One of the often-overlooked areas when it comes to mergers and acquisitions is intellectual property. It is time to change that and bring the necessary conversation forward. In this episode, Domenic Rinaldi is joined by Andrea Fuelleman to help guide us on this topic. Andrea is a partner at the law firm of Neal, Gerber & Eisenberg, where she focuses her practice on brand protection and intellectual property enforcement matters. Here, she discusses the differences between copyrights, patents, and trademarks, as well as between the use of rights and registrations. Highlighting the importance of trademark diligence in your M&A transactions, Andrea then explains the process and the best practices to safeguard your brand identity and make sure you are getting clean titles and away from potential infringement.

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Protecting Your Brand Asset Through Intellectual Property Enforcement With Andrea Fuelleman

Have you ever wondered what the differences are between copyrights, patents and trademarks? Do you understand the difference between use rights and registration? Have you considered the importance of trademark diligence in your M&A transactions? We are being joined by Andrea Fuelleman who is a Partner at the law firm of Neal Gerber Eisenberg. Andrea focuses her practice on brand protection and intellectual property enforcement matters. This is an area of M&A that is often overlooked and Andrea opened my eyes the importance during a conversation. 

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Andrea, I’m happy to have you here. Welcome.

Thank you very much. I appreciate it.

Andrea, just a quick background on yourself and your firm.

I am an associate at the law firm of Neal Gerber Eisenberg. Neal Gerber is a global law firm founded in Chicago. It’s one of the largest single office law firms in the nation. Our practice is both international and domestic scope and includes transactions. A lot of different types of businesses including litigation and intellectual property, which is what I practice in. I’ve been doing the intellectual property work with Neal Gerber. I had joined about 40 other intellectual property attorneys at our firm.

Let’s start with the hobbyist question I get asked quite a bit, which is what is the difference between a copyright, a patent and a trademark?

Copyright, patent and trademark or all different types of intellectual property rights but they covered different types of works. Patents protect inventions of new processes and methods and certain types of designs. Rights and patents are gained when a patent is registered with the US Patent and Trademark Office. On the other hand, copyright protects creative expressions of original work. This would include things like books, screenplays, musical compositions and other creative works. The third type of IP is a trademark. This is different than the copyright because it’s the word, the phrases, a symbol or a logo that you would use to identify your company and your brand from others. It’s the difference between an invention, the creative expression of the original work and the word or logo that you use to identify yourself. Those are the three main categories of intellectual property rights.

Although in an application, sometimes people could be confused about where these overlap. I’m interested in the copyright part of this. If you write original content, it’s not a book or a screenplay but it’s regular content that you’re putting up on your website or anything like that. You think that it’s very unique. Is that potential for copyright?

It is. The original content that you put on your website even if it’s just the text that you use to describe what you do. If you take photographs that you’re using in your marketing materials that are displayed in your website, those aspects of the website are copyrightable.

Let’s talk about the process. Let’s focus in on trademarks for a second and go down that path. If somebody is interested in understanding if what they have is worth trademarking, what’s the process that they go through?

The first step in establishing a Trademark Right is choosing what you think is a good mark. There’s a variety of different types of trademarks in terms of strengths. The strongest mark is an Arbitrary Mark. That’s something where the mark is unique. You say the word and it doesn’t mean anything to the customers or the audience. The word isn’t descriptive. Marks that are descriptive meaning you say the word and it describes what the goods or services are, that would be considered on the spectrum more of a weak mark whereas on the other end of the spectrum and arbitrary mark. For example, Apple for computers. That’s a stronger mark. When you’re trying to determine what mark makes the most sense of your company, you want to try to stay on the stronger end of the spectrum than the weaker because that will help you establish the trademark rights.

I see lots of businesses with similar names or similar product names. There are slight variations but they’re common names. I’m struggling to think of one, but you see it all the time. You see XYZ business in one area and then you see them in another area. You see product names that are very similar. Potentially, are people violating trademarks when they do this?

It depends on things like how the market is being used with goods and services. For example, McDonald’s. If you were to open up the retail store that sells computers under the name McDonald’s. Because McDonald’s is such a famous mark, they do have broad rights over almost all types of goods and services. On the other hand, if the mark isn’t what we would consider famous, your rights in that mark only extend to the goods and services for what it’s used or what it’s registered for. That means you may see a lot of companies operating under similar or even the same type of mark. If they’re operating in different scopes of use with different services, goods or even in different geographic areas, those are factors that would help avoid or mitigate the potential for confusion or infringement.

The little research that I did on this subject, there was something that I came across called the class. Is what you’re talking about akin to a class? You pick a class as a sector or a part of the industry and you’re using your trademark in that class. Is that the proper use of that?

Yes, the class does describe what the area of goods are. The class comes into play when you are registering your mark. When you register a mark, you have to apply for the mark within a particular international class. For example, Class 9 covers things like electronics, goods, headphones and speakers, things like that whereas Class 41 would cover things like entertainment services. Depending on how you use your good in what field that would determine what class you fit into. That’s a good starting place of determining if you see someone else using a mark that you like. See what classes are using it in and see where your mark falls. If there’s an overlap then there’s a potential for confusion or infringement down the road. The class heading is a good starting place to determine where you fall in that spectrum.

Let me illustrate it here. I’ve got a company and I’m going to call it ABC. ABC operates in the entertainment space to use your example but then there could be another ABC that operates in the financial services. As long as they don’t overlap, they can each own that name, that trademark or their products in those classes. Do I have that right?

Intellectual Property Enforcement: The differences of patents, copyrights, and trademarks are between an invention, the creative expression of the original work, and the word or logo that you use to identify yourself.

That’s correct. You could have 4 or 5 different companies operating under the exact same mark but in completely different sectors and fields. They can continue to operate under that same mark without having any confusion because they’re operating with different services or goods.

Are these classes very broad or are some of them narrow?

It depends on which class. The one example you mentioned about financial services, that’s a fairly broad class because the analysis of trademark infringement goes is that doesn’t require that the services or even the marks be exact but there’s a likelihood of confusion. If the goods are deemed to be related, even complimentary would fall under the same umbrella. That could make the class broader. If on the other hand you’re using your mark in connection with very specific goods and services, you may have it registered with those very specific goods and services that make the argument that the use is very broad much more difficult to make. You mentioned the difference between use and registration. The way you described the mark in the trademark registration or the trademark application is a good example of why that’s important in terms of differentiating the broadness of the use.

I’m assuming it’s going to do this work as early as possible and as often as you think it’s meaningful to your business. What do you normally tell business owners who are contemplating content, names or products and services? How do you work with them?

You hit it on the nail when you first mentioned about starting early. One of the most important things about adopting a trademark, a new slogan or product name is to start early. It’s easier to choose a good mark and develop rights in a good mark early on in the process when you know that there aren’t any other obvious obstacles, potential infringements then starting to use it. Putting the money behind the mark and slogan to find out a year or two down the road that someone else is using the exact same mark and services. At that point, if you run into an infringement issue and have to change the mark or change the name of the slogan that your customers have now become too identified with you, it becomes expensive and confusing to your customers. In terms of best practices, we always advise our clients to clear the mark early before you start to use it.

How expensive is it to go through this work upfront, an order of magnitude? Is it for the US or is it international as well? What’s the shelf life of this work?

When you register a mark in the US, you’re getting your rights to the mark within the United States. There are similar trademark registration systems around the world. By having use in the United States doesn’t necessarily mean that those rights are enforceable in other jurisdictions. Same thing if you’re using it in Europe or in the UK only. That doesn’t mean that you have an enforceable right in the US. If you are a worldwide company or have plans to expand beyond the United States, it is advisable to register the mark in other countries. That can certainly increase the costs of obtaining a market as well as enforcing the mark, but looking at the US, the process involves a couple of different steps. The first being running a preliminary knock out a trademark search. That’s to identify whether there are any existing registrations or applications for the same or similar mark and services.

Depending on the results of that. You may want to get a deeper dive by doing a more comprehensive trademark search, which we’ll look into common law. Meaning unregistered uses of the trademark to see what else is out there in the marketplace beyond what’s registered on the US trademark office website. Once you’ve run both of those reports or one or the other and are comfortable with the risk. There’s always a risk that the adoption of any mark, there could be some unregistered use that you haven’t disclosed that may come out of the woodworks which is always a risk with trademark rights. Once you’re comfortable with that risk and make the decision to file the trademark application, the actual application process is fairly inexpensive. The filing fee is about $275 for the US PTO costs. The attorney time in preparing it and making sure the description to class, designation, the specimen, then also the preliminary searches can increase the costs of getting an application on file.

You threw a new term in there for me, specimen. Can you talk a little bit about that? 

I use the term so frequently. A specimen is a fancy word for saying an example of use. When you apply for a trademark application, you won’t be able to get a registration for it until you can prove that you’re using the mark with the services that you’ve applied for. A specimen is an example of your use of the mark. If your services are in the financial field, you could submit a screenshot of your website that includes the description about us, the services we offer or a brochure. If your goods are headphones, speakers or consumer electronic products, you could submit something like a photograph of the product that bears the mark or the product packaging. In order to perfect your rights in the mark, you have to use the mark.

Let’s move over and talk about how this comes to play M&A transactions. I don’t see that a lot of buyers undertake this diligence when they do their transactions. I’m wondering what’s your advice there? Do you have any experience where the people didn’t do this work and they had a surprise that wasn’t a pleasant one?

It’s important going into an M&A deal that you don’t overlook intellectual property rights. The patent rights that seem like an obvious one. You want to make sure. That’s one of the reasons why you registered patents, to be able to monetize that and profit off of that when you enter into a sale. Often, trademark rights can be deemed as either less valuable, less important or forgotten altogether but it shouldn’t be because the trademark is the brand identity. It’s what your customers call you. It’s what they refer to when they are asking for your product. It’s important to know at the end of the deal. Is that mark still going to be used? If so, who’s going to be using it and who owns it?

These are all different types of questions and provisions that should be included in the M&A deal. There’s one that I worked on the deal. This case did involve the brand was a big aspect of the deal. It was important to be very fair and complete in identifying all the potential risks and enforcement efforts down the road because they’re the buyer and the seller were both making substantial reps and warranties with respect to these rights and ownership of the rights. It’s important that when you go into these deals, you have a very good understanding both on the buy side and the sell side of what you’re getting. You would hate to enter into a deal, spend a lot of money to acquire these assets to find that either the entity you’re purchasing them from didn’t have rights in them or was already facing very significant challenges that undermine those rights.

Are there any situations where you saw an outcome that was less than favorable because people didn’t do this work?

There are always less than favorable outcomes. The first example that comes to my mind of matters that I’ve worked on, there’s a very strong silver lining in this particular case. I had a client who had acquired a trademark right through an acquisition. The market at the time seemed right. They developed a new website, their new marketing materials and they started to get investors on board. As they were trying to register or update the registration details, we found out that down the chain of title unbeknownst to my client, there was a break. Meaning the trademark was listed in the name of someone that it shouldn’t have been within the company as opposed to the entity name itself.

In any event, the break in the chain of title made it what should have been an easy assignment issue, more of a challenge. A third-party picked up on that and tried to use that against us to alleged infringement action. Once we were exploring our options in terms of do we fight this and do we go back and try to perfect this chain of title or do we look around and see perhaps another mark that makes more sense. In this particular example, based on what this client’s plans were to enter into the market and to expand their use. It turned out that the earlier mark didn’t resonate as well with the customers as some of the new marks that they were considering based on what they were doing in the market anyways. This example of the train of title issue ended up being an opportunity to reach out to their customers and adopted new name that made more sense and resonated better with their customers.

Intellectual Property Enforcement: When you’re trying to determine what mark makes the most sense of your company, you want to stay on the stronger end of the spectrum than the weaker.

It is still a cautionary tale because if somebody picked it up and was ready to do battle over that trademark and silver lining for sure because your client pivoted. It sounds like they’ve got a better mark anyway that resonated better with their clients but still points out that people are watching this stuff and you have to be careful when you’re going to market.

People are always watching for these things. It can be a very expensive endeavor, especially if you’re a small middle-market company. You’re not necessarily budgeting for trademark infringement battles. You want to put your research and development, putting your product out in the market and getting your customers to buy into it. That brings me back to the point I made. It’s important to clear the mark early because it becomes foreign. It becomes challenging and confusing to your customers to pivot to a different mark after years of operation under the same mark down the road. We always advise to start that process early. If there’s any question whether if you acquire, market it through an M&A, assignment or any other type of transaction. Definitely work with an experienced attorney to look through those records and make sure that there isn’t a break in the chain of title because those can end up with the same type of issues even if it’s not infringement to an initial infringement.

Under the three: copyright, patent and trademark. To be fair, I do see people spend time on the patents. It seems like that’s the one that gets the most attention. They don’t see a lot of attention on the copyright and the trademarks. They get tied up in the patents and forget about the rest of this. Let me shift gears a little bit further here as it relates to laws. Are there any changes in the laws that are coming or anything that’s happened around copyrights, patents or trademarks whether it’s in the US or internationally that impacts how people perfect all of this? 

In the United States, you have to prove use of your mark to register it. In other countries, you could file a trademark application, pay the registration fee and get a registration. Mexico is an example of this where they’ve changed their laws. They do not require use of a mark. Before, brand owners in the United States were trying to get a foothold in the international market by filing a lot of applications and maintaining registrations all around the world. Now that some of these laws are changing, they’re seeing that they have to let some of these applications and registrations go because they can’t perfect their use. They can’t sign that declaration attesting to the fact that they’re using that mark in that particular market. We are seeing some changes internationally where some of the laws are becoming more similar to what we have here in the United States where you can’t claim rights to a mark to prevent others from using it. Rather you have to have rights in it by using that mark in that particular country.

As you talk about that, it reminds me of what happened with domain names. A land grab and people were grabbing all these domain names even if they had no plan to use them and then it’s become quite a big business. Grabbing a domain and reselling it. It almost sounds like that’s what’s happening internationally. People squatting on trademarks in different parts of the world and trying to get leverage if somebody wants to access to that.

We see that a lot especially in countries like China. We call them type of squatters. They’ll take either the famous mark and shifted where a letter around in it or even take a mark has it been registered in another country and try to register it first. That way, when a brand owner tries to enter into that market, they’re like, “Someone else has already had a registration for my mark with my goods in this country. This can’t be.” Once you try to fight that battle, they say, “We’ll sell it to you for some absorbent fee.” It’s a practice that we see way too common which is another reason why we advise our clients. If you are already using it or if you have plans to use your marks internationally, it’s advisable to holding the ground early to prevent squatters from doing that.

Is there anything that you’d want to leave the M&A Unplugged community with as it relates to this topic?

One thing briefly that we didn’t get into was counterfeiting. We mentioned about the differences of using versus registering marks. In the United States and a lot of other foreign jurisdictions, it’s important to register your mark because you can record registrations with the customs offices in those countries to prevent or to at least have some type of enforcement mechanism against counterfeiting coming in. We didn’t get into too much about the benefits of registration versus use. One of the main benefits I do want to leave your audience with is that if you’re having any issues with counterfeiting or someone using your mark on products that you didn’t authorize in China, for example, that are coming into the United States. If you register your mark with the US Patent and Trademark Office, you then can register that with the customs office and customs will stop those on their own without having to initiate any type of criminal proceedings. That’s a good enforcement mechanism. It’s a big benefit to making sure that you register your marks if you’re using them with goods.

Andrea, thank you so much for being here. If anyone in the M&A Unplugged Community wanted to get in touch with you about this topic, how could they reach you?

I’m always available by phone. My number is (312) 269-5347. I am available also for email. It’s [email protected]. I’d be happy to talk further in greater detail if there’s anything that I’ve mentioned that sparks further interest or further conversation.

Andrea, thank you so much for being here. 

It’s my pleasure. Thanks for having me.

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Andrea pointed out some important things especially as it relates to M&A transactions. If you are an acquirer of a business, you want to make sure that you’re getting clean title to any copyrights or trademarks and that there are potential infringements out there because I don’t think a lot of people go through the diligence upfront when they come up with these marks whether it’s product names, company names, logos or taglines to make sure that they’re not infringing on another company. It’s important to make sure that you’re getting a clean title. As Andrea said, you want to make sure that you’ve got that to protect your brand asset. If you would like to learn more about the process of acquiring or selling a business, please visit our website at SunAcquisitions.com or feel free to reach out to me at [email protected]. I look forward to seeing you again on the next episode. Until then, please remember that scaling, acquiring or selling a business takes time, preparation and the proper knowledge.

 Important Links:

• Neal Gerber Eisenberg
• [email protected]
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About Andrea Fuelleman

Andrea Fuelleman is an Intellectual Property attorney at Neal Gerber Eisenberg, a Chicago-based law firm. She focuses her practice on brand protection and intellectual property enforcement matters where she counsels clients on a variety of IP issues, including developing and managing international anti-counterfeiting programs and online enforcement programs, trademark clearance, and domestic and international trademark portfolio management. Prior to becoming a lawyer, Andrea worked for several years in the interactive media industry, on both the agency and client side, which enables her to better understand clients’ diverse issues in building and protecting brands in an online marketplace.businesses.

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