Intellectual Property in Business Transactions George A. Wowk  October, 2004
<ul><li>Intellectual property due diligence </li></ul><ul><li>Transaction documents  </li></ul><ul><li>Post-closing matter...
Intellectual Property Use in Business <ul><li>“Have you filed any patent applications or trademark applications?” </li></ul>
Examples <ul><li>Software licenses contain provisions which restrict their assignability </li></ul><ul><li>Contract termin...
Intellectual Property Due Diligence <ul><li>The investigation of the assets and liabilities and the business undertaking <...
Scope of Due Diligence <ul><li>Scope of due diligence </li></ul><ul><li>Limitations </li></ul><ul><ul><li>impossible to ob...
Factors <ul><li>Cost and time of conducting the due diligence </li></ul><ul><li>Nature of the transaction </li></ul><ul><l...
Intent of the Purchaser <ul><li>Significant bearing on the scope of due diligence </li></ul><ul><li>Ensure that the terms ...
Issues <ul><li>Intended uses of intellectual property </li></ul><ul><li>Intended markets </li></ul><ul><li>Which products ...
Inventory of Intellectual Property <ul><li>Through disclosure </li></ul><ul><ul><li>disclosure documents </li></ul></ul><u...
Public Record Searches <ul><li>Some intellectual property </li></ul><ul><ul><li>must be registered </li></ul></ul><ul><ul>...
Patents <ul><li>Searches </li></ul><ul><ul><li>patent number </li></ul></ul><ul><ul><li>owner </li></ul></ul><ul><ul><ul><...
Patent Analysis <ul><li>Claims analysis </li></ul><ul><ul><li>scope of the claims </li></ul></ul><ul><li>Validity analysis...
Trademarks <ul><li>Searches </li></ul><ul><ul><li>trademark </li></ul></ul><ul><ul><li>Owner </li></ul></ul><ul><ul><ul><l...
Trademark Analysis <ul><li>Infringement analysis </li></ul><ul><li>Registerability review </li></ul><ul><li>Validity analy...
Copyright <ul><li>Searches </li></ul><ul><ul><li>title </li></ul></ul><ul><ul><li>owner </li></ul></ul><ul><ul><li>securit...
Moral Rights <ul><li>Does the author's moral rights interfere with an intended use of a work </li></ul>
Proprietary Information <ul><li>Due to nature of proprietary information it may be difficult to obtain disclosure to condu...
Protection of Proprietary Information <ul><li>Processes in place to protect </li></ul><ul><li>Infrastructure in place to p...
Transfer of the Proprietary Information <ul><li>Disclose it </li></ul><ul><li>Covenants to not use or disclose </li></ul><...
Domain Names <ul><li>Review registration records </li></ul><ul><li>Domain names which contain a significant trademark </li...
Site Investigations <ul><li>Intellectual property management practices </li></ul><ul><ul><li>identification </li></ul></ul...
Contract Review <ul><li>Identify contacts </li></ul><ul><li>Locate them </li></ul><ul><li>Review them </li></ul>
Types of Contracts <ul><li>Purchases </li></ul><ul><li>Licenses </li></ul><ul><li>Joint venture </li></ul><ul><li>Product ...
Considerations <ul><li>Title </li></ul><ul><li>License rights </li></ul><ul><ul><li>granted to a third party </li></ul></u...
Purchase and Sale Agreement <ul><li>Assets or shares being purchased </li></ul><ul><li>Definitions </li></ul><ul><li>Purch...
Representations and Warranties <ul><li>Ownership </li></ul><ul><li>Sufficiency to the conduct business </li></ul><ul><li>E...
Valuation of Intellectual Property <ul><li>Legal entitlements </li></ul><ul><li>Other factors </li></ul><ul><li>Use a qual...
Post-Closing Matters <ul><li>Recordal of transfer </li></ul>
Questions <ul><li>George A. Wowk </li></ul><ul><li>Burnet, Duckworth & Palmer LLP </li></ul><ul><li>403-260-0130 </li></ul>
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  1. 1. Intellectual Property in Business Transactions George A. Wowk October, 2004
  2. 2. <ul><li>Intellectual property due diligence </li></ul><ul><li>Transaction documents </li></ul><ul><li>Post-closing matters </li></ul>Introduction
  3. 3. Intellectual Property Use in Business <ul><li>“Have you filed any patent applications or trademark applications?” </li></ul>
  4. 4. Examples <ul><li>Software licenses contain provisions which restrict their assignability </li></ul><ul><li>Contract terminates on a change of control </li></ul><ul><li>Target using unregistered trademarks </li></ul>
  5. 5. Intellectual Property Due Diligence <ul><li>The investigation of the assets and liabilities and the business undertaking </li></ul><ul><li>Understanding of the rights and obligations of the target in relation to its intellectual property </li></ul>
  6. 6. Scope of Due Diligence <ul><li>Scope of due diligence </li></ul><ul><li>Limitations </li></ul><ul><ul><li>impossible to obtain all the information required </li></ul></ul><ul><ul><li>endless number of issues that can arise </li></ul></ul>
  7. 7. Factors <ul><li>Cost and time of conducting the due diligence </li></ul><ul><li>Nature of the transaction </li></ul><ul><li>Nature and value of the intellectual property </li></ul><ul><li>Nature of the target’s business </li></ul><ul><li>Intended use of the intellectual property after the transaction </li></ul><ul><li>Certainty that can be obtained from the due diligence </li></ul><ul><li>Risk profile of the client </li></ul><ul><li>The representations, warranties and indemnities that the vendor is prepared to give </li></ul>
  8. 8. Intent of the Purchaser <ul><li>Significant bearing on the scope of due diligence </li></ul><ul><li>Ensure that the terms of the purchase and sale agreement are sufficient for the purchaser’s needs </li></ul><ul><li>Purchaser obtains the rights to the intellectual property as required </li></ul>
  9. 9. Issues <ul><li>Intended uses of intellectual property </li></ul><ul><li>Intended markets </li></ul><ul><li>Which products and services </li></ul>
  10. 10. Inventory of Intellectual Property <ul><li>Through disclosure </li></ul><ul><ul><li>disclosure documents </li></ul></ul><ul><ul><li>discussions </li></ul></ul><ul><li>Through contract review </li></ul><ul><li>Through registry search </li></ul><ul><li>Site investigations </li></ul>
  11. 11. Public Record Searches <ul><li>Some intellectual property </li></ul><ul><ul><li>must be registered </li></ul></ul><ul><ul><li>can be registered </li></ul></ul><ul><ul><li>cannot be registered </li></ul></ul>
  12. 12. Patents <ul><li>Searches </li></ul><ul><ul><li>patent number </li></ul></ul><ul><ul><li>owner </li></ul></ul><ul><ul><ul><li>target </li></ul></ul></ul><ul><ul><ul><li>related companies </li></ul></ul></ul><ul><ul><ul><li>key employee or principal </li></ul></ul></ul><ul><ul><li>inventors </li></ul></ul><ul><ul><li>interests recorded against title </li></ul></ul><ul><ul><li>provincial personal property registry </li></ul></ul>
  13. 13. Patent Analysis <ul><li>Claims analysis </li></ul><ul><ul><li>scope of the claims </li></ul></ul><ul><li>Validity analysis </li></ul><ul><li>Infringement analysis </li></ul><ul><li>Patentability analysis </li></ul>
  14. 14. Trademarks <ul><li>Searches </li></ul><ul><ul><li>trademark </li></ul></ul><ul><ul><li>Owner </li></ul></ul><ul><ul><ul><li>target </li></ul></ul></ul><ul><ul><ul><li>related company </li></ul></ul></ul><ul><ul><ul><li>predecessor company </li></ul></ul></ul><ul><ul><li>interests recorded against title </li></ul></ul><ul><ul><li>provincial personal property registry </li></ul></ul>
  15. 15. Trademark Analysis <ul><li>Infringement analysis </li></ul><ul><li>Registerability review </li></ul><ul><li>Validity analysis </li></ul><ul><li>Use review </li></ul><ul><ul><li>different trademark </li></ul></ul><ul><ul><li>different wares and services </li></ul></ul><ul><ul><li>statutory use </li></ul></ul><ul><li>Section 50 review </li></ul><ul><ul><li>trademarks properly licensed </li></ul></ul>
  16. 16. Copyright <ul><li>Searches </li></ul><ul><ul><li>title </li></ul></ul><ul><ul><li>owner </li></ul></ul><ul><ul><li>security interest </li></ul></ul><ul><ul><li>author </li></ul></ul>
  17. 17. Moral Rights <ul><li>Does the author's moral rights interfere with an intended use of a work </li></ul>
  18. 18. Proprietary Information <ul><li>Due to nature of proprietary information it may be difficult to obtain disclosure to conduct due diligence </li></ul>
  19. 19. Protection of Proprietary Information <ul><li>Processes in place to protect </li></ul><ul><li>Infrastructure in place to protect </li></ul>
  20. 20. Transfer of the Proprietary Information <ul><li>Disclose it </li></ul><ul><li>Covenants to not use or disclose </li></ul><ul><li>Covenants to destroy </li></ul><ul><li>Will vendor retain any right to use or disclose </li></ul>
  21. 21. Domain Names <ul><li>Review registration records </li></ul><ul><li>Domain names which contain a significant trademark </li></ul><ul><ul><li>are they registered </li></ul></ul><ul><ul><li>who owns them </li></ul></ul>
  22. 22. Site Investigations <ul><li>Intellectual property management practices </li></ul><ul><ul><li>identification </li></ul></ul><ul><ul><li>protection </li></ul></ul><ul><ul><li>commercialization </li></ul></ul><ul><li>Infringement mitigation practices </li></ul><ul><li>Identify intellectual property used by target </li></ul><ul><ul><li>locate relevant documents </li></ul></ul><ul><ul><li>review of operations and products and services </li></ul></ul>
  23. 23. Contract Review <ul><li>Identify contacts </li></ul><ul><li>Locate them </li></ul><ul><li>Review them </li></ul>
  24. 24. Types of Contracts <ul><li>Purchases </li></ul><ul><li>Licenses </li></ul><ul><li>Joint venture </li></ul><ul><li>Product development </li></ul><ul><li>Marketing </li></ul><ul><li>Manufacturing </li></ul><ul><li>Distribution </li></ul><ul><li>Consulting/contractor </li></ul><ul><li>Employment </li></ul>
  25. 25. Considerations <ul><li>Title </li></ul><ul><li>License rights </li></ul><ul><ul><li>granted to a third party </li></ul></ul><ul><ul><li>granted to target by a third party </li></ul></ul><ul><li>Obligations </li></ul><ul><ul><li>legal action against infringers </li></ul></ul><ul><ul><li>indemnification </li></ul></ul><ul><ul><li>royalty </li></ul></ul><ul><li>Assignability </li></ul><ul><li>Change of control </li></ul>
  26. 26. Purchase and Sale Agreement <ul><li>Assets or shares being purchased </li></ul><ul><li>Definitions </li></ul><ul><li>Purchase price </li></ul><ul><li>Payment details </li></ul><ul><li>Closing date </li></ul><ul><li>Closing details </li></ul><ul><li>Conditions precedent </li></ul><ul><li>Representations </li></ul><ul><li>Warranties </li></ul><ul><li>Indemnity </li></ul>
  27. 27. Representations and Warranties <ul><li>Ownership </li></ul><ul><li>Sufficiency to the conduct business </li></ul><ul><li>Encumbrances </li></ul><ul><li>Third party claims/litigation </li></ul><ul><li>Infringement of third party rights </li></ul><ul><li>Registrations in good standing </li></ul><ul><li>Licenses in good standing </li></ul>
  28. 28. Valuation of Intellectual Property <ul><li>Legal entitlements </li></ul><ul><li>Other factors </li></ul><ul><li>Use a qualified valuator </li></ul>
  29. 29. Post-Closing Matters <ul><li>Recordal of transfer </li></ul>
  30. 30. Questions <ul><li>George A. Wowk </li></ul><ul><li>Burnet, Duckworth & Palmer LLP </li></ul><ul><li>403-260-0130 </li></ul>

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