Thomas Cook and the enduring value of a brand

Thomas Cook, the oldest brand name in world tourism, looks set to survive the travel group’s collapse, after Chinese conglomerate Fosun buys its trademarks, websites and social media accounts from liquidators for £11 million. The deal highlights the enduring value of a strong trademark portfolio.

The purchase of the trademark, website and social media assets of the now defunct Thomas Cook travel group, announced in November, could mark the start of a new chapter for the historic brand. The brand name was first used in 1841 by the travel group’s eponymous founder and grew to become one of the best known tourism brands before its collapse in October. 

The sale is not the first time that the trademark rights of a household name have been snapped up during liquidation, but it is certainly one of the most high profile. At £11 million, the deal also serves to highlight the high value of a business’s brand assets, even after it has ceased trading. 

The legal value of a brand

Although a brand isn’t the only asset that typically gets picked up in the process of liquidation (Thomas Cook’s UK network of high street stores was also sold, for example), it is common for the legal rights that protect a brand name to emerge as one of the highest assets during insolvency. This is often the case despite the bad publicity that typically goes alongside a business's collapse, potentially damaging the goodwill associated with the trademarks, at least in the short term.

As IP professionals know all too well, however, brand value is just as often undermined by an inadequate trademark protection or maintenance strategy. A brand is more than its trademark registrations, of course, but without trademark protection, a brand can be potentially worthless. For this reason, undertaking IP due diligence prior to purchase is critical to ensure you’re buying what you think you are buying – and for the right price. 

For buyers thinking specifically about buying the IP portfolio of a brand that has gone out of business, there are additional challenges to consider. Here, we would recommend undertaking a thorough and comprehensive due diligence using a trusted adviser to:

• Identify chain of title issues, third-party disputes and any other potential problems with the portfolio;
• Ensure you understand what rights the trademarks you are buying give you (i.e. do the trademark/s cover the goods/services you expect or are there deficiencies?);
• Ensure the goodwill of the trademarks is being sold as well as the actual rights themselves (trademark value is rooted in the goodwill generated in consumers); and
• Assess any damage to goodwill that could have occurred prior to purchase that might affect plans once the brand is bought (e.g. if the business’s demise is mired in scandal or serious criminality).

Planning is also crucial to the safe transfer of the purchased IP portfolio, including updates to the chain of title, as there will be a limited window in which to complete formalities if the company ceases to exist after the transaction.

Preparation is key

From the seller’s perspective, IP due diligence is equally important, albeit easier to manage where the divestment is planned rather than forced by insolvency. Assuming records have been well managed and maintained, value (and price) will be strengthened by the right levels of IP protection, e.g. by ensuring:

• The IP portfolio is comprehensive, by registering all relevant trademarks for correct goods/services and in all applicable jurisdictions;
• Ownership information is up to date and valid, and the chain of title is secure;
• Continued use of the trademarks, as the value of a trademark could diminish significantly if it is vulnerable to cancellation because it has not been used and/or the buyer is aware of this as a risk; and
• Excellent record keeping of this use.

Assuming the portfolio is in good shape, discussions over value then return to the impact of a business’s insolvency on the goodwill associated with those registrations. It may be some work for Fosun to rid the Thomas Cook brand name of its association with the company's spectacular and high-profile business collapse, at least in the minds of those tourists whose holidays were spoiled by being stranded abroad. However, the company clearly sees the potential, noting in its announcement that: “The group has always believed in the brand value of Thomas Cook. The acquisition of the Thomas Cook brand will enable the group to expand its tourism business, building on the extensive brand awareness of Thomas Cook and the robust growth momentum of Chinese outbound tourism.”

For more on brand valuation, please read our article 'Do you know how much your trademarks are worth?', speak to your Novagraaf attorney or contact us below.