1. KEY INTELLECTUAL PROPERTY AND
INFORMATION TECHNOLOGY
ISSUES IN AN M&A TRANSACTION
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2. The Backdrop
• Increasingly, the value of companies, especially tech
companies, revolve around intangibles and goodwill,
ultimately expressed in the strength of their IP: Their
trademarks, patents, copyrights, trade secrets/know‐
how, software, and domain names
• Ubiquitous use and reliance on Internet, IT, social media
and other technologies have increased the stakes
• Global markets for in‐provision of services and sale and
out‐licensing of products and services complicate matters
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3. Some IP Basics
• IP rights extend one country at a time and are
not global or multinational
• Paying a contractor who developed IP for you
does not transfer ownership of the IP
• Owning a patent does not give you the right to
sell a product covered by that patent
• Domain names are not technically IP but are
treated generally as such in the M&A process
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4. IP/IT Due Diligence
• Does Target own the IP it thinks it owns?
• Does Target have the IP license rights it thinks
it has (and are they transferable)?
• Has Target taken appropriate steps to register
its IP?
• Is Target infringing any third‐party IP?
• Is Target conducting its business in compliance
with information privacy laws?
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5. Chain of Title
• Who originally created/developed/invented
the work/invention?
• Is there a written assignment of IP?
• What about discrete components (art in a
game…sound in a multimedia work…etc.)?
• Who is listed as owner in registered IP? Have
appropriate assignments been filed?
• Also track new versions/releases/updates
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6. Contract/License Issues
• Basic but important questions:
– Has the agreement expired?
– Is the scope of license sufficient?
• Nontransferability clauses are critical
– Clauses sometimes prohibit not only assignment
but also “change of control”
• Does the license allow use by “affiliated companies”?
How will the sale of one affiliated company affect
license rights of remaining affiliated companies?
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7. Software Issues
• Use of Open Source must be carefully examined
– Consider use of commercial scanning tools and
services
• Source code licensing and escrow arrangements will be
examined closely
• Review use of encryption and export controls
• Proprietary software licenses are often non‐assignable
• Internally used software and IT systems should be
maintained properly, properly secured, and virus‐free as
much as possible

8. America Invents Act
• Fundamental Shift in American Patent System
• First to File instead of First to Invent
• 9‐month Post‐Grant Review Period
• Prior Use defense expanded from business
methods to other areas
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9. Privacy Issues
• Various US federal privacy acts (COPPA, HIPAA) have recently
been updated, and reviews for compliance are in order
• States have been active in passing identity theft acts
• Massachusetts requires a written information security
program if you maintain personal information re: a MA
resident
• EU and other countries have various stricter requirements on
handling of personal info
• Are you in compliance with your published privacy policy?
Will it conflict with the acquiror’s policy?
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10. Concluding Thoughts
• Consider a pre‐acquisition IP audit to address issues
before the buyer forces you to (which may lead to a
lower sales price)
• Measure your key IP against your key products and
services – do you have a good match?
• Don’t forget to transfer IP initially held by founders
to the company
• Use appropriate care in entering into license,
development, and distribution agreements
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