© 2013 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP

IP Issues in TransactionsF.I.R.E. Series, University of RochesterMay 14, 2013

Ralph A. LorenPartnerrloren@edwardswildman.com

Examples of corporate transactions that may have IP issues

♦ Licenses

♦ Investments

♦ M & A

♦ Loan Security

♦ Valuation

♦ S-1/10-K Risk Factors

♦ Employee/Consultant Agreements

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Basic IP Law

♦ Patents♦ Covers the idea itself♦ Limited in time but absolute in scope♦ Coverage on a country-by-country basis

♦ 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

♦ 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

♦ 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

♦ What type of IP exists?

♦ What is status of existing IP?

♦ Does it cover the product or process being sold or contemplated?

♦ Any additional IP available?

♦ What is licensed in and out?

♦ What is the competitive landscape?

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What is the Status of Current IP

♦ Are there patents that cover methods or products being used by the company?

♦ Does the IP cover anything that is being sold or licensed out?

♦ Are there patents on the products or methods?

♦ Are there trademarks covering anything sold?

♦ Where is the IP filed and where is it being used?

♦ What is issued versus pending?

♦ Are additional foreign (or US) applications possible?

♦ What is the duration of IP remaining?

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Is the IP Protection Sufficient?

♦ Does the IP cover critical products or processes sufficient to protect the company against competitors?

♦ Does the IP provide a picket fence or just single product protection?

♦ How strong are any trademarks or copyrights?

♦ Is the IP overbroad; that is, is it broad without more limited claims?

♦ Does the IP somehow provide differentiation from competitors?

♦ Can the IP be made stronger?

♦ Has lifecycle management been considered and planned for?

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Is Ownership of the IP Correct?

♦ Is the IP owned by proper entity?

♦ Have the inventors signed all necessary documents?

♦ Has anyone claimed that the inventorship is incorrect?

♦ Are there any licenses outstanding to third parties?

♦ 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

♦ Are the rights in any licensed-in technology sufficient to cover the current (or future) products?

♦ What are the scope of the licenses?

♦ Were any licenses limited to research and if so, is it defined?

♦ Are the licenses exclusive or nonexclusive?

♦ How many different licenses are used on a product or process that would generate royalties (and who will claim them)?

♦ Are there viable anti-stacking provisions?

♦ Are these combination products or are the methods unique?

More Problems with Licenses

♦ Are there change of control clauses and how do they operate?

♦ What is the difference between a change of control clause and an assignment?

♦ 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

♦ Are there termination clauses that are onerous?

♦ Are there indemnity clauses that are a problem?

♦ Are there arbitration or venue clauses that are problematic?

Additional IP Available?

♦ Are there pending applications that can support additional claims?

♦ Are continuations or divisionals possible?

♦ Is there any additional technology that can (or should) be patented?

♦ Is the scope of filing geographically commensurate with the distribution of the products?

♦ Are the trademarks registered where necessary?

♦ Have the trade secrets/know-how been properly protected?

Competition Issues

♦ Who are competitors in the field?

♦ What are the competitive technologies?

♦ Does the IP provide specific advantages?

♦ Will the IP protect potential market share?

♦ If the technology is licensed in, are the licenses sufficiently exclusive to keep out competitors?

♦ Are there possible antitrust issues from the licenses; e.g., tying or Sherman §or 2 issues?

Freedom To Operate

♦ How important is IP to the deal?

♦ Is the pertinent IP in the form of patents, trademarks or copyrights?

♦ Is a Freedom to Operate study valuable in terms of cost?

♦ Will using the technology infringe any rights of others?

♦ Are others using related technology who might have blocking IP issued or pending?

♦ Are licenses available?

Duration of IP

♦ When does the critical IP expire (or does it expire)?

♦ Is the additional IP sufficient for differentiation?

♦ Do trade secrets/know-how provide sufficient coverage?

♦ Can any of the IP be extended?

♦ Are there ways to practice Life Cycle Management that are worth exploring?

Areas to Investigate for Life Cycle Management

♦ Methods of use

♦ Manufacturing processes

♦ Delivery methods and carriers

♦ Formulations

♦ Dosing

Any FDA/Governmental Filings that have been made and IP Effect?

♦ Is this technology subject to Patent Term Extension?

♦ Is a Patent Term Extension still available?

♦ If so, has a Patent Term Extension been granted?

♦ What product or process should be the basis of the extension?

♦ Is there some form of exclusivity available?

♦ NCE, NFE, Orphan

M & A/Investment Specific Issues

♦ Do the IP representations and warranties make sense?

♦ What reps and warranties have knowledge qualifiers?♦ Ownership?♦ Validity?♦ Noninfringement?

♦ What is the effect of the Knowledge qualifier?

♦ Are all liens being released?

♦ Who will own IP?

♦ Change of control clauses?

S-1/10-K Issues

♦ Is the description of the IP accurate?

♦ Are the risk factors correct in terms of competitors and IP?

♦ Are there known threats that must be discussed?

♦ Is the description of any technology accurate?

♦ Have all liens on IP been released and recorded properly?

Consultant and Employee Contracts

♦ 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?

♦ Scope of employment issues♦ Consultants working for others♦ Employees not hired to invent

♦ Special work made for hire issues on copyright

♦ Duration of agreement and is there a conflict with another job?

♦ 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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