“It is not an industry where you could expect there to be a lot of IP, but that was the topic that was keeping people at the table at 5am,” said Julie Van Nuffel, an associate in the Hong Kong office of Linklaters, who acted for the liquidators in the deal.
By that stage, Barclays Capital had bought the core US business of Lehman Brothers and, along with it, most of the failed bank’s IP. Nomura, which wanted to buy the Asia-Pacific business of Lehman Brothers, had to negotiate with Barclays Capital to make sure it had the right transitional services agreements and licences in place.
Negotiations had to be completed on a Sunday night so that the sale could be approved by a court on Monday morning, and parties found it difficult to agree on the IP and IT clauses, said Van Nuffel. “That was my first all-nighter,” she added.
Van Nuffel used the Lehman Brothers sale as an example of IP considerations in corporate transactions during a seminar in Hong Kong last week.
According to the lawyer, IP can be an issue in any corporate transaction, but is often not thought about until the deal is at an advanced stage.
She said that she has been involved in two private equity deals where IP has become a sticking point. In some cases, although the employees of a target company usually have clauses in their contracts stating that the IP that they create belongs to the company, the owners of the company have rarely made similar commitments. If the owners are uncooperative, then it can create big problems for investors.
“When you invest in a company like that, you are not investing in much,” she said.
To resolve this situation, lawyers can create a perpetual licence between the former owners and the company. However, given that these kinds of licences are not recognised in some jurisdictions, Van Nuffel said that she would recommend a licence with a specific duration.
It is vital for companies to identify what IP they own at an early stage, she added. This seemingly simple step can often delay transactions because small businesses have not worked out what IP they own, while, in multinational companies, the head office doesn’t know what IP is being created by regional offices.
“It is amazing to see how many companies do not know what IP they have,” she said.
Once assets have been correctly identified, there are a number of steps that need to be taken to safeguard IP during corporate transactions. These include making sure that contracts have good IP clauses that, for joint ventures, take into account what IP will be created; for larger companies, having intra-company agreements that deal with IP; and ensuring that patent and trade mark registrations are valid and are in the name of the correct company.
