Topic 5
Transfer and Acquisition of IP
WIPO-KIPO-KIPA IP Panorama Business School Investment Summit
6 October 2008
Geneva
OPTEON
Philip Mendes
Level 3, 33 Queen St
Brisbane QLD, Australia
Ph + 61 7 3211 9033
Fax + 61 7 3211 9025
philip@opteon.com.au
What is an assignment ?

Assignment occurs when ownership of IP is transferred
 Assignor
 The seller of the IP
 Assignee
 The buyer of the IP

Outline
 Due diligence
 Assignment assurance
 What is assigned
 Financial terms
 Confidentiality and non use
 Technical assistance
 Records to transfer
 Warranties to make
What is a due diligence?
 A fact finding
 “What are the facts”
 An assessment
 “What do I think of this”
 A validation or corroboration
 “Is this what I’m told it is”
 “am I getting what I understand I should be getting”
 Types of due diligence
 IP ownership and rights due diligence
 patent position due diligence (validity and infringement)
 scientific / technical due diligence
Legal Due Diligence
Chain of title: ownership & rights
 What is the chain of title ?
 What are the links in the chain ?
INVENTOR
 Are any links not accounted for ?
EMPLOYER
OWNER
Chain of title: ownership & rights
.
Inventor 1
Inventor 2
Inventor 3
Inventor 4
(student)
University B
Company
License
MTA
Right
Something
Field A
Institute C
First Refusal
Else ?
University A
Legal Due Diligence - Encumbrances
 Is there anything that detracts from the ability to make deals freely with this
IP?
 Is there a security interest granted over the IP ?
 Mortgage
 Charge
 Is there a joint owner ?
 Does someone have an option over the IP
 Does someone have a right of first refusal
 Is there an obligation to manufacture in a particular country or state ?
 Does the owner have an obligation of confidentiality
Encumbered rights - contracts
 Are there existing licenses in place ?
 Licenses granted in a Confidentiality Agreement
 Licenses granted in a Material Transfer Agreement
 Implied license granted by transferring biological material without a
Material Transfer Agreement
 Are there other contracts
 carried forward interests
 Options for rights, or for shares
 Are there any breaches of existing contracts ?
 Terms of other contracts
 performance obligations
 Termination rights that may have accrued
Common Issues and Surprises
in a Legal Due Diligence

Is the person who asserts ownership really the owner ?

Is there a joint owner ?

Joint ownership:
 Patents: one owner cannot assign without the consent of the other (except US)
 Copyright: all copyright holders must act jointly, neither can act alone

Particulat ownership issues:
 students
 collaborators
 contractors
 volunteers
 seconded employees - visiting scholars
 staff for hire companies
Effect of due diligence defect
 Likely: no adverse effect
 Defect is discovered, defect is remedied
 Worst impact may be a short time it takes to remedy the defect
 But some defects may be serious
 Possible adverse impact:
 Discovery of a joint owner that has inflated commercial expectations and
puts your capital raising or deal at risk
 Discovery of students who cannot be located, or refuse to sign an
assignment – even on equitable terms
 Delays in capital raising or deal
 Financial terms renegotiated by assignee / investor / licensee given the
risks of discovered and previously undisclosed defects
 Deal abandoned
What should active IP Owner do
 IP Owner should undertake its own due diligence as part of preparing IP for a
capital raising or deal
 Discover its own defects
 Plug them up first
 Prepare
 IP & Contracts Map
 Identifies every inventor
 Identifies every link in the chain of ownership and rights
 Employee to Employer
 Assignment or license from collaborator
 Assignment from student
 Ownership provisions in an MTA
 Assignment from a contractor
 Demonstrates that the IP Owner has the ownership (or rights) to deal
with the IP in the deal proposed
Chain of title: IP and Contracts map
.
Inventor 1
Inventor 2
Inventor 3
Inventor 4
(student)
University B
Company
License
MTA
Right
Something
Field A
Institute C
First Refusal
Else ?
University A
Assignment / assurance
 Assignment must be in writing
 Language of assignment is straightforward
 “Company A assigns its right title and interest in the Intellectual Property” both
legally and beneficially
 Also customary:
 To assign the right to sue for damages against in past infringement
 To have a further assurance
 That the assignor will sign and firther document required to more
properly record the assignment
 For example, the documents required by each domestic patent office to
record the assignment in that patent office
What is assigned


May assign granted patents
May assign a patent application, and
 All future patent applications based on that application
 All future patents granted pursuant to all those applications

Consider also whether there is an confidential information or trade secrets that should
also be “assigned”
 That is, knowledge, broadly
Knowledge is not proprietary, it cannot be “owned” nor “assigned” in the true sense
But consider assigning knowledge broadly
 Which may be the subject of a future patent application
 Which may be a trade secret, which the assignee wants to capture in the same way
as a patent is captured



Sometimes the assignment of IP is accompanied by the sale of physical assets
 Plant and equipment, prototypes, etc
Financial terms
 Most commonly an assignment is for a lump sum payment payable on
execution of the Deed of Assignment
 Lump sum is paid
 All the value of the IP is paid to the Assignor simultaneously




Should an assignment be made in return for royalties ?
Royalties are a periodical payment
Unexpired patent may be many years
What if the Assignee
 Goes bankrupt ?
 Sells the IP to another person, without passing on the royalty obligation ?
 May be in breach, but it may cease to exist after selling the IP to another
person
Confidentiality and non use
 Customary to impose on Assignor obligations in relation to the IP that is
assigned:
 confidentiality – not to disclose to other persons
 Of non use
 Usual exceptions
 If the IP enters the public domain (other than as a result of breach)
 Of course, IP enters the public domain when a patent is published
 Use:
 Sometimes the Assignor may retain use rights:
 In its own business
 If a university or research organisation – for research purposes
Technical assistance
 Sometimes the Assignor may agree to provide technical assistance to the
assignee in relation to the Intellectual Property assigned
 Often, that is the subject of a separate agreement
 Technical assistance agreement
 Consultancy Agreement
 With additional financial terms
Records to transfer
 Customary to transfer certain records, along with the IP
 Records relating to the ownership of IP
 Granted patents
 Certified copies of lab books (or originals?) to demonstrate inventorship if
there should be a future challenge
 Records relating to technical matters
 Reports
 Data
 Drawings etc
 Records relating to rights
 Licenses granted
 Employment contracts
 Contracts with collaborators etc (refer Contracts Map)
Warranties
What are warranties ?
 Warranties are statements made by an assignor
 Akin to a guarantee
 An assignor warrants something to be true, that is, the assignor guarantees
something to be true
 If the statement is untrue, the assignee may :
 Sue for damages
 Termination inappropriate (title has transfferred)
 Therefore important that warranties that are made, are made accurately
 Important consequences follow from the breach of a warranty
 As a rule, an assignor will want to make the minimal warranties sought
Warranties:
Warranties about ownership of IP

Not uncommon for an assignor to warrant that the assignor
 owns the IP being assigned


Should such a warranty be unqualified ?
Consider:
 Patent application filed
 Assignment of IP in PCT stage
 Assignor warrants that it owns the IP in that patent application
 Later, it is discovered that another person has an earlier priority date
 That other person owns the IP in that patent application, not the assignor
An absolute warranty about ownership would therefore be beached
Such a warranty about ownership:
 should not be unqualified
 should be expressed to be made to the best of the assignor’s actual knowledge


Warranties:
Warranties about infringement
 Not uncommon for warranties to be sought that a IP does not infringe another
person’s IP rights
 Should such a warranty be unqualified ?
 Use of an improvement patent held by the assignor infringes an earlier
patent
 Or, exploitation of assignor’s patent encumbered by another person’s
blocking patent
 Neither situation may be known to the assignor
 Assignor cannot undertake a complete search to be able to ensure accuracy
 Patent applications may be filed with an earlier priority date, but may not
be published for years afterwards
 Such a warranty:
 should not be unqualified
 should be expressed to be made to the best of the assignor’s actual
knowledge
Warranties:
Warranties about unencumbered rights
 Not uncommon for an assignor to be expected to warrant that:
 No notice has been received of any claim asserting infringement
 No notice has been received opposing the grant of a patent, or challenging
its validity
 No license has previously been granted
 No option to license or right of first refusal has been granted
 If any of the above are incorrect, warranties are made subject to disclosures
 Should such a warranty be unqualified ?
 All these are matters within the control of an assignor
 Assignor should be able to make the warranties sought without any
qualifications
Warranties:
Warranties about patents
 Common warranties about patents:
 That named persons are the only inventors
 No inventor has been omitted from being named in the patent application
 That no person is named as an inventor who is not an inventor
 That named inventors are employees of the assignor and made the
invention in the course of employment
 All patent maintenance, continuation and renewal fees have been paid
 Patents have not been revoked
 Patent applications have been made properly
 No failure to take a required step in the patent application process
 Should such a warranty be unqualified ?
 All these are matters within the control of an assignor
 Assignor should be able to make the warranties sought without any
qualifications