Intellectual Property issues arising when buying or selling a business

Intellectual Property issues arising when buying or selling a business

When buying or selling a business it is important not to overlook the intellectual property aspects of the transaction.  For the vendor, proper analysis of intellectual property rights can ensure that the business is properly valued.  For the purchaser, it is crucial to ensure that all intellectual property assets that the purchaser wishes to acquire are transferred to the purchaser upon settlement.

In the sale of 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 analyse their businesses to ensure that all IP rights are properly identified.  Registrations (trade marks, patents, business names) should be checked to ensure they are current and accurate (eg trade marks or designs may have been modified since registration, or trade mark classes or lists of goods or services may not be accurate and reflect use).

Ownership of IP rights should be checked (eg trade marks may be owned by a holding company or other third 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 analysed to ensure that it is captured in written form, kept confidential and able to be transferred (eg methods of manufacture, processes and procedures, manuals, client databases and lists may all be valuable and able to be transferred to purchases).

Purchasers should carefully analyse what IP rights are being transferred to ensure that they are getting what they pay for.  If trade marks haven’t been registered, are they capable of registration and in these circumstances evidence of use and reputation should be obtained from the vendor as part of the sale process to assist in a future application.

Copyright to works created by employees during their employments may vest in the vendor, but moral rights will vest in employees as authors of works of copyright (eg 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 or upon sale to the purchaser).

For more information please contact our friendly and professional team at Peter Speakman & Co on 9822 8611.