WHY IS IT IMPORTANT TO ADDRESS DECISIONS IN PARTNERSHIP AGREEMENTS?

Entrepreneurs have many opportunities available to grow their business. One strategy that business owners often contemplate is expansion through acquisition. There are various strategic reasons why businesses choose to merge with or acquire another business in their industry. Regardless of the reasons, acquiring a business is a large undertaking. And business owners must be strategic and diligent as they move forward with such a deal. ACQUISITIONS RECEIVE A LOT OF ATTENTION One reason why business owners must approach acquisitions carefully is because these endeavors often garner a lot of scrutiny. A recent example would be the news of TFI International’s acquisition of UPS Freight. But many others have been under the spotlight as well in the last few decades, including Disney’s acquisition of 21st Century Fox and Google’s of YouTube. The larger the company, the more attention an acquisition will receive from consumers, the media and other business owners alike. And business owners must be prepared. CONDUCTING DUE DILIGENCE IS CRITICAL There are many things business owners should consider proactively when faced with an acquisition, including: Legal liabilities: This step is important on both sides. Business owners should have a candid conversation with the other party and conduct careful research about any legal issues – past or present – so they can protect the reputation of their own business. Finances: Business owners should carefully evaluate their finances before, during and after an acquisition. Owners should look into all aspects of their finances, from the purchase itself to the other party’s payroll information. This is essential to avoid complex tax issues as well as any other potential legal penalties under California law. Branding strategies: When acquiring another business, many want to apply their name to the other business. However, this might be a mistake. It is often beneficial to maintain a trusted brand name after an acquisition to also maintain the consumer base and following that brand has. Forbes reports that growth will be a challenge in 2021. This is something to be aware of, as the state of the market can impact an acquisition’s success. However, it is critical that owners are aware of these steps and understand how to approach the situation.

Growing one’s business in a new venture can be exciting, as it allows businesses to diversify and increase sales as well as their consumer base. And in the current circumstances created by COVID-19, many businesses are getting creative on this front. They are moving fast with temporary or long-term ventures to meet changing consumer demands. MANY COMPANIES QUICKLY PURSUING NEW VENTURES For example, retail giant Walmart Inc. is partnering with the Tribeca Film Festival to create the Walmart Drive-in. Many other companies have also expanded their products to include masks and hand sanitizer to meet the increased consumer demand for these products in only a short amount of time. These ventures, like the Walmart Drive-in, might only be temporary. Regardless, business owners must be diligent and take care to measure the risks before moving forward, so they do not put their company in jeopardy or even face litigation. THREE STEPS TO TAKE IN SUCH VENTURES There are more than three steps business owners must take when pursuing ventures that carry their company’s name. In these cases, it is often wise for business owners to consult an experienced business attorney throughout the process to protect the business’s interests. However, these three steps include some of the most critical issues business owners should evaluate in these ventures, including: Preparing operations: Inc. Magazine points out that one of the most common risks businesses face in new ventures is that they are ill-prepared to operate them. This could involve preparing the product or service, planning how to make decisions, hiring the proper staff and providing them with the proper training, having adequate funding, and planning for risks. Ineffective management of such new ventures can cause significant issues. Know the market: When expanding into a new area, business owners must ensure they understand what consumers expect in this market. For example, Walmart might be partnering with the Tribeca Film Festival, which is familiar with the movie market, but it is still an area outside of Walmart’s business as usual. Failing to deliver expectations in a new market can put businesses at risk of financial losses. Consider the brand: New ventures and growth can be good for a business’s brand, but it can also put it at significant risk. Business owners should take measures to protect the integrity of their brand as consumers have come to know it. This also often requires business owners to take steps to protect any intellectual property they might share in these ventures with new partners.

Back in 2021, we discussed the difference between trademark infringement and trademark dilution. Business and trademark owners know that both issues can have a considerable impact on their reputations. However, the main concern when it comes to dilution often lies in determining whether or not it is truly a dilution of a trademark or a parody. In that previous blog post, we addressed the particular case involving Jack Daniels’s trademark whiskey bottle design. This case – and the effect parodies have – remains at the center of this complex matter. ONGOING BATTLE OVER DILUTION WENT TO THE SUPREME COURT This legal battle has gone back and forth over the last few years. Some courts determined that the dog toy shaped like the well-known whiskey bottle is indeed a parody, and therefore the company that created it has First Amendment protections. However, in 2023 the Supreme Court ruled that it is not quite a parody. The Supreme Court determined that the toy reflects the trademark enough that it violates trademark protections and rules. The different opinions on this matter illustrate just how complicated it is. So, what must business owners consider? TAKE A CLOSER LOOK AT DILUTION The definition of trademark dilution is quite broad. The federal Trademark Dilution Revision Act of 2006 does not actually consider the risk of confusion or negative economic impacts – as trademark infringement does. The law defines dilution as the use of a mark that might tarnish the mark itself or the reputation tied to it. In short, this law focuses only on protecting the trademark. It is not necessary to prove that consumers may be confused when it comes to a claim of dilution. This allows businesses to protect their image. After all, a business’s public image is an important factor in gaining and maintaining consumer approval. Any mark that would sully or degrade that image the business worked hard to build could be a considerable concern and risk. DILUTION V. PARODY: A SUBJECTIVE ISSUE Of course, the law also explicitly states that parodying is not dilution. These cases are often quite subjective, as the differing opinions also indicate. This subjectivity can just as easily work in favor of businesses trying to safeguard their intellectual property, as it can against them. Protecting a trademark requires vigilance. However, it is also beneficial to obtain skilled legal counsel in order to effectively protect the brand and business in such subjective situations.