Conforming the Provisions to Reflect the Due Diligence and the Deal

AuthorLeah Brownlee
I. Introduction
Intellectual property is a deal driver. Whether the deal is a
license, asset purchase, or stock purchase, the intellectual prop-
erty held by a company is often the most valuable asset of that
company, and it is likely a key component to the future success
of the target company or business unit. In the context of a deal in
which intellectual property is acquired, several terms that dene
the scope and breadth of the intellectual property must be dened.
The terms needed will vary depending on the type of product the
intellectual property covers and how close the product is to the
commercial market. For instance, in the life sciences industry,
a patent may be licensed that would cover a future product that
has not yet been identied, or it may cover a specic compound
or device that has received approval for sale from the U.S. Food
and Drug Administration, or anywhere in between. The deni-
tions are used primarily within the conveyance section, in the
case of a license or asset purchase agreement, and within the rep-
resentations and warranties sections of all types of transaction
Conforming the Provisions
to Reflect the Due
Diligence and the Deal
By Leah Brownlee*
* I would like to thank my daughter for all of her patience and understanding.
630 CHAPTER 16
documents. In the representations and warranties section, there
will most likely be several subsections that address intellectual
property specically, with the requirement that schedules of dis-
closures (disclosure schedules) be created to accompany and sup-
plement the text in these sections of the transaction document.
II. Denitions
Dened terms are used throughout the transaction document,
but dened terms specic to intellectual property have certain
key uses, such as the language of the license grant in a licens-
ing transaction or the listing of assets purchased in an asset pur-
chase transaction. This section discusses and gives examples of
dened terms specic to intellectual property (IP). In addition, for
the purposes of the examples in this chapter, the following terms
are used throughout as dened here.
Agreement means the transaction document in which the
provisions would be included, whether that be a license agree-
ment, asset or stock purchase agreement, or other type of convey-
ance document. Company means the transferor of the intellectual
property under the Agreement.
An exemplar of a license grant is shown here with certain
terms bolded. Each of these terms is dened in this Section II and
discussed in this chapter, and throughout this chapter, when used
in examples, each of the discussed terms specic to intellectual
property is bolded.
Example License Grant Language
Subject to the terms and conditions of this Agreement,
the Company hereby grants Licensor an [exclusive]
license under the Intellectual Property to: (a)make,
have made, develop, import, export, distribute, market,
promote, offer for sale, and sell Products; (b) prac-
tice any method, process, or procedure within the
Intellectual Property; and (c) otherwise exploit the
Definitions 631
Intellectual Technology, each within the Territory
for use within the Field.
Dened terms used here are:
• Field. The definition of field sets forth the commercial
area or field of use in which the intellectual property may
be made, used, or sold by the licensor of the technology.
Two examples of a specific definition of field are:
For a pharmaceutical drug product, Field means
For a software product, Field means mobile computer
devices and/or communication devices, and the
process(es) employed to manufacture such devices.”
Generally, the term eld is used in the context of a license
agreement. In the context of an asset purchase or stock purchase
transaction, all elds of use will be transferred to the purchaser,
and thus the term may not be used in the related transaction
The information that is gathered during due diligence will
indicate what elds of use the product is being developed for, and
this knowledge will be useful for drafting the denition in the
event that some, but not all, elds of use of the technology are
transferred pursuant to the transaction documents.
• Territory. This term is also generally used in the context
of a licensing agreement. The term is defined to identify
the countries or areas (territories) in the world for which
rights to the technology at issue such as, rights to make,
use, sell, and/or import products and/or services covered
by the intellectual property—to the extent such rights
exist in those countries—are being transferred pursuant
to the Agreement. Two examples of a specific definition of
territory are:
Territory means worldwide,” in a context where the
purchaser or licensor negotiates for rights in the tech-
nology that are not geographically limited.

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