“Due diligence” is a word that appears very frequently in investment and M&A, finance, IPO, listing and other business fields. It is a basic business for lawyers. In the field of intellectual property, few people conduct due diligence. In fact, due diligence plays an important role in all fields of intellectual property. This article takes trademark transfer as an example to briefly sort it out.
You must still remember the well-known case of trademark transfer, that is, Apple signed a transfer contract with Taiwan Proview Company regarding the transfer of the IPAD trademark, and the IPAD trademark was under the name of Shenzhen Proview Company, so Apple and Shenzhen Proview Company has a dispute over the IPAD trademark transfer. After the case was mediated, Apple finally paid an additional US$60 million to Shenzhen Proview, and the two parties settled the IPAD trademark dispute in a package. Apple paid $60 million more to acquire the IPAD trademark. In reality, in the trademark business, many clients and agencies only focus on the legal issues in trademark application, opposition, review and other procedures, but do not pay enough attention to trademark transfer.
We just believe that the legal issues involved in trademark transfer are not simple compared to those involved in other trademark procedures. Procedures such as trademark application, transfer, opposition, and reexamination involve legal issues related to the trademark itself, which fall under the category of traditional intellectual property rights. Therefore, trademark agencies or traditional trademark lawyers can basically solve them. The issues involved in trademark transfer are not only trademark law, but also company law and contract law. The entire trademark transfer procedure is a very complicated process. Due diligence is a very important link.
1. Conduct due diligence on the transferor
Generally speaking, the applicant/registrant of a trademark has the right to transfer his trademark, and the possibility of problems is unlikely, even if In this way, Apple did not conduct an investigation into the subject in the IPAD trademark transfer case, and it was taken for granted that Proview Taiwan was the subject of the IPAD trademark. In addition to determining the owner of the trademark, it is also necessary to conduct at least the following three aspects of investigation on the subject: a. Does the trademark have the same owner? b. In the current administrative procedures, there are no individual industrial and commercial households or rural contractors. Without a business owner's license, you cannot apply for a registered trademark. Therefore, many natural persons entrust a company to apply for a trademark for themselves. The natural person and the company sign a holding agreement, stipulating that the applicant or registrant of the trademark has no right to transfer the trademark; c. Investigation Whether he forged relevant documents and certificates when applying for a registered trademark. In view of this, due diligence should be conducted on the transfer entity to prevent this risk.
2. Conduct due diligence on whether there are identical or similar trademarks on the same or similar goods/services
According to the provisions of the Trademark Law, if a registered trademark is transferred, the trademark registration Similar trademarks registered by a person on the same kind of goods, or identical or similar trademarks registered on similar goods, shall be transferred together. The focus of this item is how to determine similar goods and similar trademarks. Without due diligence and rich practical trademark experience, accurate judgments cannot be made. This investigation not only includes registered trademarks, but also investigates and judges trademarks in application status.
3. Whether the trademark transfer complies with the relevant provisions of the transferor's company's articles of association
The transfer of trademarks is an act of disposing of company assets and should be carried out in accordance with the company's articles of association and the relevant provisions of the company law. Make resolutions of shareholders' meetings or perform other procedures. There are big flaws in trademark transfer without going through legal procedures. Even if the legal representative signs and/or the company stamps the official seal, the trademark transfer may be deemed invalid or terminated according to law. Investigate the above matters, list existing problems, and issue solutions to improve trademark transfer behavior.
IV. Whether the transferred trademark has rights defects
Whether the transferred trademark has been challenged by other third parties, requested for invalidation, or canceled on the grounds of cessation of use for three consecutive years , or even the possibility of infringement complaints/litigation.
The transferred trademark shall comply with the relevant provisions of the Trademark Law: a. It shall not constitute an identical or similar trademark to a trademark previously applied for registration by others on the same or similar goods; b. It shall not be a preemptive registration of a trademark with which there is an agency relationship; c. There is no infringement of the prior rights of other third parties, including prior trade name rights, name rights, copyrights, etc.; d. There is no infringement of other companies' high-profile trademarks, etc.
5. Investigate whether the transferor is involved in major litigation
Trademark rights are a type of property right. Once the transferor is involved in major litigation, the trademark can be sealed or detained by the court. , will bring obstacles to future transfers, and even cause the possibility of being unable to transfer. If the transferor is involved in major litigation, a solution needs to be proposed based on the transferor's situation and the risks of transferring the trademark need to be assessed.
6. Conduct due diligence on whether the transferred trademark has been licensed to other parties
If the trademark to be transferred has been licensed to other parties, it will have a great impact on the transferee. The rule of "sale and purchase does not break the lease" also applies to the transfer and licensing of trademarks. The transferee of a trademark still has the obligation to continue to perform the previously signed trademark license agreement. Once another third party can use the transferred trademark, he will have to continue to perform the trademark license agreement. The market will have a huge impact. What's more serious is that some trademark licenses are exclusive licenses, that is, the trademark owner has no right to use the trademark himself during the license period.
7. Investigate whether the transferred trademark is pledged
Due to external financing, the transferor often pledges the trademark rights to external parties. Once the pledged trademark is transferred, once the transferor If there is a problem with repayment, the transferred trademark will enter the auction process and the transferee will not be able to obtain the trademark.
8. Investigate the transferor’s foreign investments
Investigate the transferor’s foreign investment companies to determine whether these subsidiaries operate the same goods and services as those approved for the transferred trademark or Similar businesses. If there are identical or similar businesses, will there be any impact on the use of the transferred trademark? These impacts will be evaluated and solutions proposed.
The above eight aspects that need to be investigated in trademark transfer are all based on actual cases. Although through hard work, most customers solved the problem or minimized the impact. However, some companies have lost their trademarks despite paying the transfer fees because they did not conduct due diligence; some have transferred trademarks that have been challenged by other parties and are invalid; some have been sued for infringement liability; Licensed trademarks; some trademarks have been withdrawn by the transferee.
Even if the problem is finally solved, a lot of manpower and financial resources are spent, and some even lose the best opportunities in the market. Therefore, due diligence in trademark transfer is an indispensable part, and it is an awareness that every company that values ??intellectual property rights should have.