jay a. lefton senior partner [email protected] common mistakes that cause...
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Jay A. LeftonJay A. LeftonSenior PartnerSenior Partner
[email protected]@ogilvyrenault.com
416.216.4018416.216.4018
Common Mistakes Common Mistakes That Cause Turmoil in That Cause Turmoil in
Licensing, Financing and Licensing, Financing and M&A TransactionsM&A Transactions
Presentation at the Sault Ste. Marie Innovation Centre
September 15, 2009
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IP ProtectionIP Protection
Failure to obtain and keep good title to intellectual property Enter into agreements on a timely basis
Intellectual property assignment agreements Employees Consultants Including waiver of moral rights
Confidentiality agreementsBe aware of employees’ pre-existing obligations
Instituting an IP and trade secret protection policies/program Failure to have, keep and chronicle key documents
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Contracts Only Go So FarContracts Only Go So Far
Assuming that a contract is all you need Failure to assess the integrity of the people you’re
dealing with “Once a trade secret or confidential information is out of the
bag, you can’t get it back in” Failure to recognize that patents are different from trade
secrets Patents represent exclusive monopoly rights granted by the
government in exchange for disclosure of an invention Trade secrets are internal information or knowledge that is
not known by anyone else
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IP ProtectionIP Protection
Failure to understand the implications of collaborating with outside parties in the creation of intellectual property Consultants Academics Implications of Joint Ownership of IP
Rights of joint owners to act independent of the company
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Patent ProtectionPatent Protection
Premature disclosure of invention Failure to pay attention to patent filing deadlines
Is there a grace period? In the U.S.: yesElsewhere: no!
Failure to ensure that scope of the patents is broad enough to give protection
Underestimating the importance of trade secrets and confidentiality
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Due DiligenceDue Diligence
Failure to constantly be re-evaluating the need for “housekeeping” Don’t be a pack rat: get rid of financial obligations for patent filings
you don’t need anymore No one should know the skeletons in your closet better than you, so
deal with them, or at least be aware of themDon’t let someone else find the cracks in your walls
Misguided priorities: “We’ll save money now and fix things later”
Results in bad, inconsistent or non-existent documentationBe cost-conscious, but do it right
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Assessment of Third Party IPAssessment of Third Party IP
Failure to properly recognize or license IP
rights that are owned by others
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Securities in the CompanySecurities in the Company
Failure to have proper record keeping of organizational matters Who owns what number of shares? Properly document transfers Grants of options:
Don’t just “promise”: implement!
Don’t always need a Shareholders’ Agreement Should always have drag-along provisions
Make sure that you can deliver 100% of the company
Keep your eye on voting control Don’t let the tail wag the dog!
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Assignment clauses in Assignment clauses in ContractsContracts
Failure to plan for the future disposition of the company Share Sale:
Is there a “change of control” clause in the agreement? Asset Sale:
Contracts often require the other party’s consent to the assignment of the contract
Include a consent to assignment to a party who is acquiring all of substantially all of the company’s assets or the assets of the division in respect of which the contract relates
Be clear that the company is only responsible for obligations up to the date of the sale
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Licensing AgreementsLicensing Agreements
Assuming that all license agreements are the same Failing to pay attention to detail
Nothing is boilerplate! Read the words carefully: they’ll bite you!
Failing to tailor the agreement to the realities Failure to plan for the future contingencies
Things won’t always be rosy Not being explicit about expectations/obligations
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Licensing AgreementsLicensing Agreements Sloppiness in the Grant Clause
What is granted to whom? Don’t give what they don’t need Improvements? How broad/narrow is the “whom” defined? Ability to sublicense?
What can’t the licensee do? For what purpose? For how long? For where? Exclusivity
“exclusive” “sole” (NEVER “sole and exclusive”) “non-exclusive”
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Licensing AgreementsLicensing Agreements Failure to create deal terms which properly
incentivize/motivate/protect Compensation strategy
Types of fees, royalties and paymentsRoyalty obligations based upon what?Currency conversion
“Duty to Exploit” obligationsSilence?“Best efforts”?“Reasonable commercial efforts”?Particular milestones?Subjective/objective criteria?
Limitation of Liability provisions
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Licensing AgreementsLicensing Agreements
Failure to consider term/termination Be clear as to start date and termination date Be clear on when obligations to make
financial payments terminateU.S. vs. Canada
Patents vs. know-how
Who gets what on termination? When can the agreement be terminated? What rights continue post-termination?
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Agreements GenerallyAgreements Generally
Blind reliance on precedents Failure to draft the first draft Failure to include all deal terms
Failure to make sure that your advisor truly understands what you want from the deal
Failure to consider the Choice of Law The law may override your intentions
Failure to consider implications when a provision changes A Rubik's cube!
Failure to distinguish between a regular “contract” and a “strategic alliance”
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Privacy LawsPrivacy Laws
Failure to understand the implications of privacy laws to the collection of “personal information” Establish the proper policies and
practices Plan for the ability to share and/or
transfer such personal information in the event of a sale of the business
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Jay A. LeftonJay A. Lefton
Ogilvy Renault LLPOgilvy Renault LLP
Suite 3800 – 200 Bay StreetSuite 3800 – 200 Bay Street
Royal Bank Plaza, South TowerRoyal Bank Plaza, South Tower
Toronto, Ontario, Canada M5J 2Z4Toronto, Ontario, Canada M5J 2Z4
416.216.4018 (o)
416.998.1818 (c)