fundamental ip and privacy issues in m&a transactions · 2015-04-01 · © 2015 winston &...

© 2015 Winston & Strawn LLP

Fundamental IP and Privacy Issues in M&A Transactions

April 1, 2015


Today’s Speakers

Liisa M. Thomas Becky L. Troutman

Partner, Intellectual Property and Technology San Francisco +1 (415) 591-1401 [email protected]

Chair, Privacy and Data Security Practice Chicago +1 (312) 558-6149 [email protected]

mailto:[email protected]



1. Do You Need to Worry About Intellectual Property or Privacy in Your Deal?

2. What To Worry About During Diligence

3. Negotiating the Deal

4. Wrapping Up the Deal

3


Should You Worry About IP?

Yes!!

What Happens Post-Deal

Deal Drivers

Nature of Business

4


Should You Worry About Privacy?

Yes!!*

Nature of Business?

Consumer Info?

Employee Info?

*The FTC Cares, and you should too… 5


Does the Target Have Patents?

What is patentable?

Ideas

Designs

Plant varieties

Must be new, non-obvious

Did They Create Rights?

Gov't issues

Limited duration

What Rights?

Stops others from making, using, selling,

importing

Not an affirmative

right to practice the invention

6


Patents: Red Flags

Ownership Transfer

Security Interests Territory

Filing Deadlines Disputes

7


Does the Target Have Consumers' Information?

What kind of information?

Names and addresses

Usernames and passwords

Emails

Behaviors (online, offline)

Where could it come from?

Online newsletters

Product purchases

List purchases

Legal restrictions

Use as represented

Regulated industries (health,

financial)

8


Consumer Information: Red Flags

Use Restriction • Regulatory • Disclosure-Driven

Ability to Transfer • Disclosure-driven • Third Party contracts

Insufficient Security • Breaches? • Failed audits?

9


Does the Target Have Copyrighted Works?

What is protected?

Fixed expression of idea

Literary work

Musical or dramatic work

Pictures, sculptures, architectural works

Sound recordings

How is it protected?

As soon as fixed

But to exercise rights, need registration

What rights?

To make copies, modify, distribute, perform

Rights are limited (but longer than patent rights)

Protects against unauthorized copying,

modification, distribution, performance

10


Copyright Red Flags

Ownership Joint Owners

Transfer Security Interests

Termination of Licenses Disputes

11


Does the Target Have Trademarks?

What is a trademark?

Company names

Product names

Logos

Trade dress

Colors

What is protected?

Stops others from creating

confusion

Confusion test multi-faceted

Can mean stopping similar

uses

Duration?

Indefinite

If protected!!

Registration in US not required

12


Trademark Red Flags

Ownership Transfers

Licenses Disputes

13


The Target Has Domain Names

What are they?

Web site addresses

How do you get them?

Register with domain registrar

Anyone in IT could get

Red flags

Searching difficult

Did employee put it in his/her

name?

Transfers can be complex

14


The Target Has Employee Information

What information?

Names, addresses

SSNs

Compensation, financial info

Risks

International flows

Stored forever

Legal usage restrictions

Many third party vendors

Breach, breach, breach

15


Does The Target Have Trade Secrets?

What is it?

Formulas, Processes

Source Code

Customer Lists

Did They Protect it?

Secret!

Value b/c not known

How Created?

Take steps to keep secret

Limit access

Confidentiality agmt

Safeguards

16


CLE Code

74351





4. Wrapping Up the Deal

18


Getting The Right IP Information

Title searches •From target •On your own! •All current and

past owners •Confirm chain of

title

UCC Searches Review liens/licenses

Review Material Contracts

Look at Litigation •Claims made by

or against Target •Conduct

separate search

19


Getting the Right Privacy Information

Ask questions! • Where did it come from? • What did you tell people

about use? • What laws apply? • Has there been a breach?

Get the right documents • Privacy policies • Security policies • Third party audits • Litigation?

Transfer restrictions? • Policy restrictions (Asset

deal) • Agreements or promises

not to share?

20


Special Considerations for Patents

Discuss Trade secret and patent protection/enforcement strategy

Status of patents/pending apps

Review US file histories and potential bars to patentability/claim scope

International portfolio and potential bars to patentability/claim scope

Searches/opinions of counsel

Consider Conducting separate searches

21


• Discuss Target’s trade secret and copyright protection and enforcement strategy

• Discuss software development (who developed what, where and their relationship to the Target), and review all related employee and contractor agreements

• Review all third party tools, components and software used to develop, incorporated in or used in connection with products and services

• Review use of open source software • Review any source code escrow agreements or other source code

access given to third parties • Review any searches and opinions of counsel relating to licensing,

fair use, infringement or other copyright-related issues

Special Considerations for Software

22


Special Consideration for Trademarks Discuss Trademark protection/enforcement strategy

Status of registrations/applications; use of marks

Review File histories

International portfolio

Examples of use

Opinions from counsel

Understand Scope of rights and protections

If anything is vulnerable

23


Special Considerations for Material Contracts

Identify

Inbound licenses

Outbound licenses

Trademark agreements

Reseller

Distributor

Franchise

Quality control?

Other Agreements

R&D

Manufacture

Supply

Pricing

Advertising

Reseller/Sales Agent

Privacy-Related

Website Terms

Clickwraps

DMCA Registrations? 24


Special Considerations for Privacy

Potential breaches

Protection measures?

Third party contracts?

Regulatory obligations?

25


Special Considerations Relating to Litigation

Review IP-related inquiries, C&D letters, "informational" letters

Patent/trademark office filings

Litigation proceedings

Require (buyers)

Summary of challenges to rights

Analyses questioning rights to use

Discuss Allegations made by or against the Target

Subject areas: IP, advertising, data, pricing, competition, import/export, right of publicity

26





4. Wrapping up the Deal

27


Understand for allocation of risk:

Getting Started in Negotiating the Deal

Purchase price Escrow/holdback Survival

period/fundamental reps

Basket Cap Qualifier Effect on Indemnity

28


Buy-Side: • Intellectual Property, personal

information and privacy laws defined broadly

• Clearly define what is owned vs. what is licensed and tailor reps to each bucket of IP

• Specify all material assets in a schedule (including registered IP, material common law trademarks, material in-licensed IP)

Sell-Side: • Narrow scope of definitions • Limit disclosures

Crafting Definitions

29


Basic Privacy Reps & Warranties

30

General

• No separate privacy rep • Rely on general compliance with laws

Comply

• With privacy policy • For collection, use, storage, distribution

Claims

• None threatened • No actual

Security

• Have measures in place • No data breaches (knowledge)


More Detailed Privacy Reps & Warranties

31

Comply

• With PCI-DSS • FTC Guidance, other admins • Industry standards • Industry-specific laws

Target

• Has conducted security assessments • Remediated/addressed risks • Has done training (effective)

Vendors • Comply with all of the above


• Target owns or has the right to use / Buyer is acquiring all IP used in or necessary for the business

• The schedule contains a complete and accurate list of all Target-owned IP (or all Target-owned registered IP and material unregistered IP)

• All Target-owned IP is valid and enforceable (knowledge) • Protections taken to preserve confidentiality • There are no liens, claims or other encumbrances on the

use of IP

Basic IP Reps – Ownership

32


•No Infringement; Other Violations • No infringement or other violation of third party IP • No infringement by third parties of Target IP (knowledge)

• Licenses • Target has sufficient license rights from third parties • List of all [material] inbound and outbound licenses • No breach of third party licenses/agreements • No consents or additional payments required for, or other

restrictions on, transfer of licenses/assignments

•Material contracts rep

Additional Basic IP Reps

33


Detailed IP Reps & Warranties

• Support • Indemnity

Contractual obligations

• Sufficient for current (and planned) business

• Disaster recovery

Systems • Non-compete • Non-solicitation • Target

cooperation!

Misc.

•No gov't funding •Conf agmt, everyone

execute

Development of IP

• List all inventors •Disclose prior art •No public disclosures •Patent markings

Patent Protection • Schedule 3rd party

software •Don't use in

"undesirable" way

In-Bound Licenses/Open Source

Software

34


IP Rights Retained by Seller and Licensed to Buyer or Transferred to Buyer and Licensed Back to Seller

Purpose; Scope

Term; Termination

Exclusivity; Non-Compete

Restrictions on transfer

35


IP Rights Retained by Seller and Licensed to Buyer or Transferred to Buyer and Licensed Back to Seller

Ownership and license use rights

Enforcement against infringers

Indemnity

Limitation of liability

Privacy Considerations 36





4. Wrapping up the Deal

37


Pre-Closing Action Items

Disclosure Schedules

Legacy Security Interests

Assignments Required Consents

Security Agreements

IP Maintenance

Clear Ability to Use PII

38


Post-Closing Action Items IP

Ass

ets • Assignments

• Domain Transfer

• Licenses • Prosecution

going forward?

• New filings? • Anything

expiring? Pers

onal

Info

rmat

ion • Update

Disclosures • Improve

Security • Audit/Assess

Third Party Relationships

• Educate Employees M

ater

ial C

ontr

acts

• Consents • Renewals • Terminating

39


Lessons Learned?

Think about privacy and intellectual property at the beginning of the deal!

40


CLE Code

74351


Thank you!

Liisa M. Thomas Becky L. Troutman

Partner, Intellectual Property and Technology San Francisco +1 (415) 591-1401 [email protected]

Chair, Privacy and Data Security Practice Chicago +1 (312) 558-6149 [email protected]

42



fundamental ip and privacy issues in m&a transactions · 2015-04-01 · © 2015 winston &...

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