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Names, Rights and Risks: How Trademarks Shape M&A Deals in India

  • Writer: Alisha Rastogi
    Alisha Rastogi
  • 6 days ago
  • 6 min read

Introduction

 

The Indian landscape of mergers and acquisitions has seen substantial momentum in recent years, driven by economic liberalization, digital transformation and investor interest. With brand equity becoming central to growth strategies, intellectual property assets, particularly trademark rights, now play a defining role in M&A transactions. Trademark due diligence essentially forms a vital element in the determination of legal enforceability and commercial scalability of a company’s brand identity. Underestimation of the risks associated with ambiguous ownership, pending litigation or limited protection can possibly derail transactions, reduce valuations and complicate post-merger amalgamation.

 

Navigating the different modes of Trademark Transfer in M&A

 

The distribution of trademark rights in M&A transactions can largely be categorized by way of assignment, licensing or a statutory merger.

 

In an assignment, ownership along with related rights and liabilities of the trademark is entirely passed on from the seller to the buyer. Thus, investigating Registry status and supporting IP transfer documentation prior to making any acquisition is of utmost importance. In T.I. Muhammad Zumoon Sahib v. Fathimunnisa[1], the Madras High Court held that an unregistered deed of assignment does not invalidate the transfer of trademark rights among parties who agreed to it. Nonetheless, although rights do continue to transfer from assignor to assignee, delayed registration can make enforcement more difficult and delay the finalization of the deal.

 

Licensing, on the other hand, permits the acquiree to utilize the trademark without transferring ownership but in accordance with the terms of the license. The Indian courts have been consistently emphasized that assignment and ownership must be distinctly established to be able to preserve trademark rights. In the judgement rendered in Morgardshammar AB v. Morgardshammar India Pvt. Ltd.[2], the Delhi High Court ruled that use of a trademark by a licensee does not give rise to ownership, even if the licensee has used the mark for a long time. This case illustrates how an unclear recording of ownership and assignments can lead to uncertainty, particularly in a due diligence exercise in M&A deals.

 

Furthermore, in the case of a full merger, where two companies merge to create a distinct legal entity, both parties' trademark rights are typically assumed by the resulting merged and co-owned company. In whatever manner it is constituted, it is vital that any grant or assignment is thoroughly documented and registered with the respective trademark register in order to make it enforceable as well as to prevent dispute. For example, the merger between Kingfisher Airlines (KFA) and Air Deccan required strategic rebranding and trademark transaction. KFA initially expressed interest in Air Deccan and eventually merged the two airlines. To leverage Air Deccan's existing customer base, the combined entity first retained the "Deccan" title and prefixed the tagline "Simplifly Deccan", progressing towards renaming the logo and colors to match the Kingfisher brand. Later, "Deccan" was abandoned and the airline was fully rebranded as Kingfisher Red, focusing on the "delight of flying" experience[3].

 

Understanding Trademark Due Diligence in the M&A Context

 

Trademark due diligence entails a thorough examination of a target company's trademark portfolio to determine the validity, extent, ownership and any legal encumbrances of the trademarks. This involves checking if the marks are registered in the proper entity, if the marks cover all product classes of interest, if assignments have been sufficiently executed and recorded, and if there are any ongoing oppositions, cancellations or litigation proceedings. For instance, the Jet Airways example brings into perspective the necessity of the trademark ownership being aligned with the operating company, especially in capital events such as IPOs. Even as one of India's prominent airlines, Jet Airways didn't own its own brand originally, since the "Jet Airways" trademark was registered under founder Naresh Goyal's own separate entity, Jetair Enterprises. This misalignment was identified as a major threat during the IPO process of the company. To continue, Jet Airways was required to officially license and subsequently purchase the trademark at an IP valuation price of USD 7.5 million. The incident highlights how ambiguous ownership in trademarks may cause regulatory challenges and financial consequences in restructuring or raising capital by a company.[4]

 

Brand Equity and Legal Ownership: A High-Stakes Correlation

 

The concept of brand value is closely associated with a company's reputation, distribution channels, and customer trust. In numerous acquisitions, poorly managed trademark portfolios have created uncertainty around core brand ownership, especially when trademarks are still held by founders, early consultants, or foreign affiliates. Without proper assignment and class coverage, even a strong product or service may lack legal insulation from infringement or imitation. A widely cited example highlighting the critical importance of IP due diligence is the 1998 acquisition of Rolls Royce by Volkswagen[5]. While Volkswagen purchased the physical assets and business ventures of Rolls Royce, it was later discovered that the trademark rights to the Rolls Royce logo and name did not constitute part of the transaction since the same had already been acquired by BMW due to a preexisting agreement with Rolls Royce for engine production. This lack of trademark due diligence caused lengthy negotiations between BMW, Volkswagen, and Rolls Royce, ultimately to a settlement wherein BMW acquired the Rolls Royce brand, and Volkswagen was left with rights to the Bentley trademark.

 

In the Indian context, the cautionary case of Modern Foods highlighted a similar risk. When Hindustan Unilever Limited (HUL) acquired Modern Foods from the government in 2002, the company was purchasing a once-dominant legacy brand. Yet within a few years, the acquisition turned out to be commercially unviable. Although several factors contributed to the failure, poor IP diligence was a contributing cause. Due to the absence of brand protection strategy, poor trademark enforcement and effective commercial positioning, the equity in the brand had declined seriously by the time Everstone Capital took over Modern from HUL in 2016[6].

 

On the other hand, in a 2023 ruling, Modern Snacks Pvt Ltd v. Kamran Ghani[7], the Delhi High Court once again asserted the established fame of the "MODERN" mark and issued an injunction over deceptively similar mark "MARDEM". The judgement highlighted the enduring enforceability of legacy marks when ownership and usage are traceable. But the result also showed just how much stronger the legal position of the brand could have been if trademark rights had been actively defended and asserted more earlier in the lifecycle of the brand.

 

Real-World M&A Successes Tied to Trademark Clarity

 

Several recent Indian transactions offer strong evidence of the value of well-managed trademark portfolios to transaction success. In 2022, Norwegian consumer goods conglomerate Orkla bought Eastern Condiments, a domestic brand in Kerala. Central to the transaction was due diligence on the trademarks. Orkla's legal team undertook exhaustive scrutiny of the company's IP portfolio, so as to ensure major marks were registered across product lines, properly assigned to the legal entity, and free from outstanding disputes. The outcome was a swift, clean acquisition with good valuation terms, and seamless integration into Orkla's South Asia portfolio[8].

 

Similarly, Wipro Consumer Care's 2021 acquisition of Nirapara brand highlighted the importance of comprehensive IP audits[9]. The trademarks for the brand covering spices, pickles, and rice foods were said to be in good order, with no current litigations and ownership issues. Regulatory approvals, such as FSSAI licensing and packaging copyrights, were also confirmed through diligence. Nirapara's trademark position's strength and clarity played a pivotal role in Wipro's efficient closure of the transaction.

 

It thus becomes clear that customers are not just investing in financials or operating performance; they are investing in brand reputation, goodwill, and defensibility down the road. Strong IP directly equates to reduced legal risk, improved post-acquisition integration, and increased investor confidence.

 

Conclusion

 

As Indian consumer brands grow, trademarks are not merely legal assets any more—They are strategic growth facilitators. HUL's experience with Modern Foods reminds us against dismissing the impact of trademark strength in brand legacy deals. However, Orkla and Wipro's proactive diligence in taking over Eastern and Nirapara demonstrate that transparent, enforceable, and well-defined IP can significantly speed up deal closure and facilitate premium pricing. Indian courts have time and again prioritized transparency of trademark ownership, correct registration, and continued enforcement. For founders, investors, and M&A practitioners alike, there can be no ambiguity: trademark well-being equals deal well-being. Spending on trademark transparency, assignment clean-up, domain ownership, and class-wide registration is no longer optional. It is a key to long-term brand success and value realization in Indian M&A.



References:

[1] (1960)1MLJ270

[2] CS(OS) 863/2010

[7] C.O. (COMM.IPD-TM) 76/2021

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