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?