It is very important to take IP due diligence to avoid future discrepancy over the use of the mark. 

What is IP Due Diligence?

Intellectual property is something that is the creation of human minds including inventions, literary and artistic work, industrial models and trademarks used in trade and commerce. In other words Intellectual property is a creation of mind with which both commercial and moral value attached to it. Further IP due diligence is conducted to assess the quantity or quality of the intellectual property assets owned by or licensed to a company, business, or individual. It is generally conducted to assess the risk involved in the assets during transactions.

With the growing age of business in this digital era, businesses have understood the importance of Intellectual property (IP) Assets. Therefore companies regularly conduct IP audits to understand the full value of these intangible assets and make the most of their potential benefits. 

In other words IP due diligence is an exercise which provides comprehensive knowledge of the value and risk involved in the company’s intangible assets. The due diligence is designed to understand and analyze the scope, strength and future potential that could be derived from the intangible assets i.e. Patents, Copyright or Trademark.

IP due diligence is conducted when there is Merger and Acquisition in the company, or when an investor wants to invest in a startup company or when a company wants to raise money by mortgaging its IP assets.

What is Trademark Due Diligence?

Every corporate transaction requires at least one trademark. Basically Trademark due diligence is the process of analysing information about the target company’s trademark portfolio and risks, exposure and benefits involved with the transaction. 

What steps to be taken under Trademark Due Diligence?

Following are the steps which should be taken under Trademark Due Diligence-

  1. Identifying and Consolidating the Portfolio- This steps follows by collecting all the registered Trademark and Pending Trademarks application of seller and consolidating the trade mark portfolio. In Trademark due diligence buyers must ensure that the seller must own Trademark on its name where he is doing his business, otherwise he has to obtain trademark registration of its product within that area.
  2. Ownership Of the Trademark- once consolidated, the buyer must ensure that seller is the rightful owner of the product, otherwise he has to obtain that right by way of assignment or by applying a fresh Trademark application.
  3. Details of the Owner of the Trademark- The details of the Trademark owner should be there.
  4. Details regarding the Trademark and associated documents- Details regarding Trademark application needs to be accurate. Status of the trademark needs to be checked from time to time. Documents submitted while registration of Trademark need to be reviewed whether the details mentioned in the application are accurate or not. Further documents with regard to its use needs to be evaluated.
  5. Description of goods and services and its desired use- Description of goods and services need to be evaluated according to the current use by the seller.
  6. Incense and Agreement- documentary evidence pertaining to Trademark licenses and assignments needs to be evaluated whether they are compliant with the government requirements or not. Unattractive licenses can reduce the commercial viability of a trade mark for the buyer.
  7. Dispute- The buyer must ensure that Trademark is free from any dispute or not and has to review documents accordingly. Any dispute whether relating to Trademark infringement, passing off, legal notice, cease and desist needs to be reviewed.
  8. Trademark watch and clearance- It has to be checked that seller’s mark is not infringing any thor party’s mark. 

Since each corporate transaction revolves around a unique set of facts and circumstances, there is no single approach to Due Diligence, which is dependent on the nature of the transaction and the parties involved. However, the above-mentioned steps focus solely on Trade mark Due Diligence and seek to provide a broad overview for conducting the same

Conclusion

Therefore both the parties should undertake the due diligence to ascertain the rights. For conducting due diligence an experienced team of IP professionals needs to be set up who all are well qualified to conduct the due diligence. A proper investigation needs to be conducted to verify the facts of the company and to determine the protection afforded to the IP of the company which includes checking ownership of the IP of the company, identifying any potential threat, analysing the litigation or infringement involved, identifying any discrepancies and conducting a status, claim, validity, ownership as well as conflict check. Finally a comprehensive result analysis needs to be conducted. An IP due diligence identifies the IP assets of the company, verifies the ownership of its existence, third party claims as well as evaluates potential IP infringements. Therefore, a thorough IP due diligence helps in identifying any risk involved, and is beneficial to all the parties involved.

BIAT Legal LLP is a team of Experienced IP lawyers and helps in conducting due diligence for a company.

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