Ladas & Parry - Closing the Deal

IP As Property / IP Rights Transfers / Closing the Deal

IV. CLOSING DAY

A. EXECUTION PROCESS
B. PAYMENT
C. DELIVERY OF RELATED DOCUMENTS AND FILES:

A. EXECUTION PROCESS

(1) Location – having a central location bringing together all the

relevant parties for execution of the documents is helpful. There are distinct benefits in arranging for execution of all necessary documents, including confirmatory assignment documents, at Closing, including:

(a) by having a central location for execution of all the documentation, the presence of all necessary parties, including duly authorized officers of the Buyer and Seller, to complete execution of the documents results in greater efficiency in terms of time and reduced costs for the party bearing the expense, usually the Buyer.

(b) by not executing the documents piece-mail, counsel for the Buyer can immediately take possession of the confirmatory assignment documents and begin the process of dispatching the documents overseas for filing at the respective trademark offices. This is critical for two reasons:

(i) it eliminates the risk, which exists in many jurisdictions, that the Trademarks Office will impose fines or penalties for late submission of change of ownership documentation.

(ii) it eliminates the risk of rejection of the documents in their entirety for late submission or “staleness”. This is especially true if the documents are backdated or bear an effective date earlier than the date of actual execution and the jurisdiction has a particularly short filing deadline.

(2) Availability of notaries: by having all of the confirmatory assignment documents executed at the Closing or post-Closing ceremony, the parties will be able to take advantage of the presence of attesting notaries and witnesses as well as their designated signatories. When executing confirmatory assignment documents for purposes or recordal at national trademark offices, very often these documents require notarization and/or consular legalization or authentication by Apostille. For those countries that require consular legalization, especially in large transactions, by having both the Seller and Buyer execute all the confirmatory assignment documents in one location, the notarial acknowledgments will be uniform. This, in turn, will expedite the process of authentication, certification of the notarial acknowledgment and consular legalization at the Department of State or individual foreign consulates.

(3) Authorization of Officers to Execute Documents: The parties should require documentary evidence of the representations of both Buyer and Seller to legally execute the Closing documents and bind their companies. This evidence might include a Power of Attorney, a Board of Directors Resolution, Certificates of Incorporation or By-Laws. In terms of recording the assignment of rights abroad, several jurisdictions, especially in Latin America, require detailed notarized documents providing that the officer who executed the assignment documents on behalf of the company (whether Buyer or Seller), has been appointed as an agent of the company authorized to act on its behalf or appointed as an officer pursuant to a specific Resolution of the Board of Directors or other documents. In most instances, this will require the completion of detailed information such as the date of the resolution and/or the date that the company was incorporated.

(4) Country/Place of Execution: The place of execution will affect the manner in which the documents are notarized and/or legalized. In terms of a worldwide recordal program, having all the documents executed and subsequently notarized by notaries who are qualified in the same county or country will hasten the legalization process in that the notarials can be certified by at a single County Clerk’s office. By not doing so, having several documents sent to several different counties for certification can result in significant delay.

(5) Contingencies: Trademark counsel, whether representing the Buyer or Seller, should be prepared for all contingencies which may arise at a Closing with respect to execution of the documentation. Such contingencies can include:

(a) Errors in Preparation: Due to the jurisdictional nature in which trademark rights arise, the preparation of an extraordinary amount of documentation is required in terms of preparing for a worldwide assignment recordal. As such, if an error in preparation is discovered at the Closing, trademark counsel should be prepared to immediately correct such error(s) in order to promptly arrange for execution of the new, correct document. Towards that end, counsel should make certain in advance that:

(i) Adequate staff is available to implement such changes; Electronic versions of all documents are at counsel’s disposal in order to promptly implement such corrections.

(b) Errors in Execution: In terms of worldwide trademark assignment recordal programs requiring execution of what can be an extraordinary amount of documentation, it is inevitable that mistakes in execution will occur. This situation arises more frequently when several different parties are required to execute the same document, such as officers of each party, attesting witnesses and notaries. As discussed above, counsel should be in a position to have adequate staff and electronic versions available to promptly arrange for the preparation of new documentation.

(6) Corporate Seals: Corporate seals for each entity should be available at the Closing. Trademark counsel should make certain well in advance of the Closing date that either the officers of each company bring such seals to the Closing or that new seals are promptly ordered and available by the Closing date. Although affixing corporate seals can occur at any time subsequent to the Closing, this may delay the filing and ultimately the recordal of the assignment documents at the Trademark Registries. The failure to affix corporate seals can result in rejection of the assignment documents in several jurisdictions.

B. PAYMENT

The following concepts should be kept in mind in terms of transfer

of money:

1. Check/wire transfer: all pertinent banking particulars should be available to the parties, especially in the context of a wire transfer, so that the appropriate funds can be transferred to the Seller without undue complication;

2. Confirmation of receipt: confirmation of receipt of such funds should be available and delivered to the Seller upon request.

3. Escrow Accounts: established.

C. DELIVERY OF RELATED DOCUMENTS AND FILES:

1. Files : From a trademark standpoint, relevant files pertaining to the

trademark rights should be delivered to the new owner, to the extent possible, at or post-Closing, which can include:

(a) pending application files: should be delivered to counsel for Buyer in order to make certain that all actions and/or deadlines are met.
(b) opposition/cancellation files;
(c) litigation files;
(d) prior chain of title files;
(e) pending renewal files;
(f). license files; and
(g) general trademark files.

In arms length transactions, Buyer’s trademark counsel will often be different from that of the Seller. Therefore, Buyer’s counsel should prepare a simple, but formal letter to Seller’s counsel requesting the immediate transfer of all files subject to the transaction.

2. Certificates of Registration: To the extent possible, Certificates of Registration for each trademark registration should be delivered to the Buyer at Closing or shortly thereafter. Depending upon the specific portfolio, rights in the trademark may have been registered several years or decades ago, and therefore, it is not unusual for many of these certificates to have been lost or destroyed. In order to record the assignment in favor of the Buyer in those jurisdictions which require submission of the Certificate of Registration, it will be necessary to obtain certified copies of the Certificate of Registration from the Trademarks Office. In large transactions, this could result in significant additional expenses, especially in less sophisticated jurisdictions, which the parties should anticipate. If not negotiated in the Purchase Agreement or General Trademark Assignment Agreement, this additional expense will usually be borne by the Buyer.

3. Letters to local trademark counsel re: file transfer: Where several trademark applications, renewal filings or conflicts are pending worldwide and if the Buyer prefers to use local counsel differing from that of the Seller, Buyer should notify its preferred counsel to instruct Seller’s counsel to immediately transfer such files. Buyer’s preferred counsel should then file the appropriate substitution of counsel documentation with the Trademarks Office where necessary so as not to interfere with the prosecution of the applications when the assignment documents are filed. At the very least, notice to all counsel by Seller’s counsel should be sent out advising of the change in ownership and responsibility.

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