I am a 70-year-old business owner engaged in the manufacture and sale of soft drinks, which have gained considerable popularity among consumers. In light of my advancing age, I wish to undertake comprehensive estate planning. In particular, I intend to preserve the recipe of my soft drink and ensure that it is securely passed on to my children.
Additionally, the business has built substantial goodwill in the market, and I would like to transfer the ownership of the brand name, logo, and other intellectual property rights to the next generation. In these circumstances, I seek guidance on whether such succession of both tangible and intangible assets, including confidential business information and intellectual property, can be effectively structured under law.
—Name withheld on request
Yes, succession planning can absolutely cover business assets — including intellectual property (IP) and confidential information. In fact, incorporating intangible assets into estate planning is both prudent and essential for business continuity.
In your case, careful structuring is required to ensure smooth transfer of the recipe, brand identity and goodwill.
At the outset, it is important to recognize the types of IP involved in the business, for example, trademarks, copyrights, designs, trade secrets, etc. The transfer of such intangible property can be effectuated in the same way as tangible assets, i.e., through preparing wills, creating trusts, and so on.
However, it is important to understand the differences between the aforesaid intellectual properties and which ones are relevant to the business in question.
Trademarks: With respect to trademarks, it would be advisable to ensure that the brand name and logo are properly registered under the Trademarks Act, 1999. Registration of both word marks and device marks (if any) strengthens legal protection and facilitates a smooth transfer of ownership. Registered trademarks are assignable and can be bequeathed under a will, thereby reducing the risk of disputes among successors.
Copyright: In case the business owns any artistic works, inter alia, the text on the packaging or content in brochures/pamphlets or other advertising-related literature, the same can be registered under the Copyright Act, 1957. The rights therein can eventually be inherited.
Designs: A design can be registered under the Designs Act, 2000. Many brands, including beverage companies, get the design of their bottles or containers registered under the Designs Act. This would not only protect the distinguishing features of the brand but also result in a hassle-free transfer of rights.
Trade secrets: Although, as of today, legislation specifically governing the registration of trade secrets does not exist in India, the recipe can be protected through jurisprudence under common law, contract law (Indian Contract Act, 1872), and principles of equity. Considering that trade secrets help in maintaining confidentiality, it is important that the same is disclosed only to trusted successors under strict conditions.
Apart from recognizing the types of IP involved, it is also advisable to undertake proper valuation of the intellectual property of the business. The best way to ensure a successful IP management process is to build an IP portfolio that lists all the intangible assets the business possesses along with their valuation.
Aditya Chopra is the managing partner and Fatima Ali, is an associate at The Victoriam Legalis (TVL)
