Acquiring a Trademark

Oftentimes, people become new business owners by purchasing an existing business. Current business owners may also buy businesses to expand their line. The assets from these sales may include trademarks from the business. As such, business owners need to be aware of a few items before signing the purchase agreement.

First, business owners should be aware of what marks they are actually buying. Sometimes, the seller will transfer a mark that has no relationship to the business to be sold, but the mark just happened to get listed in the schedule of assets because, well, it’s always been that way. Other times, the house mark—the main mark used by a business–gets transferred, but a subsidiary mark gets left out. To remedy this, business owners should insist on separate schedules to the sales agreement that list the intellectual properties being sold with the business.

Second, because trademarks are a bundle of rights similar to real or personal property, the marks may be encumbered by security agreements. For each trademark listed on the schedule of assets, you should clear the chain of title of each mark to ensure that the mark is free of any security interests.

Third, business owners should be sure to get an assignment of each individual mark from the seller. Trademarks are assigned to new entities all the time and the process is very simple, but, because of this, this step is often overlooked. Once the schedule of trademarks is confirmed, you should ask your trademark counsel to begin drafting assignments for each mark to be signed at the closing.

There are many other important factors for business owners to take into account when buying a business and the associated trademarks including representations and warranties, licenses, and valuation. Check with your trademark counsel early in the process to avoid headaches after closing.