The document discusses cross-border licensing issues, highlighting the advantages and challenges of going global, including tax implications and compliance with foreign laws. It emphasizes the importance of due diligence in intellectual property, the need for protecting IP rights, and includes examples of enforceability issues in various jurisdictions. The document concludes by stressing the significance of legal and business due diligence in navigating the complexities of international licensing transactions.

1. Cross-Border Licensing Issues
Global IP Convention, 2013
Bangalore, January 30, 2013
Satya S. Narayan
Of Counsel, Royse Law Firm, PC
Phone: +1650 521 5745
Email: snarayan@rroyselaw.com
Bio: http://rroyselaw.com/satya_narayan.html

2. Going Global – Some Advantages
• New markets for goods/ services
• Be close to significant customers
• Advanced technologies
• Human resource – “Talent”
• Low cost manufacturing centers
• Challenges in existing markets (e.g., intense competition; slow
national economy)
• Tax advantages
• Overseas funding

3. Going Global – Some Paths
• Foreign WOS
• Joint ventures
• Strategic partnerships
• Mergers and acquisitions
• Direct to foreign consumers

4. Cross-Border Transactional Challenges
• Tax consequences
• Transfer pricing issues
• Foreign governmental approvals and permits
• Foreign filing requirements (including for oversight of license
royalties)
• Compliance with foreign laws (including warranty
limitations, consumer protection, FCPA and anti-bribery laws)
• Hedging for foreign exchange risks

5. Today’s Focus: Cross-Border Licensing Issues
I. Intellectual Property (IP) Related Due Diligence
II. Protection of IP
III. Some Examples of Weakened License Restrictions &
Enforceability
IV. International IP Dispute Resolution
V. Choice of Law

6. I. IP-Related Due Diligence
 Due diligence is critical for global transactions, including
cross-border licensing transactions
 Cross-border IP/ technology due diligence questions:
 Does the licensor own the IP?
 Does the licensee have any strikes against it? Can the
licensee be trusted?
 What specific intellectual property rights will need to be
licensed?
 Which licensee affiliates will need the license? What is the
location of those licensee affiliates?
 In which country is the licensor’s and licensee’s assets
predominantly located?
 Will any of the IP assets to be licensed infringe a third party’s
intellectual property rights in the foreign jurisdiction?

7. II. Protection of Intellectual Property
 Register your key export-related IP assets (such as patents and
trade marks) in licensee markets
 Tailor intellectual property agreements/ clauses to overcome
or work around presumptions under foreign law
 Require the licensee (including the joint venture company) to
agree in writing to:
 “no contest” terms
 confidentiality obligations
 a present assignment and cascading license/ waiver of any
rights to your IP which may vest in the licensee by virtue of
the transaction, including rights in any
derivatives, improvements and modifications made by the
licensee to your IP

8. III.Some Examples of Weakened License
Restrictions & Enforceability Issues
 U.S. copyright law and the EU Computer Programs Directive permit
reverse engineering of computer programs for achieving
interoperability
 U.S.: Contractual restrictions on reverse engineering
are, however, enforceable. Bowers v. Baystate Technologies
 EU: Contractual restriction on reverse engineering
unenforceable.
 Under German law, sublicense agreements are protected even
though the license agreement is terminated for any reason
 Japanese courts have reinstated licenses to distributors
notwithstanding a termination that is in accordance with the
distribution agreement if significant investment has been made by
the distributor
 Competition/ antitrust laws impact restrictions (including
restrictions on distribution and pricing) on distributors in many
countries

9. III.Some Examples of Weakened License
Restrictions & Enforceability Issues
 Under U.S. law, unless a licensee elects under Section 365(n) of the
U.S. Bankruptcy Code to retain the licensed IP within the prescribed
time and continues to pay royalties, the bankrupt licensor or its
trustee may reject the license agreement which is typically
considered an executory contract (even if the license is fully-paid).
The licensor or its trustee in bankruptcy may also reject any
agreement supplementary to the license (e.g., technology escrow
agreements). Section 365(n) does not protect trademark licenses.
 Most jurisdictions do not have IP license protection similar to
Section 365(n) of the U.S. Bankruptcy Code
 Under Indian law, failure to pay applicable stamp duty may make
the IP agreement inadmissible in court or other proceedings

10. IV.International IP Dispute Resolution
 In cross-border transactions involving IP/ technology, subject to certain
exceptions, arbitration is a better dispute resolution mechanism.
 An award by the national courts of the non-breaching party may
not be automatically enforceable in the national courts of the
breaching party
 International litigation management can be costly and subject to
delays, uncertainty, and sometimes protectionist foreign courts
 The New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 1958:
 Subject to limited exceptions (e.g., subject matter is not
arbitrable, award contravenes public policy) courts of
contracting states must give effect to private agreements to
arbitrate and to recognize and enforce arbitration awards made
in other contracting states.
 148 contracting states (including India and the U.S.); 47
countries are not parties (including Taiwan)

11. IV.International IP Dispute Resolution (cont.)
 International Arbitration:
 Institutional arbitration:
 ICC, ICDR, LCIA, SCCAM, SIAC, SCC, JCAA, CIETAC, JAMS, WIPO
(specializes in IP disputes)
 Ad hoc arbitration: UNCITRAL Model Law on International
Commercial Arbitration
 IP Exception: Licensors typically expressly reserve rights to access
courts to protect their IP
 Time is of the essence in protecting one’s IP; courts may be able to
provide interim relief in the shortest time-frame
 Ex parte relief may be necessary if bad faith is suspected; ex parte
arbitration orders are enforceable under the New York Convention
(Art. V(1)(b) requires notice and opportunity to present)
 A third party is involved in the IP dispute; arbitration is limited to the
parties to the contract

12. IV.International IP Dispute Resolution (cont.)
 Local and foreign counsel should be consulted to select the
appropriate arbitration forum, rules and venue for the contract
 Express provisions, whetted by local and foreign counsel, should be
included in the contract

13. V. Choice of Law
 Most jurisdictions respect the choice of law selected by parties to a
private contract (including India and U.S.); but expressly exclude
conflicts of law principles that would change the parties’ choice of
law selection
 In U.S. – India transactions, U.S. federal law and New York state law is
most typical; English law sometimes accepted
 Caveats:
 Certain foreign local laws may still apply (e.g. export
laws, FCPA/ anti-corruptions laws, IP laws, antitrust/
competition laws)
 Typically, the following types of contracts will be subject to
foreign local law:
 Contracts between local parties (e.g. contracts between a
U.S. company’s Indian subsidiary and its Indian partners)
 Contracts with governmental entities
 Contracts with consumers/ individuals

14. V. Choice of Law (cont.)
 U.N. Convention on Contracts for the International Sale of Goods
(UNCISG):
 UNCISG will apply to licenses involving international sale of goods
(e.g., software) unless the contract's choice of law clause
specifically excludes UNCISG terms
 The UNCISG applies to contracts for the sale of goods between
parties from countries that are signatories to the UNCISG. The
U.S. is a signatory and India is not. May be implicated if the
Indian company’s affiliate based in a UNCISG signatory country is
contracting.
 Permits parole evidence, oral contracts (proven by any
means), and other atypical provisions

15. Conclusion
 Cross-border licensing transactions involve a complex interplay of
national and international laws and many pitfalls for the unwary
 Business, IP, and legal due diligence is paramount in achieving
transaction success and adequate time should be allotted for such
due diligence
 Licensors and licensees should each work with counsel in the
countries in which the licensor and licensee does business and
counsel where the IP will be licensed to avoid pitfalls in cross-border
transactions

16. Questions?
Questions?
Satya S. Narayan
Bio: http://rroyselaw.com/satya_narayan.html
E-mail: SNarayan@rroyselaw.com
Phone: 650.521.5745
PALO ALTO LOS ANGELES SAN FRANCISCO
1717 Embarcadero Road 11150 Santa Monica Blvd., 135 Main Street,
Palo Alto, CA 94303 Suite 1200 12th Floor
Los Angeles, CA 90025 San Francisco, CA 94105
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