Closing: What Happens Next?

• Author: Randi Karpinia
• Pages: 681-724

681

I. Introduction

The challenge for the responsible intellectual property attorney,

once the merger or acquisition is completed, is the seamless inte-

gration of the new and existing intellectual property portfolios.

Different systems, processes, and people, coupled with potential

gaps in historical records, documentation, and knowledge, can

create obstructions to smooth integration. Whether a small or

large transaction, the post-closing activities ensure maximized

growth and benet from the new ownership of acquired technolo-

gies, intellectual property, and technological talent. Due diligence

at posttransaction closing assures the highest value of intellectual

property assets, attributes, and advantages. This chapter focuses

on postacquisition management of intellectual property port-

folios, and includes practice tips relating to people, ownership,

portfolio, data management, documentation and recordkeeping,

licensing, and brand management.

Chapter

Closing: What

HappensNext?

By Randi Karpinia

18

682 CHAPTER 18

II. Acquiring Intellectual Property Portfolios

You are an experienced and talented in-house intellectual prop-

erty attorney at a major corporation, and today is a good day.

Your patent application preparation backlog is large but manage-

able, with only a few bar date cases due in the next few months.

Your patent and trademark dockets are both under control. You

haven’t accrued any extensions of time this month. Your clients,

both technologists and business managers, are cooperative and

are cognizant of company processes. You’ve become a near expert

in the technologies within your assigned intellectual property

portfolio.

Then it happens. It could be a phone call, a knock at your

ofce door, or an email. No matter what the method, the mes-

sage is the same: your employer corporation just acquired a new

company, and you’ve been assigned to manage the integration

of the acquired intellectual property, including the patent, copy-

right, and trademark portfolios. Your well-controlled life is about

to be turned upside down. Using this chapter and the associated

appendices as a guideline, you can successfully manage the sur-

prises and challenges ahead.

III. Patent, Trademark, and Copyright Portfolios:

Understanding the Acquired Value

A. Ownership Verification

Typically, at the time of transaction close, the seller assigns,

transfers, conveys, and delivers all of its right, title, and interest

in and to the transferring intellectual property to the acquiring

party. It is therefore imperative to verify the right, title, and

interest of each acquired patent and trademark asset, preferably

prior to the close of the transaction. Ownership considerations

include missing assignments, incomplete chain of title, security

interests, litigation judgments, company buyouts, name changes,

ownership changes, and the like, and double conveyances

Patent, Trademark , and Copyright Portfolios: U nderstanding the Acquired Value 683

(whichcause the later conveyance to be moot). One caveat: In the

case of errors in an assignment, the intent of the parties controls,

making the error correctable. With so many potential unknowns,

it is imperative to coordinate with attorneys both within your

corporation and within the entity that previously managed the

acquired assets.

As intellectual property rights have become increasingly

valuable assets for many companies, it has become common for

commercial lenders to secure obligations of borrowers using as

collateral not only their tangible assets but also their intangible

intellectual property assets. In other words, the intellectual prop-

erty owner will pledge its patents, trademarks, and copyrights as

collateral for a bank loan. A security interest is not a present own-

ership interest; however, it is an interest superior to subsequent

assignment and security interests. The intellectual property

owner can still assign its rights, but until a formal release is exe-

cuted, any subsequent purchaser takes ownership subject to the

security interest. The interest holder may not systematically pro-

vide a release when the terms of the loan are met, leaving a lin-

gering defect on the title. Therefore, prior to acquiring intellectual

property assets, identify any such security interest agreements,

assume that the obligations of the security agreement have been

met, and request an executed release.

For proper title, there must be a complete chain of documents

from the original owner(s) (e.g., the inventors in the case of a

patent asset) to the present owner. Following the chain of own-

ership can be complicated. For example, one or more parties in

a chain of title may be dissolved or otherwise defunct, in which

case identication of the successors in interest would be required.

There may also be missing link(s) in the chain due to changes of

corporate entity such as a merger. When one company mergers

into another company, with only the latter surviving thereafter,

there is a change of ownership of the intellectual property. As the

acquiring owner, your company will need documentation identify-

ing this ownership change to establish a clean path to its owner-

ship. Another example of an unclear chain of title resultsfrom