Before the overseas trademark and patent transfer transaction, Lawyer Shen Jinlong said who should do this due diligence list and how to review the intellectual property clauses in the transaction contract

Conclusion: In the due diligence investigation of overseas trademark and patent transfer, the buyer is the main responsible party, and the seller cooperates to provide documents. However, what truly captures the risk is a "two-way due diligence+contract terms closed loop" - the buyer checks the rights themselves, the seller discloses the burden of rights, and then the lawyer writes the statements, guarantees, compensation, and delivery conditions into the contract. The most important thing to focus on in the contract is whether the chain of rights is complete, whether there is any pledge or exclusive license of rights, and whether the seller still needs to cooperate and sign after delivery. If these three things are not clearly stated, even if you pay for the rights, you may not be able to get them clean.

What the buyer is looking for, what the seller is paying, don't expect the other party to do it for you

Many customers who encounter overseas trademark and patent transfers for the first time will assume that 'the seller is the rights holder, and the documents he provides must be complete'. In practice, it is exactly the opposite. The seller will only provide you with a scanned copy of the registration certificate and a statement saying 'clean rights', and the rest will need to be supplemented by the buyer themselves. The buyer should proactively verify with the official database that the TSDR system of the United States Patent and Trademark Office (USPTO) can track the transfer chain, renewal status, and whether the trademark has been revoked; The eSarch Plus of the European Union Intellectual Property Office (EUIPO) can view objections, invalidity, and license filings of EU trademarks (EUTM). On the patent side, the USPTO Patent Center and the European Patent Register of the European Patent Office (EPO) need to be compared item by item, focusing on whether the annual fee has been interrupted and whether the priority rights are continuous.

The seller is required to disclose the "burden of rights": whether there is an exclusive license, whether there is a pledge, whether there is an ongoing infringement lawsuit or invalid procedure. If these are not included in the disclosure letter, it will be difficult for the buyer to provide evidence later on. We generally recommend that the buyer obtain the seller's written disclosure before signing the contract and attach it as an appendix to the contract.

One link in the chain of rights is broken, and the entire trademark may be invalidated

The biggest fear of American trademarks is the discontinuity in the transfer chain. USPTO requires that transfers must be documented in writing, and for applications based on "intent to use" (Section 1 (b)), transfers are invalid until a statement of use is submitted. That is to say, if you buy a trademark from A that is still under application and A has not submitted evidence of use (Amendment to Allege Use or Statement of Use), this transfer may not be valid in the eyes of USPTO. In practice, we have seen buyers pay money and only realize that the chain does not match when filing with USPTO. They can only go back to the original applicant for re signing, and it is common to delay for three to five months.

On the patent side, we look at the inventor's signature and employer agreement. The United States Patent Law 35 USC § 261 stipulates that transfers must be in writing. If the inventor does not sign a transfer agreement with the company and the company sells it to you again, the chain will be broken. When conducting due diligence, the buyer must obtain a complete transfer document from the inventor to the seller, without missing a single copy.

The statement and guarantee in the contract should not be written as' the seller's guarantee rights are valid '

The statement 'The seller guarantees full ownership of the subject matter' is too soft. To be broken down into enforceable terms: the seller states that they have not granted any exclusive license to any third party; No pledge or guarantee has been established; There are no pending or known infringement, invalidity, or revocation procedures that may be initiated; All maintenance and renewal fees have been paid on time. Each item must correspond to a disclosure exception list, and only items outside the list are the responsibility of the seller.

The compensation clause should clearly state the triggering conditions and upper limit. A common pitfall in overseas trademark and patent transfers is that the compensation limit is pushed down to 10% of the transaction amount, and the legal fees for buyers who are subsequently sued for infringement by third parties may far exceed this amount. We generally recommend listing "third-party claims that prevent the buyer from using" as a special compensation item, without setting a too low upper limit, or at least agreeing that the seller bears the defense costs.

Delivery does not end just after signing, cooperation obligations need to be written into the schedule

Trademark transfer usually takes 1-2 months to be recorded in USPTO, while transfer registration in EUIPO usually takes 2-4 weeks. After the patent transfer is recorded in USPTO, there is also a need to handle changes in the payment subject of annual fees. The contract should stipulate how many days after delivery the seller shall provide signed documents, sworn statements, or notarized materials. Many cross-border transaction sellers are overseas, and it takes 2-3 weeks to sign and go through Apostille certification. The schedule is not fixed, and the buyer can only wait.

Another easily overlooked point is who pays the maintenance fee before delivery. If the annual fee expires before delivery and the seller fails to pay, the patent may have expired. The contract should specify that all official fees before the delivery date shall be borne by the seller, and the payment voucher shall be one of the delivery conditions.

Who should take the lead in the due diligence checklist and at which stage should lawyers enter the field

The buyer takes the lead, but the list must be provided by a lawyer familiar with local procedures. The rules for trademark and patent transfer in the United States, European Union, United Kingdom, Japan, and South Korea are different, and USPTO and EUIPO have different requirements for the form of transfer documents. For example, EUIPO does not require notarization of transfer agreements, but USPTO requires signature witness for certain transfer records. Using a template to cover all countries will eventually lead to problems.

Our approach is to first provide a country specific due diligence checklist, and the buyer will request documents from the seller according to the checklist. The lawyer will then conduct an official database check, and once the results match, the contract negotiation will proceed. This can turn 'seller claims clean rights' into' official records show clean rights'. Transactions involving multiple countries can be handled through a comprehensive plan for overseas intellectual property, avoiding single point processing for each country.

The payment rhythm is linked to the status of rights, do not make a one-time payment

It is best to divide the payment for overseas trademark and patent transfer into three installments: signing a contract to pay a deposit, paying the final installment upon completion of the official transfer record, and paying the final installment upon full fulfillment of the seller's cooperation obligations. This way, the buyer always has chips in their hands. In practice, we have seen that the buyer pays in full at once, but the seller does not cooperate and sign afterwards. The buyer can only send a lawyer's letter, which is costly and time-consuming.

If the transaction involves a US trademark and the seller is overseas, the issue of evidence of use related to 37 C.F.R. § 2.62 and USPTO's requirements for foreign applicant agency rules must also be considered. These program details are not scheduled in advance, making it difficult to fill them up after delivery. For more complex cross-border transactions, it is recommended to directly followUS and EU trademark and patent filing page.Follow the process of due diligence, contract, and filing into one line. For those involving Southeast Asia, the Middle East, and other regions, you can refer to other countries' intellectual property legal services.

Which situations require a lawyer to conduct due diligence, and which can be done by oneself first

If the subject matter only has one US trademark, no license or litigation, and the seller is the original applicant, the buyer can go to USPTO to check TSDR and then have a lawyer review the contract, with controllable costs. But as long as any of the following situations occur, it is recommended that lawyers intervene throughout the process: the subject matter exceeds three rights, involves patents, the seller is a successor rather than the original rights holder, there is an exclusive license or licensee, there are pending lawsuits or objections. In these situations, the complexity of disclosing the chain of rights and burdens will sharply increase.

We generally recommend that the buyer allow the lawyer to enter during the Letter of Intent (LOI) stage, as the due diligence checklist and contract terms are linked. Wait until the official contract is sent before making any changes, as there is much less room for negotiation. If you need a lawyer to coordinate, you can do so throughLawyer Shen Jinlong of this firmContact their team on the introduction page.

Lawyer Shen Jinlong, from Guangdong Zhiming Law Firm's foreign-related intellectual property team, has been handling trademark and patent copyright business in the United States and the European Union for a long time. For overseas trademark and patent transfer, cross-border intellectual property due diligence, and contract review, please call the hotline at 0755-25986969 to make an appointment for communication.

Disclaimer: This article is only for general legal information sharing and does not constitute legal advice on any specific transaction. The transfer of overseas trademark patents involves procedures and substantive rules in different jurisdictions. For specific cases, please evaluate them separately based on the status of the subject rights, transaction structure, and applicable laws.