IP Tech Knowledgy

When purchasing a business that includes intellectual property, be sure the seller’s representations and warranties provide assurances that the buyer can operate risk-free.

A buyer should affirm that the acquired IP is not infringing on the rights of third parties, and all relevant inventors, creators, developers and marketers have assigned or licensed their rights in the IP to the seller. The reps and warranties should state that: the seller owns or has licenses for, and is transferring all of the IP necessary to operate its business; there are no liens or encumbrances on the IP, or threatened or actual lawsuits against the IP; all registrations are valid; and the IP assets being sold are all that are necessary for the current operation of business. The seller should provide all agreements that give or receive intellectual property rights to the seller (as assignments or licenses), and the seller should promise the documents are still valid and not in breach by any party.

If assets include patent or trademark applications, the seller should be sure that the representations and warranties reflect the current status of the applications, in case there has been a new office action impairing the assets.  If trade secrets are part of the IP assets, the seller should confirm that all reasonable steps under the circumstances have been taken to protect the confidentiality of the trade secrets. The seller should also state that it has complied with all appropriate laws regarding social media accounts, data and personal information acquisition, storage and usage.

The negotiating strength of the parties may impact whether representations are made absolutely or only to the extent of what the seller actually knows about, or not made at all. The same reps and warranties apply whether the buyer is acquiring controlling equity interests in the seller or is purchasing some or all of the seller’s assets.

Ned T. Himmelrich
410-576-4171 • nhimmelrich@gfrlaw.com