2008-04-27, 09:10

Naming Issues

By: Multifamily Real Estate Industry Team
Apartment owners and managers should vigilantly protect the brand and goodwill that they create in each of the submarkets in which they own and operate their apartment communities. The branding of a single apartment community, a multi-property portfolio or even an asset or property management company itself and the creation of the associated goodwill occurs through the consistent use by the owner and its property manager of their trade names, logos and other proprietary names and marks (i.e., their “Intellectual Property”) over an extended period of time.

The need to protect Intellectual Property does not end when an owner moves into a “disposition” mode for a single community or a portfolio of properties. In fact, to the contrary, the Intellectual Property of the owner and the property manager should be expressly excluded from the assets being sold.

However, what happens during the transition period immediately following a sale? It is simply not realistic to expect a purchaser to immediately discontinue the use of the Intellectual Property starting on day one of its ownership of a community. One practical way to address this issue is for the parties to enter into a “name license agreement” that survives for a short period following the closing on the sale of the community or portfolio.

Through a name license agreement, the seller can grant to the purchaser a non-exclusive, revocable and limited license to use the Intellectual Property for a specific period of time, typically not more than ninety (90) days, following the closing of the sale. The sole purpose of the name license agreement (which should be stated in the agreement) is to facilitate the transition of ownership to the purchaser and the agreement should prohibit the purchaser from using the Intellectual Property in conjunction with any other property or in any other respect.

The agreement should also state that the seller is not warranting any of its rights in the Intellectual Property and that the purchaser is using the same at its own risk. The seller should have the right to immediately terminate the name license agreement if the purchaser fails to comply with its terms in any respect (hence the need to state that the license is “revocable”). Finally, the agreement should prohibit the purchaser from assigning its license to use the Intellectual Property so that these rights are personal only to the purchaser.

A name license agreement is really a “win win” document for both a seller and a purchaser. It permits the parties to address in a pragmatic way the unavoidable transition issues relating to the Intellectual Property rights associated with the assets being sold and puts a seller in a better position to protect its brand and associated goodwill.

(This entry posted by Pamela V. Rothenberg, a member of the Real Estate Development group.)

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