the trademark going to hold up the deal.
“When I got here around six years ago the M&A team did pay attention to the trademarks but it did happen more times than I care to admit that the deal would be done and the trademark team would see the announcement on our internal website and the trademark attorneys would be looking at each other like, ‘Did you work on that deal, I didn’t work on that deal?’ and there are trademarks all over their website.
“That is coming from a very tech, IP and trademark savvy corporation where still the different business units didn’t necessarily know that upfront. I have had to do a decent amount of work to involve myself with the M&A teams and make sure they know who we are, that we are around, that legal isn’t a four letter word, that we can work with them, keep the deal moving, and we are not going to be an impediment.”
Have a clear chain of title“It is important to have a clear chain of title. We don’t want assignment issues to crop up,” said Turk from VF, which bought Timberland in 2011. “There are some purchases – not Timberland – that VF has made over the years, whether it is buying somebody out of bankruptcy or buying a brand that has been run into the ground by somebody, where you don’t always know what you are getting. So there are chain of title issues, there are assignment issues, and things like that to be aware of.”
Have a plan“Another issue to be aware of when conducting due diligence is to make sure you know what you are doing with the intellectual property before you dissolve the company, if you dissolve it,” said Turk. “We’ve bought various companies that had one or two trademarks that were not owned by the main company or were owned by European subsidiaries and those subsidiaries were since merged out of existence or dissolved. You then have a situation of having your own trademark registrations that are owned by a company that no longer exists blocking your own new trademark filing.
“That is a post-acquisition issue, but going forward that is the kind of thing I look for in doing due diligence now – pointing out to the business team and the rest of the legal team before you start restructuring post acquisition that we need to do X, Y, Z, we need to assign these trademarks, we need to make sure we have the proper chain of title, we need to make sure there are still officers of this company around to sign assignment documents at the closing or shortly thereafter.
“There is a different trademark analysis that is required for us than say for Intel. We are not purchasing for technology. We are purchasing for the brand and the consumer awareness. You have to take a different approach when looking at due diligence. One of VF’s stated goals is that we want to be a global company so we want our brands to be global brands. If you are purchasing a regional brand that is popular, for example, in Europe or the US what is key for us in due diligence is whether we expand that.”
Know what you are buying“There’s the issue of continued use of the trademark and/or personal names,” said Joseph Nabor at Fitch Even Tabin & Flannery. “It is not unusual for a lot of smaller businesses to be organized under the name of the owner. When that owner sells does he or his family have right to the continued use of the family name in competitive businesses? How long would you structure a non-compete? What is appropriate for both sides? There are a number of instances where not the entire business is being sold but the purchaser needs to use the name of the company in their acquisition even though the company will still exist as a separate entity. So what residual rights and trademarks are there that you need to work out?
“The pitfalls to avoid are not doing an adequate due diligence and not taking into account the twists and turns that are going to come in the short term following the deal. The problems come in whether or not the seller owns what they are selling and the buyer buys what they think they are buying. Those are two entirely separate issues. From the buyer’s perspective you have to make sure the seller really is selling what the buyer thinks they are getting from this. There are some famous situations in the past where people thought they were buying a trademark lock, stock and barrel and found out they were only getting a part of it after the deal closed.”
CT21 – Working Trademarks into the M&A Process: 11:45 am to 1:00 pm tomorrow
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