The purchase or sale of a business involves many considerations. A key issue for both buyers and sellers is whether that business has adequate protection for intellectual property.
Every business has at least one intellectual property asset – its “brand” (or “trade mark”). The trade mark is a major component of a business’s goodwill and value. It has often been described as ‘the title deed’ to the business. It should therefore be protected as diligently as any other asset.
A common misconception is that a business or company name protects the brand of a business. However, only a trade mark gives enforceable rights in a brand name, and it can often be used to stop someone else using a similar brand name, business name, company name, or domain name.
A trade mark can be registered or unregistered. A registered trade mark is preferable because it gives stronger and more easily enforceable rights, and it is also published on an official government database.
Sometimes, businesses will have one core trade mark and other secondary trade marks (e.g. for individual product lines). Each is a separate and potentially valuable asset.
It is important that intellectual property matters be discussed prior to the sale or purchase of a business.
From the purchaser’s perspective, its rights to register or enforce a trade mark in future may depend on proving use of that trade mark in the past by the seller. Business records, advertising materials and old invoices may therefore be crucial evidence, and should be obtained as part of the sale if possible. Importantly, a buyer cannot always rely on the seller to provide assistance after the sale. The seller may be uncooperative, or they may have disposed of old records.
From a seller’s perspective, offering a business for sale that has secure protection of its intellectual property (particularly its key brands) is likely to be much more attractive to potential buyers.
Prior to the sale of a business, we recommended that an IP professional review the sale contract and other business documentation. An IP professional can advise on:
- current level of protection of the business’s intellectual property assets;
- possible obstacles to protection and registration of intellectual property;
- recommendations for protecting unregistered intellectual property.
If you are planning on buying or selling a business, we recommend that you contact us for a review of the business IP.