IP Issues in Transactions
F.I.R.E. Series, University of Rochester
May 14, 2013
Ralph A. Loren
Partner
rloren@edwardswildman.com
© 2013 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP
Examples of corporate transactions that
may have IP issues
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Licenses
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Investments
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M&A
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Loan Security
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Valuation
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S-1/10-K Risk Factors
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Employee/Consultant Agreements
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Basic IP Law
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Patents
♦ Covers the idea itself
♦ Limited in time but absolute in scope
♦ Coverage on a country-by-country basis
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Trademarks
♦ Identifies the source of the goods or services
♦ Unlimited in duration
♦ Can be lost if term becomes generic
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Basic IP Law
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Copyrights
♦ Covers the expression of an idea, not the idea
♦ Not limited to national boundaries
♦ Life of the author plus 70 years
♦
Trade Secrets or Know How
♦ Covers the idea itself
♦ Limited by secrecy but can be lost if it loses secrecy
♦ Does not cover independent invention or reverse engineering
♦
Domain Names
♦ Covers the URL only
♦ Has some trademark implications
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Requirements for a Patentable Invention
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An invention must be:
♦ Patentable Subject Matter
♦ Novel
♦ Non-Obvious
♦ Enabled
♦ Description to Meet Written Description Standard
♦ Best Mode
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Changes to Patent Law under AIA
Under new Patent Act (March 16, 2013), First Inventor to File, not
First to Invent is the basic test
♦ Different scope of prior art
♦ Grace Period for Inventor’s Disclosure
♦ New Post Grant Review Procedures:
♦ Post Grant Review in 1st 9 Months after issuance – all grounds
of invalidity possible
♦ Inter Partes review – After PGR – Only based on Patents and
Printed Publications
♦ Derivation Proceedings – Did the Named Inventor get the Idea
from Someone Else?
♦ Supplemental Examination – Patent Owner method to cure
even Inequitable Conduct – Becomes Ex Parte Reexamination
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IP Due Diligence Issues for any Transaction
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What type of IP exists?
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What is status of existing IP?
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Does it cover the product or process being sold or contemplated?
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Any additional IP available?
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What is licensed in and out?
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What is the competitive landscape?
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What is the Status of Current IP
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Are there patents that cover methods or products being used by
the company?
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Does the IP cover anything that is being sold or licensed out?
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Are there patents on the products or methods?
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Are there trademarks covering anything sold?
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Where is the IP filed and where is it being used?
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What is issued versus pending?
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Are additional foreign (or US) applications possible?
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What is the duration of IP remaining?
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Is the IP Protection Sufficient?
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Does the IP cover critical products or processes sufficient to
protect the company against competitors?
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Does the IP provide a picket fence or just single product
protection?
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How strong are any trademarks or copyrights?
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Is the IP overbroad; that is, is it broad without more limited claims?
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Does the IP somehow provide differentiation from competitors?
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Can the IP be made stronger?
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Has lifecycle management been considered and planned for?
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Is Ownership of the IP Correct?
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Is the IP owned by proper entity?
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Have the inventors signed all necessary documents?
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Has anyone claimed that the inventorship is incorrect?
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Are there any licenses outstanding to third parties?
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Are there any licenses that expired and if so, are there any
provisions that last past expiration?
If the IP includes ex-US rights, have all owners agreed to any
license?
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Licensed-In Technology Problems
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Are the rights in any licensed-in technology sufficient to cover the
current (or future) products?
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What are the scope of the licenses?
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Were any licenses limited to research and if so, is it defined?
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Are the licenses exclusive or nonexclusive?
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How many different licenses are used on a product or process that
would generate royalties (and who will claim them)?
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Are there viable anti-stacking provisions?
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Are these combination products or are the methods unique?
More Problems with Licenses
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Are there change of control clauses and how do they operate?
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What is the difference between a change of control clause and an
assignment?
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Is there a restriction on assignment?
♦ Can the license be transferred?
♦ What is required to effectuate the transfer?
♦ Difference between operation of law and assignment
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Are there termination clauses that are onerous?
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Are there indemnity clauses that are a problem?
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Are there arbitration or venue clauses that are problematic?
Additional IP Available?
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Are there pending applications that can support additional claims?
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Are continuations or divisionals possible?
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Is there any additional technology that can (or should) be
patented?
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Is the scope of filing geographically commensurate with the
distribution of the products?
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Are the trademarks registered where necessary?
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Have the trade secrets/know-how been properly protected?
Competition Issues
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Who are competitors in the field?
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What are the competitive technologies?
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Does the IP provide specific advantages?
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Will the IP protect potential market share?
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If the technology is licensed in, are the licenses sufficiently
exclusive to keep out competitors?
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Are there possible antitrust issues from the licenses; e.g., tying or
Sherman §or 2 issues?
Freedom To Operate
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How important is IP to the deal?
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Is the pertinent IP in the form of patents, trademarks or
copyrights?
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Is a Freedom to Operate study valuable in terms of cost?
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Will using the technology infringe any rights of others?
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Are others using related technology who might have blocking IP
issued or pending?
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Are licenses available?
Duration of IP
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When does the critical IP expire (or does it expire)?
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Is the additional IP sufficient for differentiation?
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Do trade secrets/know-how provide sufficient coverage?
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Can any of the IP be extended?
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Are there ways to practice Life Cycle Management that are worth
exploring?
Areas to Investigate for Life Cycle Management
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Methods of use
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Manufacturing processes
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Delivery methods and carriers
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Formulations
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Dosing
Any FDA/Governmental Filings that have
been made and IP Effect?
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Is this technology subject to Patent Term Extension?
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Is a Patent Term Extension still available?
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If so, has a Patent Term Extension been granted?
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What product or process should be the basis of the extension?
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Is there some form of exclusivity available?
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NCE, NFE, Orphan
M & A/Investment Specific Issues
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Do the IP representations and warranties make sense?
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What reps and warranties have knowledge qualifiers?
♦ Ownership?
♦ Validity?
♦ Noninfringement?
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What is the effect of the Knowledge qualifier?
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Are all liens being released?
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Who will own IP?
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Change of control clauses?
S-1/10-K Issues
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Is the description of the IP accurate?
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Are the risk factors correct in terms of competitors and IP?
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Are there known threats that must be discussed?
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Is the description of any technology accurate?
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Have all liens on IP been released and recorded properly?
Consultant and Employee Contracts
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Are there agreements on who owns any IP generated during
employment or consulting?
♦ Is the scope of the employment/consulting well defined?
♦ Are there work-made-for-hire issues?
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Scope of employment issues
♦ Consultants working for others
♦ Employees not hired to invent
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Special work made for hire issues on copyright
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Duration of agreement and is there a conflict with another job?
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Inventions made before the agreement
IP Due Diligence Checklist
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IP Due Diligence Checklist continued
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IP Due Diligence Checklist continued
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