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  • Writer's pictureSaumya Kapoor

Trade Mark Due Diligence: Dot your I's and Cross your T's

Never before has the question of “What’s in a name” been more apt than in the conflict between BMW and Volkswagen regarding Rolls Royce. In 1998, Volkswagen paid approximately $780 million to Vickers PLC to acquire the automotive operations and assets of Rolls Royce. However, Vickers did not own the rights in the mark “Rolls Royce”, which belonged to Rolls-Royce P.L.C. BMW AG, a competing group, acquired the mark “Rolls Royce” and the logo in a separate negotiation from Rolls-Royce P.L.C. for approximately $65 million. Thus, Volkswagen only bought the factory and production facilities, the nameplates, designs and administrative headquarters, but not the rights to use the mark “Rolls Royce” or the logo which belonged to Rolls-Royce PLC, and subsequently BMW. This brings to the fore the danger of undermining or ignoring Intellectual Property Due Diligence during a commercial transaction.

What is IP due diligence?

Merriam-Webster defines Due Diligence for business as research and analysis of a company or organization done in preparation for a business transaction (such as a corporate merger or purchase of securities). It is the careful, thorough evaluation of a potential investment, whether on a corporate or individual level.[1] Further, IP Due Diligence is essentially an audit to assess the quantity and the quality of intellectual property assets owned by, or licensed to, a company, business or individual. It is to assess the value of assets involved and evaluate the risks involved in the transaction.[2]

In the digital era, the value of intangible assets, such as the IP of a company, far outweigh the value of the tangible assets, such as property, equipment and inventory. In recent times, companies have become more mindful of the prominence of IP assets for their businesses in raising capital and providing financial gain. Thus, companies regularly conduct IP audits, which provide comprehensive knowledge and analysis about the estimated commercial value, potential risks, validity of the status as well as scope of protection of these intangible assets. A thorough IP Due Diligence provides the understanding and value of a company’s IP portfolio and helps in determining the worth of the company and maximizing the value of its intangible assets.

When is IP due diligence conducted?

IP Due Diligence comprises due diligence of trade marks, patents, copyrights, designs, trade secrets, IP litigation etc. and is required in any corporate transaction which involves IP assets of a company, such as M&A transactions, IPOs, investment (PE/VC) transactions, joint ventures, assignment of IPs, tax benefits, partnerships, or agreements. Some of the situations where IP Due Diligence is often conducted are:

  • When a company is preparing for an IPO listing;

  • In case of merger with another company or acquisition of another company;

  • If an investor/venture capitalist wants to invest in a start-up;

  • When a company is looking to raise money;

  • When a company is interested in purchasing/licensing the Intellectual Property of another company.

What is Trade Mark Due Diligence?

Any corporate transaction involves at least one trade mark. Trade mark Due Diligence is the process of evaluating the trade mark portfolio of a company and its associated rights. It includes analysing the facts as well as detecting any risks associated with the trade marks of a company and strategizing to resolve the same. Trade mark Due Diligence may be conducted by the potential buyer or seller, for identifying and mitigating the risks, if possible, and determining the value of the assets, accordingly.

What steps are to be taken under Trade Mark Due Diligence?

Given below are some steps which a buyer can perform in a corporate transaction for assessing the seller’s trade marks:

  1. Identifying and consolidating the portfolio

Document all the trade mark registrations and pending applications of the seller in all the countries where the seller has a presence and consolidate the trade mark portfolio. These trade marks can be in the name of the owner, the parent company, subsidiaries etc. The list of the marks should be obtained from the seller as well as by conducting independent trade mark searches by the buyer. In case the seller does not have any trade mark rights in a country where its business extends to, the same needs to be rectified and fresh applications need to be filed. In Trade Mark Due Diligence, the buyer should ensure that the marks are owned by the seller itself or else, take necessary steps for acquiring the trade marks accordingly from the rightful owner.

2. Ownership of the trade mark

Once consolidated, the buyer needs to ensure that the seller has rights in its trade marks and those rights are not strained. Seller cannot transfer the title and rights in a disputed trade mark. In case the seller does not have the rights nor was the original owner, it needs to be ensured that a proper chain of title exists for the current owner from the original owner. In this regard, every document regarding assignment or transfer of the trade mark needs to be reviewed to establish a proper chain of ownership to the current owner. Further, it needs to be ascertained if any limitations to the rights of the current owner have been imposed by the previous owner. Any irregularities in the chain of title need to be investigated. Furthermore, documents in other corporate transactions of the buyer need to be scrutinised in order to ascertain if any trade mark rights have accrued in favour of any third party owing to the transaction.

3. Details of the owner of the trade mark

Details of the current owner of the trade mark, i.e. the name, legal status and address need to be checked and in case of any discrepancies, the same need to be rectified. Further, in case of any amendments to the name or address of the owners, it needs to be checked that documents for amendment are correctly uploaded.

4. Details regarding the trade mark and associated documents

It needs to be checked whether the details regarding the trade mark in the application are accurate. Further, it needs to be assessed if the mark has been registered/filed with any limitations. In case of registered marks, the validity of the marks needs to be checked and the period for filing renewal of the mark needs to be noted. In case of any pending renewals or alerts by the IPO, the same also need to be noted. Further, regarding pending marks, the time frame for taking the next step by the seller needs to be evaluated and noted. Documents for outstanding prosecution issues need to be studied regarding the claims of the seller. Moreover, documents also need to be reviewed to check whether details mentioned in the same are accurate. In case of any discrepancies, the same need to be remedied. Further, documents proving use of the mark need to be evaluated.

5. Description of Goods/Services and desired use

The description of goods/services of the trade mark need to be evaluated in light of the current and actual goods/services provided by the seller to verify if any goods/services are liable to be cancelled on grounds of non-use. Further, in case the seller has any actual goods/services which are not covered in the applications, new applications would have to be filed to obtain protection for the same.

6. License & Assignment

Documentary evidence pertaining to Trade mark licenses and assignments needs to be evaluated whether they are compliant with the Governmental requirements. Unattractive licenses can reduce the commercial viability of a trade mark for the buyer. Further, the rights which have been licensed need to be appraised.

7. Dispute

Most importantly, a buyer needs to evaluate whether the trade mark is free from disputes or has been involved in any previous disputes and review documents regarding the same. All documents pertaining to the trade mark in the sense of cease and desist or other legal notices received from a party as well as documents filed in support of the trade mark at any stage need to be reviewed. Identify assertions of trademark infringement, passing off, dilution, or unfair competition made by or against the borrower.[3]

8. Trade mark watch and clearance

Check if the seller’s marks infringe the marks of any third party by conducting clearance searches and evaluate any potential infringements. Clearance searches would also divulge the scope of competition in the market for the relevant goods/services. Further, the quality and vigilance of the existing trade mark watch services needs to be evaluated to identify any potential risks which may occur in the value of the trade mark portfolio or identify any third-party mark which maybe infringing upon the rights of the seller in its marks.

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.


It is evident that owing to the catastrophic outcome in commercial transactions, IP Due Diligence gains even more prominence in the current times. Ideally, in corporate transactions, both the parties should undertake the due diligence to ascertain the rights. For conducting an IP Due Diligence, a team of IP professionals needs to be set up who are well qualified to conduct the Due Diligence. Further, a set of goals need to be defined for a better understanding of the IP of the business and a Due Diligence checklist needs to be prepared. Thereinafter, a thorough 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 identifying the IP relevant to the transaction, checking the ownership of the IP, identifying any potential threats, analysing the litigation or infringement involved, identifying any discrepancies and conducting a status, claim, validity, ownership as well as a conflict check. Finally, a comprehensive result analysis needs to be conducted and reported to the company which elucidates the findings of the Due Diligence and provides advice on further course of action. An IP Due Diligence essentially identifies the IP assets of a company, verifies the ownership and existence of IP, checks for applicable territories and terms, third party claims as well as evaluates potential IP infringements. Thus, irrespective of the portfolio or the type of commercial transaction, a thorough and well-timed IP Due Diligence helps in identifying the risks and seeks to mitigate the same and is beneficial to all the parties involved.




The article was originally published on on July 07, 2020 and can be accessed here.

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