Be prepared Scouting for IP problems

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Be prepared -Scouting for IP problems

Daniel Pavin
Licensing Executives Society 23 January 2003
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Overview

• Scope of this talk specific issues within IP due
  diligence
• Why carry out it out?
• Timing constraints
• Tailoring the due diligence exercise
• Some comments on IP agreements
• Keeping one eye on the future
• Managing IP after the transaction is
• complete

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Why carry out IP due diligence (as a buyer) 1

• Caveat emptor think used car
• Establish what IP you will get
• Establish whether there are any restrictions on
  that IP
• Assess risk

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Why carry out IP due diligence (as a buyer) 2

• Manage risk
• Live with it on current terms
• Change terms to reduce or remove the risk
• Change terms to make the risk commercially
  acceptable
• Get the seller to sort out the issue pre-contract
• Assess the value of the target IP are you
  offering the right price? (Were your assumptions
  correct?)
• Decide whether you are doing the right sort of
  deal (or whether you should even do the deal at
  all)

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Why carry out IP due diligence (as a seller)

• Avoid liability for
• Misrepresentation
• Breach of warranty
• If you know less about your business than the
  purchaser/investor then your negotiating position
  is weakened

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Why cant I rely on my warranties?

• Limitations of liability
• By maximum claim
• By minimum claim
• By time
• Assumes warrantor will be around and will have
  money
• Solutions after the event (i.e. litigation)
  invariably more expensive than solutions before
  the event
• Hassle factor
• Damages may be less than actual loss

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• CLICHÉ ALERT
• PREVENTION
• IS BETTER THAN
• CURE

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Its all in the timing

• Question 1
• What is the timetable for the deal?
• Question 2
• No, seriously what is the timetable for the
  deal?

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Tailoring your IP due diligence to the transaction

• What is the value of the deal?
• What is the value of the IP in the context of the
  deal?
• At what stage of development is the product?
• What are the intended markets?
• What is the nature of the technology?
• E.g. platform technology
• What does the business model say?

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Too many rights, not enough time (or fees)

• Narrow down to key patents (or other rights)
• Which ones are key
• Are they the ones which are key to the client?
• Narrow down to key jurisdictions
• See above
• Contractual back-up
• Warranties
• Indemnities

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Too many rights, not enough time (or fees)

• In an ideal world, you would investigate
• What is the invention disclosure policy within
  the seller?
• What do the employment contracts say?
• What do consultancy agreements say?
• What do assignment agreements say?
• At the other extreme
• Target warrants that it owns all the Business
  IP

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Due diligence of IP-related agreements

• Show me the money
• Royalty provisions
• Other terms for close study
• Restrictions on grant
• Termination events and duration
• Restrictions on assignment and licensing
• Obligations to disclose and license which extend
  into the new group

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Keeping one eye on the future

• For example
• Data protection
• Privacy in Electronic Communications Directive
• Distance selling regulations
• Terms and conditions of business
• EU enlargement
• Definitions used in agreements

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Client concerns

• Cost
• (And on that note, How much due diligence should
  I do?)
• Focusing on the elements that really matter
• Did the client convey them to your organisation?
• Is everyone in your organisation (or in the pool
  of advisers) on message

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Presenting the findings the due diligence report

• How to present the findings
• By IP right?
• By product?
• By RD activity/project?
• Look ahead to post-completion

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Managing IP after the transaction is complete

• Post-acquisition Do you have sufficient
  resources to manage the portfolio?
• Enough staff?
• In-house or external resource?
• Do you need ongoing help?
• Are all the IP assets documented?
• Maintenance fees
• Licensing opportunities
• Exploitation strategies
• Notices to serve
• People to sue?

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Any questions?

• Daniel Pavin d.pavin_at_taylorwessing.com
• Taylor Wessing
• Carmelite
• 50 Victoria Embankment
• London
• EC4Y 0DX
• England
• Tel [phone]
• Fax [phone]