Intellectual property aspects of a sale of business transaction should not be overlooked when buying or selling a business.
From the vendor’s perspective, a thorough analysis of intellectual property rights by a vendor can ensure that the business is properly valued, and a fair sale price achieved.
Purchasers need to ensure that all intellectual property assets that the purchaser wishes to acquire are transferred to the purchaser upon completion.
When selling a business, Intellectual Property (IP) may not be limited to registered trademarks or patents. IP may include:
- Registered trade marks
- Unregistered trade marks
- Registered designs and/or patents
- Copyright
- Confidential information (trade secrets, know how, data bases)
- Business names
- Domain names
Vendors should scrutinise their businesses to make sure that all IP rights are properly identified. Registrations (trade marks, business names, patents) should be checked to confirm they are current and accurate. Trade marks or designs may have been modified since registration and may not be registered in their current form, or trade mark classes or lists of goods or services may not be accurate and reflect current trade usage.
Ownership of IP rights should be checked as trade marks or business names may be owned by a holding company or another party, or they may not be owned but licensed to the vendor in which case a transfer of the licence may be necessary.
Confidential information should be examined to ensure that it is captured in written form, kept confidential and able to be transferred. Confidential information may include: methods of manufacture, processes and procedures, manuals, client databases and lists, all of which may all be valuable and able to be transferred to purchasers.
Purchasers should carefully evaluate what IP rights are being transferred to ensure what they pay for is what they get. For example, if trade marks haven’t been registered, the purchaser needs to consider if they are capable of registration and in these circumstances evidence of use and reputation should be obtained from the vendor and handed over as part of the sale process to assist the purchaser is they wish to make a trade mark application in the future.
When considering copyright, copyright in works created by employees during the course of their employment may vest in the vendor and be capable of transfer to the purchaser, but moral rights vest in employees as authors of works of copyright. For example, moral rights in blogs written by employees and posted on a vendor’s website vest in those employees and accordingly the employees have the right to attribution of their authorship and the right not to have such work falsely attributed to the vendor upon sale to the purchaser.
For more information please contact Fleur Craig of Armour-Craig Legal on (03) 5636 4986.