• Kirsty Brummell

Trade Mark Due Diligence



If you’re considering purchasing, merging with, or investing in another business, and/or you are already in active discussions with a ‘target business,’ you will probably know about the importance of undertaking due diligence (an audit of the target business and its assets) before completing on a commercial transaction.

If there are any trade marks and other Intellectual Property (IP) to be included in a transaction, then it will be important to conduct the appropriate due diligence in relation to these assets, to get an idea of the benefits, value, risks and impact of acquiring or investing in these IP rights.

This blog focuses on trade mark due diligence and the areas that will need to be considered when potentially acquiring or investing in such rights. Being aware of the areas for consideration and knowing the right questions to ask a target business, will give you the full picture in terms of the scope, validity, strength, value, any risks involved and enforceability of the target's trade marks. This will ultimately help you to decide whether to proceed with the transaction.

It should be noted that trade mark due diligence can also be undertaken if you are looking to sell your own business or looking to take a licence from another business. These aspects will be covered in a future Trademark Tonic blog.

Given the importance and complexity involved in due diligence, we recommend utilising the expertise of a Chartered Trade Mark Attorney or specialist IP Solicitor, to undertake this type of work and advise you of their findings.

Areas for consideration

1. Purpose of transaction

One of the first things to consider is whether the trade marks of the target business, tie in with your business objectives and plans and will be a good fit for your business. Maybe they will help lead to increased turnover/profit, diversify your portfolio and/or enhance the reputation of your business.

Knowing why you are interested in acquiring or investing in a business and its purpose, will help direct you to ask the relevant questions and obtain the necessary materials and documents from the target business.

2. Target business background

Taking the time to get to know and understand the target business will be useful for any negotiations to come. Investigating the target could reveal their business interests, reasons for wanting to sell, merge, seek investment and whether they will be an easy partner to work with - bearing in mind that there may still need to be a relationship post-transaction. Also, it could identify any possible issues or risks in entering into a transaction with the target.


3. Communication

Having open lines of communication with the target business is crucial for obtaining the relevant information on its trade mark rights. Ideally you will agree on specific points of contact and how any information will be shared, such as via an online data room. It will be important for your business to be set up and ready for receiving any data and to check that the relevant materials are being sent. The earlier information gaps or issues are identified, the more likely these matters can be dealt with and resolved during the transaction window (if the transaction is time sensitive, then any information may require quick analysis).

4. Trade Mark Applications and Registrations

An analysis should be made of any trade mark applications and registrations to be included in a transaction. For example - are they valid, do they match the details on the relevant trade mark databases, are the correct goods and services covered in relation to the use of the trade marks by the target, do the territories covered match the markets where the marks are currently used/or will be used.

This exercise will help you to assess the strength of the target’s trade mark portfolio and whether there are any obvious gaps in protection.

5. Unregistered Trade Marks

If there are any unregistered trade marks identified and you are interested in using such trade marks, then searches should be made, where appropriate, to determine whether these marks are available for use and registration for the goods or services and markets of interest. Trade mark clearance searches will reveal whether there are any infringement risks and the impact of these on use of these marks post-transaction and whether any risks can be mitigated. Ultimately, the identification of infringement risks could affect the value of the transaction and whether the transaction goes ahead and is completed.

If searches reveal that the unregistered marks are available for use and registration, then new trade mark applications could be put in place in the relevant territories (depending on your budget and costs involved).

6. Ownership

Checking the ownership of the target’s trade mark applications and registrations, is important to determine that the target business is the registered owner and that you will therefore be owning the necessary rights. If the target is not the registered owner (maybe a subsidiary of the target or associated company is the owner), then the chain of title should be investigated to see if there are any issues and that any relevant assignments are made to the target business entity name where possible - ideally before the transaction is completed.

7. Deadlines and Renewals

Being aware of any deadlines (e.g. responding to Trade Mark Office actions) and renewals relating to the target’s existing trade mark applications and registrations, will enable you plan for dealing with these and potential costs involved. You may want to agree with the target that they will attend to any deadlines and renewals before the transaction is complete. This may also be an opportunity for you to decide which trade marks are worth maintaining and renewing and will be of value to your business.

8. Recordals

Checks should be made to determine whether any agreements such as assignments and licences have been recorded with the relevant Trade Mark Offices and if these are correct (cross-checked against trade mark databases). If some recordals are still outstanding then you will need to discuss with the target as to whether they will pay to complete the recordals, or if you will absorb the costs for recording the assignments. It is important to ensure that recordals are made where possible to avoid any issues e.g. in terms of ownership. Having all of the relevant paperwork in place (including any previous assignments/transfers made by the target) will be crucial to implementing a smooth recordal process.

9. Conflicts/Disputes

An assessment should be made in relation to any ongoing or previous trade mark conflicts or disputes the target has been involved in with third parties. These could be infringement/litigation matters, oppositions, cancellations as well as passing off and domain name disputes. The possible risk and impact on your business should be determined and the costs/damages that might be involved (including for any past infringements if these exist). Appropriate warranties and indemnities may need to be negotiated with the target business, or it could be that the litigious matters are too much of a risk for the transaction to go ahead.

10. Watching and Monitoring

Does the target already have any watching and/or online monitoring services in place in relation to its trade marks. If it does, then any marks watched or monitored could be cross-checked with the target’s portfolio and also used to verify if the relevant marks are being covered. If the target is quite active in this area, then it could be a good sign that it has been taking care of its trade marks and policing them properly.

If no watching or monitoring systems are in place, then this could be taken into consideration when negotiating valuation with the target business. You could also identify, which marks would be a priority when setting up such systems, post-transaction (bearing in mind your budget and costs involved).

11. Agreements

Any agreements the target business has entered into should be reviewed to determine how these will impact on the target’s trade marks and how they can be used (in case there are limitations and/or restrictions). Also, the validity of such agreements should be investigated.

These agreements could include licences, co-existence, settlement and consents with other parties. It will be important to understand the relationship between the target and these parties and the commercial impact such agreements would have on the transfer of any trade marks to your business – and whether the agreements would be carried over.

12. Domain Names

Alongside the trade mark analysis, it will also be important to investigate any domain names that form part of the transaction, particularly where a transaction involves an online business. Domain names should be checked to see whether they are owned and controlled by the target business and are valid (checking the relevant WHOIS databases). If there are domain names not currently in the name of the target business, then ideally a transfer to the target business entity name should be made before the transaction is complete (although there may be certain situations where the current domain name owner could be sufficient if controlled and associated with the target business).

The domain names should also be checked to determine if they are covered by the target’s trade mark portfolio (subsisting as registered trade marks), and if they are not registered, an assessment should be made to check that the domain names are not infringing third party trade mark rights and the relevant trade mark applications could be filed, if appropriate. Priority will normally be given to any generic top level domains (gTLDs being most important).

13. Online content and social media

An analysis of the online content of the target’s websites, social media platforms and any other online platforms/sites, will reveal which of the target’s trade marks are being used and also how they are used. This information can then be cross-checked against the target’s trade mark portfolio, to see if the relevant marks are registered and/or whether any searches and new applications would need to be filed where there is no coverage. Also, checking whether the online content is controlled and monitored by the target, will help determine if the trade marks have been policed properly and brand reputation and consistency upheld.

Trade Mark Due Diligence tips summary


1. Trade Mark due diligence of a target business is an audit intended to reveal the scope, validity, strength, value, any risks involved and enforceability of the target’s trade marks.

2. Conducting due diligence will ultimately enable you to decide whether it is worth proceeding with a transaction and/or investing in a project.

3. Given the complexity involved in the trade mark due diligence process, it is recommended to seek out the help of a Chartered Trade Mark Attorney or specialist IP Solicitor.

If you would like any further information on trade mark due diligence and/or if you have any trade mark queries in general, please get in touch.

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