Seller’s Operations: Patents And Trademarks
August 23, 2007
I once had a client who bought a business without using an attorney. The business’s trademark was very important to him, since that trademark gave the business’s products a high level of exposure and acceptance in the public mind. This is the purpose of trademarks. Only after buying the business did he learn it had never owned the trademark! The individuals who had owned the business still owned the trademark in their own right and licensed its use to the business. He was stuck, and that’s why he was in my office.
For starters, make sure the business itself owns all the valuable patents, trademarks, and copyrights. If one of the keys to the success of the business is a patent, which grants to the business the exclusive right to a certain process, don’t take the seller’s word that it owns the patent. Ask to see proof.
By eyeballing the patent itself you’ll be able to see if it’s about to expire. If it is, the seller’s business may soon face some stiff competition. Also, there’s a big difference between being granted a patent and applying for one. I was once involved in a prospective sale that fell flat on its face when our patent attorney consultant his opinion that not only had the patent offered not been granted, but that there was little chance it would be. Even if a patent or trademark has been issued to the seller, there’s no guarantee that the trademark doesn’t infringe on someone else’s trademark, or that the patent is valid in representing an advance in the state of the art. In either case, a competitor could challenge the validity of the trademark or patent. Most lawyers (me included) are not adept at patent matters. If the existence of a patent (or a trademark) is a key to the business, call in a specialist.
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