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Trademark Due Diligence In M&A Transactions

Heather Bowen

Trademarks have particularly high intrinsic and extrinsic values to entities. Because of that, attorneys must be vigilant in their due diligence review of trademark portfolios when clients enter into a merger with or acquisition of another entity. The structure of either type of transaction involves substantial amounts of preparation, review, and documentation to achieve the client’s desired objectives and ultimately achieve post-closing objectives.

Due diligence should focus on the extent of exclusivity and existing rights in the marketplace that the portfolio of trademarks will provide to the merging or acquiring entity. In merger situations, for example, attorneys must record the assignment of ownership of trademarks assets belonging to the non-surviving party. In an acquisition, on the other hand, attorneys must structure the transaction as an asset purchase or stock purchase and determine whether a target company’s trademark licenses can be transferred to the acquiring party without violating the terms of the license. Due diligence with regard to trademark licenses requires determining whether the target company has retained control over the licensed trademarks so as to not be deemed to have granted a naked license to third parties, which can result in abandonment of the marks and a loss of trademark rights in the most egregious cases.

Effective due diligence on the part of the acquirer also requires having a solid understanding of the current and projected lifespan of the target company’s trademark portfolio. It includes ensuring that trademark applications are pending and any required responsive documents are timely filed.  In addition, registered marks must have been maintained and renewed with the United States Patent and Trademark Office (USPTO) with payment of the required government fees. In addition, the due diligence review should focus on whether a target company has been continuously using its marks as source identifiers. If the target company has not been maintaining appropriate levels of monitoring over the trademark portfolio and acting upon any potential conflicts, if the company has abandoned its marks over time, or if the company has otherwise allowed a third party or multiple third parties to damage the target company’s marks due to a failure to police the marks, the value of the trademark portfolio can be a severe impediment to the pending transaction or, at least, may partially prohibit transfer of certain marks.

Regardless of whether the transaction involves domestic and/or foreign trademarks, certain aspects like a clear chain of title in the relevant jurisdiction and the transferability of intent to use (ITU) applications are key in due diligence review in M&A deals. Chain of title issues include having a clear picture of whether each trademark was filed under the name of the proper owner, as well as whether any assignments of ITU applications were made from the applicant to another party before the allegation of use had been filed.  This information can be uncovered via a thorough search of the USPTO Assignments on the Web (AOTW)[1] and Trademark Status and Document Retrieval (TSDR)[2] databases. Due diligence around pending trademark applications includes identifying unregistered marks and determining whether the mark should in fact be registered or whether the mark might conflict with marks already owned by third parties. With a few exceptions, ITU applications cannot be assigned from a target company to an acquiring company until the mark has been used and filed with the USPTO.[3]  Otherwise, an ITU application must be assigned in accordance with Section 10 which allows the assignment if it is “to a successor to the business of the applicant, or portion thereof, to which the mark pertains, if that business is ongoing and existing.”[4]

The year of 2020 has seen and will continue to see a number of M&A deals rolling out in the telecommunications and technology industries around the world including T-Mobile’s merger with Sprint,[5] GoogleCloud’s acquisition of Looker[6] and AppSheet,[7] Apple’s acquisition of Xnor.AI,[8] Vodafone’s merger with TPG,[9] and ServiceNow’s acquisition of LoomSystems[10] and Passage AI.[11]  Effective due diligence identifies the scope of trademark assets and allows both parties to make appropriate strategic business decisions for long-term profitability and survival while avoiding potential liability in this fast-paced marketplace.


[1] Search Assignment on the Web <>. (last visited Mar. 8, 2020).

[2] Trademark Status and Document Retrieval (TSDR), (last visited Mar. 8, 2020).

[3] Trademark Manual of Examining Procedure, 15 U.S.C. §1060(a) (October 2018).

[4]  Trademark Manual of Examining Procedure, 15 U.S.C. §1060(a)(1) (October 2018).

[5] T-Mobile and Sprint Win in Court; Companies Moving to Finalize Merger to Create New Supercharged Un-carrier, (last visited Mar. 7, 2020).

[6] Google completes Looker acquisition, (last visited Mar. 7, 2020).

[7] AppSheet Acquired by GoogleCloud, (last visited Mar. 7, 2020).

[8] Apple Acquires Artificial Intelligence Company, (last visited Mar. 7, 2020).

[9] Vodafone/TPG merger approval will deliver real benefits for Australia, (last visited Mar. 7, 2020).

[10] ServiceNow to Acquire Loom Systems, (last visited Mar. 7, 2020).

[11] ServiceNow to Acquire Passage AI, (last visited Mar. 7, 2020).

Heather N. Bowen, Esq. is a solutions-oriented attorney who focuses her practice on intellectual property, technology, and data privacy matters. She has experience serving as corporate counsel to global companies in both the media & entertainment and healthcare technology spaces. Heather has also helped over 125 startup businesses in New York avoid pitfalls as they navigated from newly-commenced startups to established and successful corporate entities. She continues to be a thought leader through frequent publications in the legal press and leadership in multiple bar association committees.



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