Solving a Taxing Problem
INTA’s new IP and taxation report aims to bridge the communication gap that can arise between brand legal professionals and tax specialists, reports Muireann Bolger.
While the worlds of intellectual property (IP) law and tax regimes may seem vastly different to legal professionals, in reality, they are closely intertwined when it comes to optimizing a brand.
To shed light on this subject, INTA yesterday, May 2, released a new study, Report on the Taxation of Trademarks and Complementary Rights in Europe, which provides valuable information on how to create greater synergy between the disciplines. The comprehensive report focuses on the importance of tax issues to the trademark practitioner and the impact of key tax issues along the trademark lifecycle, including creation or acquisition and exploitation such as licensing and the transfer of trademarks.
“It looks at how brands drive value in businesses and how this process is treated in the tax world,” said Jeff Marowits, president, client services at Keystone Strategy (US), and a member of INTA’s Research Advisory Council, Global Transactions and Tax Subcommittee.
The Research Advisory Council and INTA’s Commercialization of Brands Committee collaborated on the report, and an INTA Project Team partnered with PricewaterhouseCoopers (PwC) to prepare the report. It is available online to INTA members as an exclusive members-only benefit.
An Adventurous Approach
“We embarked on an adventure to produce a robust report that would tackle the taxation regimes in Europe as they interrelate to brands and—for the first time—publish a report on taxation targeting brand professionals as the core audience. We wanted to tell the tax story through the brand lens,” explained Mr. Marowits, a member of the Project Team.
The report focuses on tax aspects of the use of trademarks in the EU, Switzerland, and UK, and enables trademark practitioners to recognize critical situations that may result in a tax exposure, so that they can think ahead and identify the need for involving tax specialists.
“We embarked on an adventure to produce a robust report that would tackle the taxation regimes in Europe as they interrelate to brands.”
Jeff Marowits, Keystone Strategy (US)
Also commenting, Scott Phillips, managing director at Epsilon Economics (US), and a member of INTA’s Research Advisory Council and the Project Team, noted the report offers a solid foundational understanding of critical tax-related concepts in relation to trademarks.
“Trademark attorneys often feel uncomfortable when they encounter an area outside of their expertise. We wanted this report to help establish confidence among trademark attorneys to enter into correspondence and conversation on subjects that are related to their professional practice, including accounting and finance,” he said.
An Evolving Role
Explained Mr. Marowits: “The role of brands is changing, and tax authorities are increasingly focused on brands. And so brand professionals have a choice to kind of get ahead of this trend, to understand that it’s happening, and that they have a role to play.”
The report, he said, will allow brand practitioners to develop a way of thinking that not only considers the already-familiar legal perspective, but also other key areas of importance to the business, including tax.
Both members advised that communication and collaboration across different disciplines in a company or organization is pivotal to a brand’s success, and that tax professionals should not be kept at arm’s length when it comes to branding projects.
“It is a partnership model that really advances the interests of the brand itself. There are enormous consequences for brands when it comes to the decisions being made with regards to tax,” Mr. Marowits said.
As an example, he explained that a lack of interaction between branding and tax professionals can be detrimental when a brand is striving to develop a presence in another jurisdiction.
Meeting in the Middle
One problem is that trademarks are filed in locations that do not reflect the true value of the brand or have not been influenced by tax considerations, according to Mr. Marowits.
“There can be a lot of tension if the tax and the trademark attorneys are not talking early in the process.”
Scott Phillips, Epsilon Economics (US)
As the report points out, different geographies have different tax regimes, and may also have different enforcement regimes. “So, while a brand professional considers which region might have a well-developed trademark law, a tax professional might know which jurisdiction has a beneficial tax regime,” he explained, stressing that: “You have to meet in the middle.”
Mr. Marowits cautioned: “If this doesn’t happen, a brand could become tied to a region that doesn’t have well-established IP protections or that doesn’t have the right tax laws for the brand.”
Added Mr. Phillips: “There can be a lot of tension if the tax and the trademark attorneys are not talking early in the process. I would encourage trademark attorneys to engage with tax professionals and the accounting profession continually.”
In his view, the report addresses the communication problems that inevitably arise among different professions that contribute to the overall health of the brand.
A Lasting Legacy
For example, brand legal professionals and tax experts may have a different interpretation of certain concepts.
Noted Mr Phillips: “Trademark professionals and tax professionals often use ownership in two different senses, without really knowing it until they get involved.”
For example, he said, trademark professionals understand the concept of beneficial ownership where specific property rights in equity belong to one entity even though the legal title of the property belongs to another, but this can differ from a tax perspective.
“This report really helps bridge the gap of vocabulary between trademark attorneys and finance professionals, and accounting and businesspeople in general,” Mr. Phillips said.
Concluded Mr. Marowits: “It’s about opening a dialogue and then creating a process to do this continuously. Knowing the right language leads to better communication, which leads to good decision making. If that is the report’s legacy, then that would be an awesome one.”
Video courtesy of Adobe Stock / blackboxguild
Tuesday, May 3, 2022
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