4 Mistakes to Avoid When Buying an Existing Trade Mark
Purchasing an existing trade mark is a great way to enter an established market. However, there are several issues to consider before buying an existing trade mark, such as getting the transfer of ownership right and documenting the exchange. If your trade mark transfer is done right the first time, it will help you avoid issues down the road. If you are interested in buying an existing trade mark but are worried about making a mistake, this article will help by explaining the most common mistakes made when buying an existing trade mark and how to avoid making them.
Not Buying from the Trade Mark Owner
From time to time you may be approached by someone who appears to be the owner of a trade mark and who wants to sell you it but is not, in fact, the owner. To check if the legitimate owner has approached you, you should:
- check the owner’s name on IP Australia;
- look for the official email address;
- call the number of the company that owns the trade mark directly; and
- do your due diligence.
Ensure that you complete this step to protect your right to use any trade mark that you end up purchasing. If you do not check that you are buying from the right person, the actual trade mark owner may claim infringement when they discover that you are using their trade mark.
Not Using a Contract
If you are going to buy an existing trade mark, you should use a purchasing agreement. This agreement will set out:
- the price;
- the timeline for transfer;
- who the parties are; and
- warranties and indemnities concerning the trade mark.
Using a purchasing agreement will ensure that you know exactly what you are purchasing. It will also ensure that the seller knows their obligations. This will prevent any misunderstandings and may help you avoid disputes later in the transfer process.
Not Operating a Good or Service in the Right Class
Make sure you purchase a trade mark in the correct class of the goods and services you provide. If you purchase the trade mark in a good or service that you do not provide, you will need to ensure that you begin providing that good or service as soon as possible. Trade marks will apply to a specific class of goods and services, so you cannot buy a trade mark and change its registered class.
Not Using the Trade Mark
If you purchase a trade mark, you need to make sure that you will use it. IP Australia actively reviews trade marks that they manage to determine if you have left your trade mark to sit dormant. If you do not use the trade mark within a reasonable time, you run the risk of having the trade mark cancelled due to non-use. It will cost your business a lot of money if you buy a trade mark and fail to use it.
Not Transferring Ownership
After you purchase a trade mark, you need to transfer the trade mark through IP Australia. You can provide them with a copy of the contract to inform them that you have purchased the trade mark. The outgoing owner must then contact IP Australia and arrange for the transfer to take place. Once the outgoing owner has transferred the trade mark to you, you will have full ownership and the ability to exercise your rights over the trade mark.
Formally transferring ownership through IP Australia is the final step in the trade mark transfer process. You must complete this step to finalise the transfer of your trade mark. If you fail to inform IP Australia of the transfer, you may incur issues when trying to use your new trade mark.
Before buying an existing trade mark, you should:
- sign a contract with the original trade mark owner;
- make sure you are operating in the same class that the original owner registered the trade mark under; and
- check that the person you are buying the trade mark from is the legitimate owner.
Frequently Asked Questions
You must inform IP Australia if you purchase an existing trade mark. You can find more information on how to notify them on their website. Our experienced IP lawyers can also help you inform IP Australia.
It is not strictly necessary to sign a contract when transferring a trade mark. Still, it is highly recommended to ensure both parties are clear about their respective obligations and rights.
You need to either use your trade mark or demonstrate that you will start using it soon to retain your new trade mark. This prevents people from buying up trade marks and not using them to decrease competition in the market.
Trade marks will only apply to the class of goods and services they are registered under. You cannot change the class of goods and services a trade mark is registered under, so you will need to operate under that class when using your new trade mark.