IP Licenses May Not Transfer in Merger

"Lawyers who only occasionally work on technology company acquisitions sometimes incorrectly assume that the seller's intellectual property (IP) licenses vest in the buyer.

Typically, state merger statutes provide that the seller's rights and obligations under its contracts are automatically assumed by the surviving entity at closing, and lawyers and theirclients may believe that these laws apply without question to the seller's license agreements. However, principles of equity and federal IP law and policy may override state merger laws, and the surviving entity in a merger may not have the right to exploit the seller's licenses.

The form of the merger and the terms of the license agreements will influence the outcome. Deal lawyers also have to be aware that if the surviving company competes directly with the company that granted the license, there may be snags in getting the licenses to go with the deal."

Read more in this Jones Day publication.Technorati Tags: , , , ,