Today, owners and property managers use upscale real property brands for more than just distinguishing the property from neighboring sites. Such a strategy responds to the public mind associating “place” with “character,” transcending architectural qualities. This article addresses how real estate practitioners should engage their clients in recognizing and analyzing intangible assets for acquisition in connection with the transfer of land, especially improved land identified with place via branding.
Contracting phase. The negotiation of real property acquisitions and sales for land whose value is affected by branding requires additional considerations. The sale of land and improvements without the concurrent transfer of the established brand identity could have disastrous impacts, such as the buyer’s learning that additional compensation is owed to acquire the brand, or that another party is exploiting dimensions of a brand the buyer believed it acquired.
A first step in avoiding such outcomes is to discover whether the brand is owned by the same person(s) who own the targeted real property. The next step is to determine what identification rights the buyer seeks to acquire. These rights usually fall into one of several related categories: name of project; street address; domain name and affiliated addresses (e-mail and website); social media sites; applications showcasing the property; telephone and fax numbers; songs, slogans, and logos; blog tagline; and memes and GIFs.
The contract of purchase and sale should directly reference the transfer of ownership of all these brand elements at closing. Relying on some generic phrase such as “and all tenements, hereditaments, and appurtenances” is a recipe for client disappointment and attorney malpractice claims. It is imperative that a purchase and sale agreement include language that expressly states that the property to be conveyed by the seller consists in part of “all proprietary marks, logos, slogans, domain names, e-mail addresses, social media accounts, taglines, memes, and like identifiers, and all intellectual property or proprietary rights connected to or associated with the improved real property, including without limitation those rights described on Exhibit X attached hereto, and regardless of ownership of such property rights at the execution date hereof.”
Due diligence phase. The initial step in due diligence for the buyer is visiting the improved property’s marketing office, reception area, or lobby to obtain visual clues about what sort of brand elements the seller has incorporated in the project. These items might then be included on an exhibit to the sales agreement that addresses the intellectual property to be conveyed. The buyer also should study at length the website created for the property to locate links to photographs, blogs, bulletin boards, chat rooms, and other web-based branding approaches.
A buyer may wish to obtain representations and warranties from the counter-party regarding the extent and limits on rights to branding elements. The various matters these persons should represent, warrant, and covenant include: (1) They hold all these rights corporately, so they are not personal to the principals of the company; they have not been assigned or licensed to any other person. (2) They have paid for all work done for creating and maintaining all social media outlets; they have the unencumbered right to transfer ownership at the closing. (3) They have provided copies of all contracts for the creation of brand elements, ongoing administration, and ongoing storage of data in a private cloud; these contracts are not in default, and no fees are owed on a “maintenance” or service-period basis. (4) They have received no notice of pending investigation of the seller company by the Federal Trade Commission or any state equivalent in connection with advertising on the social media sites or the website. (5) They have received no notice of complaints from any person claiming invasion of privacy or any other demands in the nature of a “takedown” notice. (6) They have no notice that any of their trademarks or copyrights are being contested, nor are these rights the subject of a suit.
Conveyance phase. Current common processes for transferring brand elements are trademark assignments, copyright assignments, and domain name and social media assignments.
There is no legal requirement to record an assignment of a trademark with the U.S. Patent and Trademark Office (USPTO). Federal law requires only an assignment “by instruments in writing duly executed.” But it would be foolhardy not to record. First, assignments of trademarks are void against any subsequent purchaser for valuable consideration without notice, unless the prescribed information regarding the assignment is recorded in the USPTO within three months after the date of the assignment or prior to the subsequent purchaser’s acquisition. Second, because post-registration trademark procedures, like section 8 affidavit filings, will be rejected unless the identities of the mark owners are consistent with the existing USPTO ownership records, it is inefficient to postpone electronic assignment recording when the trademark transfers.
Regarding copyright assignments, the transferee needs the owner to sell its rights and thereby relinquish full control over the use of those rights to the transferee. The transferee should secure ownership of both copyright registrations and applications for registration and should seek language in the transfer document securing “all rights of any kind whatsoever of Transferor accruing under any registration provided by applicable law of any jurisdiction, by international treaties and conventions and otherwise throughout the world,” or words to that effect, incorporating any pending claims or causes of action for infringement or other forms of misappropriation of the transferor’s copyrights items.
For domain name and social media assignments, see the sample assignment agreement form by Cobalt, LLP, of Berkeley, California. The value in this form agreement lies in excellent recitations of the parties’ intentions, among them that ownership of all content available at the domain is transferred, along with any associated goodwill, upon the assignment’s execution. One apparent weakness in the posted document is that few warranties of no recurring or periodic obligations are contained in that form.
Conclusion. The primary ingredients of place marketing—identities and reputation, image, place promotion, and urban design—relate to three main influences on destination image formation. These influences are promotional material, secondary experiences, and leveraging media through events and recording those experiences, creating the property’s sense of place. Digital channels of communication have unalterably affected the consumer-destination brand relationship. The proactive role consumers take today in “conversation” with a location’s brand, and ultimately its image, mandates that real property owners and property managers both emphasize reputation building through platforms supporting the property’s brand and disseminate “destination content” across today’s massive online networks of consumers. Because many “markers” of the brand are intangible property, counsel for purchasers and occupants of real property must communicate the value in capturing brand elements’ ongoing use rights as a part of any property transaction where image making is paramount. Counsel and clients also must learn the means to secure transfer of these elements’ use rights into the overall property transaction.
ABA Section of Real Property, Trust & Estate Law
This article is an abridged and edited version of one that originally appeared on page 23 of Real Property, Trust and Estate Law Journal, Spring 2016 (51:1).
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