Trademark Law

IRS Field Memo provides guidance for drafting trademark sale agreements

By Ryan Gile

• The plain language of the agreement matters. If it reads like a license agreement and states the parties? intent that the agreement be a license agreement, then the IRS will not likely accept an argument (or even extrinsic evidence) that it was actually meant to be a sales agreement.


• Make sure that the transferor has complete rights to the trademarks being transferred. A seller cannot sell what it does not own. If the seller does not have full ownership rights to the trademarks being ?sold? (e.g., the trademarks are subject to preexisting license agreements), then how can an agreement which purports to transfer such rights be deemed a sales agreement.


• A seller must transfer ?all substantial rights? in its trademarks for the transfer to be deemed a sale. If any ?substantial? rights are retained by the seller, then the agreement looks more like a license rather than a sales agreement, and will be treated as such.

For companies that have entered into trademark or other intellectual property sales agreements that are still within the statute of limitations for federal tax assessments, such agreements may need to be reviewed in light of the above insights provided by the memo to ensure that a company?s characterization of an agreement as a sales agreement can stand up to the FIN 48 ?more likely than not? standard that most companies must now contend with regarding their uncertain tax positions.

Full post as published by Las Vegas Trademark Attorney on March 20, 2008 (boomark / email).