Lawyer Monthly Magazine - April 2019 Edition

60 First Choice Lawyers www. lawyer-monthly .com APR 2019 Intellectual Property What You Need to Know about Purchasing an Intellectual Property Portfolio In this insightful feature, Amit Aswal tells us what we need to know when considering purchasing an intellectual property portfolio. What should you be wary of? Amit reveals all. “ The due diligence should not only reflect the nature and legal status of intellectual assets, but it must also be conclusive of fact findings which could influence transactional negotiations like purchase cost and royalty calculations. ” How would you advise clients when they are exploring the possible idea of purchasing an already existing intellectual property portfolio? With evolving business dynamics, intellectual property owners are often under business compulsion to purchase portfolios. Most of such portfolios are spread over various jurisdictions covering intellectual protection in several continents, making intellectual property strategic consultancies tasks an extremely demanding one. In matters of intellectual property transactions, including purchasing, performing an informative and conclusive due diligence is of utmost importance. The due diligence should not only reflect the nature and legal status of intellectual assets, but it must also be conclusive of fact findings which could influence transactional negotiations like purchase cost and royalty calculations. Obviously, not all assets in the intellectual property portfolio would align with purchaser’s business strategies, thus the due diligence should result in segregation of assets in order of relevancy. It is important to weigh such segregation in terms of offensive and defensive business strategies, while ensuring there is an absence of similar technologies that may either be in development, on the market or in the likelihood of being invented and designed. Often, post purchase, intellectual property owners face situations wherein with the due passage of time, the original objective of purchase shifts from defensive to offensive needs. Thus, it is critical to ascertain non-expired terms and enforceability of intellectual assets. It is equally important to weigh the intellectual assets on parameters concerning freedom to operate (FTO) i.e. to ensure that there are no other restrictions on use of the assets and that no third parties’ rights are involved; basically, the implementation of a purchased intellectual property portfolio should not result in the risk of infringement. Alongside, an analysis in terms of the intellectual, technological and economic landscape of a competitors’ intellectual portfolio must be done to ascertain strategic benefits and worthiness of the purchase. Alternatively, as a prudent measure, intellectual property assets can be bought by the acquisition of business owning the assets. Once acquired, immediately arrange to record the transfer in ownership with various intellectual property offices. Moreover, the due diligence must be done under the supervision of an experienced attorney who has the knowledge and experience in contract (purchase/ licence agreement) drafting, monitoring and analysing possible implications drawn out from similar transactions. Can you share more on what the client should be wary of? The clients must be conscious of a poorly drafted and executed purchase agreement. An agreement silent on post transactional liabilities and risks can cost more than the original price of the portfolio purchase. The agreement should act as a controlling and defining factor for possible future repercussions/breach and benefits anticipated from an intellectual property portfolio purchase, besides ensuring non-divergence in matters of infringement for at least a certain duration post purchase. Obviously, the agreement should be extremely stringent on compliance, enforcement, infringement and exclusivity. Of course,otherparametersforthe agreement would be subject to the nature of the purchase being mutually exclusive or non-exclusive. Agreement drafting should begin during initial conversations of a possible transaction, thereby ensuring confidentiality and compliance issues during and post closure of purchase. Moreover, one single agreement may not cover every dimension and scope of a portfolio purchase. Therefore, while formulating a portfolio of purchase agreements, such terms and conditions should be incorporated which ensure coverage and validity of purchase over multiple countries. Particular emphasis should be placed on the wording and scope of agreement terms covering instances of cross border enforceability, country specific contract governing laws and procedures and site of alternative dispute resolution centres and such other compensatory channels. In specific, a particular agreement must be executed relating to payment of