4 Tips for Buying a Trade Mark
George Raptis
Whether you are in the process of buying a registered trade mark, or are just thinking of purchasing one, there are a few important points you should consider. This will help you ensure that the trade mark you purchase is ultimately worth buying and suited to your business. This article outlines four tips for buying a trade mark and explains the legal process you must undertake when buying a trade mark.
1. Conduct a Background Search
Before you buy a registered trade mark, you should conduct a background check of the trade mark. There may be hidden reasons why the trade mark owner is willing to sell their trade mark.
For example, maybe the trade mark’s registered class cannot protect the business owner’s goods or services, or the registered trade mark is too similar to a pre-existing trade mark.
Identifying the trade mark on the Australian Trade Mark Search can give you insight into more information regarding the trade mark, such as:
- the details of its owner;
- its registration and renewal date;
- the class or classes of goods or services it protects; and
- whether it has been registered, pending registration or removed in the past.
This information can help you assess whether or not purchasing the registered trade mark is a good option.
2. Consider Commercial Viability
As you may know, a trade mark also represents the goodwill of the business that it protects. Often, the value of a trade mark is associated with how much goodwill the business has.
For example, the value of Nike’s swoosh logo would likely be much higher than a trade mark used by a small business given the reputation associated with Nike’s logo.
Even if a business has gained a bad reputation, consumers are likely to recognise this in the trade mark. On the other hand, buying a trade mark from a business with a good reputation and a loyal customer base can benefit your business. When buying a trade mark, you should consider the goodwill associated with the mark and whether it will benefit your business. Try to buy trade marks with a good reputation in the market.
Another consideration to keep in mind is whether the trade mark will be useful to your business. Trade marks are registered in connection with a certain class of goods or services. Therefore, suppose the trade mark you are purchasing cannot protect your business’s particular goods or services. In that case, you should consider whether it would be more commercially viable to register an entirely new trade mark than buying a pre-existing trade mark.
3. Determine the Trade Mark Price
A major factor influencing whether you buy a registered trade mark or not is the price. However, the value of a trade mark is not concrete. Therefore, whilst expert valuers can give a close estimate as to the value of a trade mark, a negotiation between the buyer and seller ultimate determines the final selling price of a trade mark. This does not mean, however, that a valuer arbitrarily determines the value of a trade mark. Rather, a valuer can use some of the following methods outlined below.
Income Method
The income method bases the value of a trade mark on its expected future earnings, adjusted to the asset’s present value. For example, if the owner regularly licensed the trade mark to other businesses, a valuer may determine the value of the trade mark based on the income method.
Market Method
Where there is a comparable asset that exists in the market, you can base the value of a trade mark on the transaction price of a similar asset. However, this method relies on there being a similar asset with comparable features, that may be difficult to find in a marketplace.
4. Think About Assignment
When you purchase a trade mark, the registered trademark owner must ‘assign’ their ownership in the trade mark to you. Assignment refers to the legal process of registering a change in ownership of the trade mark. You must complete an assignment of a registered trade mark via IP Australia. The trade mark owner must file:
- an assignment request form; and
- evidence of assignment.
As the buyer of the trade mark, you must sign the assignment request form and ensure that your details are correctly detailed. As for the evidence of assignment, this would include either a:
- signed letter of assignment; or
- sales agreement.
Whilst anyone can complete the assignment process, you should seek the advice of a lawyer if you are unsure about the process.
Key Takeaways
Before you buy a registered trade mark, you should:
- conduct a background check on the trade mark;
- assess whether the trade mark is capable of protecting your brand;
- consider the cost of purchasing a trade mark.
When buying a trade mark, you should also be aware of the legal process of assignment that must occur to register a change in trade mark ownership. If you need help with buying a trade mark, our experienced trade mark lawyers can assist. Call us on 1300 657 423 or complete the form on this page.
Frequently Asked Questions
When you purchase a trade mark and undergo the assignment process, you are not renewing the lifespan of the trade mark. You are only becoming the legal owner of the trade mark. For example, if you purchase a trade mark that the previous owner registered nine years ago, the trade mark will only have one year of protection under your ownership. As the owner, you would then have the option of renewing the trade mark application.
Although it is possible to buy unregistered trade marks or common law trade marks, buying and selling registered trade marks is much easier.