Intellectual Property in M&A

Transcription

1 Intellectual Property in M&A October 23, 2015 Dallas Bar Association IP Section Steve Stein, Jesse Betts, Craig Carpenter Thompson & Knight LLP

2 Today s Topics Steps in M&A Transactions Drivers in M&A Transactions Deal Structure IP Due Diligence IP Considerations in Transaction Documents Post-Closing Obligations

3 Teeing up the Deal

4 Let s Make a Deal Typical Transaction Steps: Idea Conversation More detailed conversation - NDA Potential deal structure Letter of Intent Due Diligence Transaction Documents Closing Post-closing IP

5 Deal Structure Merger Forward, reverse, triangular Surviving entity? Acquisition Stock vs. Asset Whole or partial

6 Transaction Documents NDA LOI/MOU/Term Sheet Due Diligence Request List Purchase Agreement Ancillary Agreements Assignments Licenses Employment/Independent Contractor Non-competes/Non-solicit

7 Drivers in M&A Transactions Assets and liabilities Tax Drivers generally Tax Drivers investor issues Agreement adoption and avoidance (unions) Exit Strategies IP retention, acquisition and monetization issues

8 The Typical Purchase Agreement Assets/Stock Purchase Price Reps & Warranties Survival of Reps and Warranties Baskets and Caps Limitations of Liability Key Shareholders Shareholder Representatives

9 IP Due Diligence

10 IP Due Diligence Assets: What, where, when, how, why Active? Chain of title Encumbrances Other restrictions Lifespan Restraints on assignment (ITU TMs) Multiple inventors issue Work made for hire Joint ownership Cross reference data room with USPTO

11 IP Found in M&A Transactions Patents Patents Patent applications Trademarks Registered Applications (Usebased vs. ITU) Common law Copyrights Registered Unregistered Works made for hire Trade Secrets Proprietary business information Social Media Assets

12 IP Due Diligence IP Agreements Licenses (in-bound & out-bound) Software EULAs (clickwrap?) Security interests Assignments Anti-assignment and change of control Consents Use of OSS Is this everything? Material Agreements Employee and Contractor Agreements

13 IP Due Diligence Anti-Assignment vs. Change of Control Licensee shall not assign this agreement to a third party without the prior written consent of Licensor. OR Licensee shall not assign or otherwise transfer any of its rights, or delegate or otherwise transfer any of its obligations or performance, under this Agreement, in each case whether voluntarily, involuntarily, by operation of law, Change of Control or otherwise, without Licensor s prior written consent, which consent Licensor may give or withhold in its sole discretion. For purposes of the preceding sentence, and without limiting its generality, any merger, consolidation or reorganization involving Licensee (regardless of whether Licensee is a surviving or disappearing entity) will be deemed to be a transfer of rights, obligations or performance under this Agreement for which Licensor s prior written consent is required. No delegation or other transfer will relieve Licensee of any of its obligations or performance under this Agreement. Any purported assignment, delegation or transfer in violation of this Section is void.

14 IP Due Diligence Compliance with laws Non-infringement Data privacy Operation of the business Freedom to operate

15 Data Privacy and Security Considerations Maintaining trade secrets (NDAs, etc.) Data privacy restrictions on use of data

16 IP Considerations in Transaction Documents

17 IP Sections in Transaction Documents IP considerations in the deal go beyond the IP disclosure schedule: Definitions Included vs. Excluded Assets/Rights Assumption of Liabilities Reps and Warranties Disclaimers and Limitations of Liability Indemnification Closing and Post-Closing Obligations

18 IP Sections in Transaction Documents Definitions: Intellectual Property Intellectual Property Agreements Intellectual Property Assets Company Intellectual Property Material Contracts

19 IP Sections in Transaction Documents Assets/Rights: Disclosure All assets used in the business Included vs. Excluded Transfer and Transition License vs. assignment Third party IP Grant-back Maintenance Purchase Price Adjustments Non-competes

20 IP Sections in Transaction Documents Representations and Warranties: Asset Reps Performance warranties Non-infringement warranties Survival periods Knowledge qualifiers When does a breach occur Remedies for breach

21 IP Sections in Transaction Documents Disclaimers and Limitations of Liability: Exclusion of indirect damages Caps and Baskets Exceptions (carve-outs) IP rights Confidentiality Indemnification Etc.

22 IP Sections in Transaction Documents Indemnification: Issues before closing, but after that? General IP Infringement Control of the defense Escrow Crossover with Reps and Warranties

23 IP Sections in Transaction Documents Assignments and Change of Control Restrictions: Assumed Contracts/Licenses Necessary consents with be obtained prior to closing

24 Closing and Post-Closing Closing Closing checklist No material changes Continue to run the business as usual Further Assurances Post-Closing Assignments Recording Transfers (domestic and international) Power of Attorney Maintenance Fees (filings due during or immediately after closing) Docketing and files

25 Post Closing Problems After Closing it is discovered that.

26 Post Closing Problems One of the key products of the acquired company practices a third party patent known to Seller: Is there a breach? Is there a breach remedy? Is there indemnification? What if it comes up several years after closing?

27 Post Closing Problems One of the key products of the acquired company practices a third party patent unknown to Seller: Is there a breach? Maybe. Is there a breach remedy? Is there indemnification? What if it comes up several years after closing?

28 Post Closing Problems A third party conducts a software audit. You can t produce all the required software licenses: Is there a breach? Is there a breach remedy? Is there indemnification?

29 Post Closing Problems A competitor accuses you of trade secret misappropriation based on pre-closing activities. Is there a breach? Is there a breach remedy? Is there indemnification?

30 Post Closing Problems You find out that prior to closing the Seller had a data breach of personal credit card information of existing customers. The Seller was unaware it happened. Is there a breach? Is there a breach remedy? Is there indemnification?

31 Questions? Steve Stein, Jesse Betts, Craig Carpenter Thompson & Knight LLP