Originally published in Practical Law Company, 2012.
Form clauses for a buyer’s transitional use of a seller’s trademarks after a corporate transaction, drafted with terms favorable to the seller. These clauses can be used in connection with an asset purchase, stock purchase, merger or auction where the buyer is obtaining the seller’s assets, entities or business but is not obtaining long-term rights to one or more of the seller’s trademarks after closing. These Standard Clauses have integrated drafting notes with important drafting and negotiation tips. This Standard Clause is published by Practical Law Company and is available on the PLCIntellectual Property & Technology web service at http://us.practicallaw.com/1-517-8785.
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Scope of Standard Clause
In a corporate transaction, the target company or acquired business may use certain trademarks that will be retained by the seller after the transaction. In this case, the buyer may need the right to continue using these trademarks for a temporary period after the closing while it transitions away from use. This issue is common in a carve-out or divestiture transaction (see Practice Note, Carveout Transactions (http://us.practicallaw.com/7-504-1544)).
These Standard Clauses are for use in a purchase or merger agreement and allow a target company or business to make limited use of certain of the seller’s trademarks that were used in its business before the closing for a relatively brief wind-down period (typically 120 days or less).
These clauses are drafted in favor of the seller and permit limited use of the seller’s marks in connection with existing materials and, if applicable, inventory. They also include an optional obligation for the buyer to promptly change any of target company’s corporate names that contain any of seller’s marks. To ensure protection of the seller’s marks, the clauses include quality control and indemnification obligations.
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