1October 20, 2009

A CORPORATE REORGANIZATION?

DON’T LEAVE YOUR IP LICENSES BEHIND

Robert SeitterChris Dervishian

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A CORPORATE REORGANIZATION?DON’T LEAVE YOUR IP LICENSES BEHIND

AGENDAI. When are Licenses Transferable?

II. Are Licenses Transferred in a Merger?

III. Steering Clear of Transfer Restrictions

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When Are Licenses Transferable?

General Rule Licensors can freely assign a license agreement Licensor may assign monetary interest in a license

agreement

Possible Exceptions If licensor must perform “personal services” If Licensor must provide updates or improvements Applicable contract clause controls

First A Word About Licensors

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When Are Licenses Transferable?

State Law: Is a merger a transfer?

Federal Law: Is an IP license transferable?– Exclusive vs. Non-exclusive licenses– Patent/Copyright vs. Trademark licenses

Applicable Contract Clause Controls

Now the Licensee’s Position

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Are Licenses Transferred in a Merger? PPG v. Guardian

PPG Permaglass

Guardian(survivor)

2 Patentsnon-exclusive license, non-transferable

Dec. 1969Merger

9 Patents, exclusive licenseright of sublicense

Jan 1964 Cross-License Agreement

9 Patents, Reserved non-exlusive, non-trasnferable license for

benefit and use of Permaglass

Forward Merger - Patent

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Are Licenses Transferred in a Merger? PPG v. Guardian

ASSIGNABILITY“This Agreement and the license granted by PPG to PERMAGLASS hereunder shall be personal to PERMAGLASS and non-assignable except with the consent of PPG first obtained in writing.”

Ohio Merger StatuteAll property deemed to be transferred to and vested in surviving or new corporation.

6th Circuit“A transfer is no less a transfer because it takes place by operation of law rather than by a particular act of the parties.”

Contrast to 9th Circuit -> each company to a merger continues as an entity in new company.

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Are Licenses Transferred in a Merger? Cincom v. Novelis

Cincom

Alcan Ohio

Alcan Products Corp.

Alcan Primary Products Corp.

Alcan Corporation

July 1989License to Use Software

Alcan Fabrication Corp.

Novelis

Alcan Texas

July 30, 2003Merged into Corporate Affiliate

Alcan Ohio did not survive

May 28, 2003Name Change

July 31, 2003Merged into Texas Subsidiaries

Jan 2005Name Change

Forward Merger - Copyright

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License Terms- Non-exclusive- Non-transferable- Software only to be installed on listed computers

Non-determinative Facts Copyright license (PPG was patent) Software remained on system in Oswego, NY plant Internal restructuring among affiliates

Are Licenses Transferred in a Merger? Cincom v. Novelis

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Are Licenses Transferred in a Merger? Cincom v. Novelis

Ohio Merger StatuteAll property “vested in surviving or new corporation without further act or deed.” (Term “transfer” removed from prior statute.)

6th CircuitQuoting PPG - “A transfer is no less a transfer because it takes place by operation of law rather than by a particular act of the parties.”

“The deletion of the word transferred does not change [the] analysis.”

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Are Licenses Transferred in a Merger? Cincom v. Novelis

Consequences of Failed Transfer No License -> Copyright Infringement Injunction & Actual Damages

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Are Licenses Transferred in a Merger? SQL Solutions v. Oracle

Reverse Triangle Merger - Copyright

SybaseSub, Inc.(shell corp.)

Jan 1990Merger

Sybase, Inc.(survives)

Oracle

Dec 1987Non-exclusive licenseNot assignable

D&N Systems(survives)

(renamed SQL Solutions)

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Are Licenses Transferred in a Merger? SQL Solutions v. Oracle

Transfer?YES

Consequences of Failed Transfer–SQL Breached–Oracle was legally entitled to terminate

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Steer Clear of Transfer Restrictions

Pre-Merger Considerations

Law that governs the license agreement

Type of IP being licensed

Is the license exclusive or nonexclusive?

License Terms

Impact on Licensor

Bankruptcy

• Does the UCC apply?

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Assignment Clauses Freely Assignable/Transferable Assignable with sale of business Assignable to associated companies

– Assignable to an entity that controls, is controlled by, or is under common control with the licensor

Assignable with consent which shall not be unreasonably withheld

Steer Clear of Transfer Restrictions Contract Clauses/Solutions

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Restriction to Particular Computer/Location? Changing Computers/Location => Breach

Use after breach = IP Infringement

Solution -> Move/Change with writtennotice

Steer Clear of Transfer RestrictionsOne Division Combines With Another

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A CORPORATE REORGANIZATION?DON’T LEAVE YOUR IP LICENSES BEHIND

QUESTIONS?