9 Major Hidden IP Costs of Mergers and Acquisitions—and How to Overcome Them

Merging companies often do not realize the implications of waiting to transfer trademarks. One common approach is to wait to file the ownership change along with the renewal. The thought is that this will save money by combining the tasks; however, this is often far from being the case. Official and agent fees will still have to be paid to file the changes on top of your usual renewal fee.

Why can waiting to transfer trademarks during a merger increase costs? Rather than benefit from the economies of scale savings possible in a large-scale IP transfer project, you will be paying for one-off changes per trademark. There is also the risk of possible complications in countries where you often have ongoing litigation, are actively filing new applications, or face customs issues regularly. 

Legalization requirements vary based on the countries in which you are transacting business, and the costs for managing the legalization process for each document and jurisdiction can quickly add up.

How do document legalization fees impact the IP budget in cross-border deals? For instance, legalization costs for the UAE can exceed €900 per document. For a recent complex merger and acquisition project, one company spent over €80,000 on document legalization just for the UAE. Clearly, it is important to identify such legal costs at the time the IP transfer project is being negotiated.

Knowing the rules of engagement in each country can help you to predict the legal costs (ideally) before finalising a transaction. This includes "all-or-nothing" countries. In the context of IP transfers, these are countries where you cannot just file a merger or name change for a single mark or patent. Instead, you have to file changes for all marks or patents in the name of the entity. This can drive your costs way up!

Associated trademarks can also affect the cost of IP transfer in M&A activities. Some countries require you to assign all “similar” trademarks together, even if you are no longer interested in them. This can throw a wrench in your budget if you expected to drop some marks that are associated with the ones you wanted to keep. Be sure to know which countries have the associated trademark designation so as not to be caught off guard.

The documents required for registering changes in ownership are often long. When merging or acquiring companies have IP rights in many markets and languages, it can be very costly and time-consuming to manage the documents required to file the changes at the various local patent and trademark offices (PTOs). By anticipating this need before the work, protocols and templates can be put in place to address these issues. If handled properly, it could save a company tens of thousands of euros in legal costs.

The paralegals working for you are hired because they already have an existing job to do. They may also not possess regular and routine experience coordinating worldwide transfer or assignment projects. Even if they do, projects of this nature will consume their time, and this will have repercussions for the workload they were originally hired to do. While the bulk of the work comes in the first 12-18 months of a project, some IP assignment projects can take up to 10 years to be completed.

If a business or portfolio has gone through many business changes and its older chains of title are not up-to-date, those issues will need to be addressed before or as part of the IP transfer. Ignoring them will result in office actions or rejections at the PTOs. Companies sometimes spend an amount of up to 30% of their initial budget on portfolio “clean-up” tasks. This can be avoided by filing changes when they occur.

Not all countries have the same time window to file updates. Some have a window as long as three months, while others, like Syria, have only two weeks. The PTOs in these countries charge fines, which often compound the longer you wait. Be sure to know the time window of each country in your portfolio to avoid another potential cost.

A company’s IP assets are incredibly valuable, but, surprisingly, some executives would consider gambling with them by deciding not to assign the IP during a merger or acquisition. The business loss and cost to reclaim a lost trademark in any country can be tremendous. Missing the chance to assign IP can have serious long-term consequences not only for a company’s IP department budget but also for a company's future success.