India: Recordal Of Change In Ownership After Subsequent Mergers: An IP Perspective

A merger can be understood in common parlance as the coming together of two entities resulting in the comingling of the assets, liabilities, rights and interests of such entities.1 It is the combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.2 As a legal effect of a merger, all the rights of the original company are transferred to the transferee company. One of the most important rights acquired by the transferee company during merger is the Intellectual Property Rights of the Original Company.

The ownership of Trademark after merger and the procedure followed thereof for the transfer of right in trademark is the point of discussion in this article. The general principle is that a company which merges into another loses its identity and a merger is considered as the legal death of the original company. For instance if a company "A" merges into another company "B", then as a legal effect of the merger, the company "A" loses its identity and is no more in existence.

RECORDAL OF CHANGE IN TITLE AFTER MERGER

A Recordal of Change in the title of the trademark is to be filed in the Trademark database for bringing the new transferee company on records as per the provisions of the Trademarks Act, 1999. Timely Recordal of such a change is necessary and can be helpful in the following ways-

  • Late Recordal of the change in title may lead to lapse of any deadline of Renewals or time bound actions which can be carried on only in the name of the proprietor on record.
  • The underlying principle as per which a trademark works is that it indicates the origin of the goods or service to which it belongs. A late Recordal may also result in confusion amidst the general public regarding the actual origin of the goods or services.
  • In various jurisdictions, the fee for Recordal of change in title is also calculated based on the time period which has lapsed from the date of assignment. For e.g. in India the official fee for filing a Recordal of assignment of a Trademark is INR 5000 if made within 6 months of the Date of Assignment/Merger, INR 7500 if made after 6 months but before 12 months of the Assignment and INR 10000 if made after a lapse of 12 months from the Date of Assignment.
  • The transferee may also not be able to substantially initiate any possible infringement or Rectification proceedings till the time he is registered on record.

Therefore, it is always advisable to bring the changes in proprietorship on record as soon as possible.

PROCEDURE OF FILING A RECORDAL

As per the provisions of Section 45 and Rule 68 of the Trademarks Act, 1999, an application to register the title of a person who becomes entitled by assignment or transmission shall be made in Form TM-24 or TM-23 as it is made by such person alone or conjointly with the registered proprietor. Further, as per the practices of the Indian Trademarks Office, an affidavit for no legal proceedings pending related with the trademarks which are subject of the merger is also to be filed on behalf of the transferee company. Now, in case of a merger, since a proprietor registered on record is no more in existence and hence an application for change in title shall be filed in the name of the transferee.

A controversial situation may arise when the question is of a trademark which involves several mergers and assignments. Let's analyze the above situation with a hypothetical example, suppose a trademark "XYZ" is owned by a company "A" in the year 1950, now "A" merges to company "B" in the year 1990 and thus the remaining entity is only "B", Now, "B" subsequently merges into another company "C" in the year 2010. A request for the Recordal of change from "B" TO "C" will be filed in the name of "C" as per the Trademarks Act even if the proprietor on the Trademark Registry's Record is "A". but what would happen if during the perusal of the Post Registration Changes request the learned trademark Examiner observes that the application for transfer in proprietorship from "A" to "B" was not filed as in order to give effect to the Recordal from "B" to "C", the Recordal of "A" to "B" is a must. The question which arises here is that in whose name the application for change in proprietorship which took place in 1990 from "A" to "B" should be filed? As per the law, the transferee should be filing the application for bringing himself as the owner on the records of the trademark. But resultant to the merger that took place in 2010 between "B" and "C", "B" is no more in existence at present. Therefore, the only entity existing at present is "C".

The issue of corporate death of a company after merger has been discussed by the Courts on various occasions. As ruled out in the case of YAPI KREDI BANK (DEUTSCHLAND) AG vs. MR. ASHOK. K. CHAUHAN AND ORS3"The legal effect of a merger of two companies was that the original company which merges into the original company loses its identity and ceases to exist."

Therefore, it is clear from the above facts that a company which merges into another is no more in existence and hence filing an application as per the Trademark law in the name of "B" which is not even in existence is practically not possible.

A company is considered as a legal person in the eyes of law. Therefore mergers, acquisitions, amalgamations etc. result in the death of the company and thus the legal personality of the company diminishes. The assets of the original company are automatically bestowed to the transferee company. As observed by the Hon'ble Bombay High Court in the case of Chloro Controls (India) Pvt. Ltd. Vs. Severn Trent Water Purification Inc., formerly known as Capital Controls Company, Inc. and Capital Controls India Pvt. Ltd "The transferee company should be replaced with the original company in the same manner as the legal representative of a natural person replaces him after his death. The courts can always lift the corporate veil in such cases while considering such matters". 4

This situation was also analyzed by the English courts in the case of Mercer Alloys Corporation v. Rolls Royce Ltd.5, wherein it was ruled that "where a plaintiff company is merged in its parent company so that it has itself ceased to exist as a separate corporate entity, the court has power to substitute the parent company as the plaintiff in the action, even after judgment, both under this rule and under its inherent jurisdiction".

CONCLUSION

Mergers, Acquisitions, Amalgamations etc. result into the corporate death of the entity. Therefore, it can be said that after merger the transferee can step into the shoes of the original company for purposes of any legal proceedings which are pending or indisposed. Therefore, for the purposes of Recordal of any changes in the IP assets which took place during the existence of original company, the transferee company can file an application in its place. A separate clause should be entered in the Merger agreement, stating that the transferee can file applications on behalf of the Original company for Recordal of changes in different forums.

Footnotes

1. Negotiated M&A Guide; Corporate and M&A Law Committee.

2. http://www.investopedia.com/terms/m/merger.asp

3. FAO(OS) 511/2007, C.M. APPL. 14878/2008 & 3645/2012

4. 2006(3)BomCR119 5. [1971] 1 W.L.R. 1520

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