INTELLECTUAL PROPERTY (IP) DUE DILIGENCE GOPALAN DEEPAK SRINIWAS K & S PARTNERS INTELLECTUAL PROPERTY ATTORNEYS September 26, 2009.

INTELLECTUAL PROPERTY (IP) DUE DILIGENCE

GOPALAN DEEPAK SRINIWAS K & S PARTNERS

INTELLECTUAL PROPERTY ATTORNEYSSeptember 26, 2009

Overview

•IP Due Diligence•Patent •Trademarks

IP Due Diligence and its Objectives

IP Due diligence is about identifying, assessing and minimizing IP risk

Addresses freedom to operate and exclusivity

The target company’s ownership and clear title to IP

Reduces risks of inaccurate acquisition Allows acquirer a more negotiating room Deeper insight into the target’s liabilities

Due Diligence from Buyer’s Perspective

Does target company have any IP problems?– Confirm what you are getting (IP audit)– Is there anything affecting the target’s title in or

enforceability of the IP?– What third-party rights affect the target’s IP?– Does anything affect the value of target’s IP?

Due diligence analysis allows buyer to:– Draft transaction documents appropriately– Restructure deal– Re-negotiate price– Back out of deal

IP Assets

IP assets in transactional due diligence: PATENTS DESIGNS COPYRIGHT TRADEMARKS

What are Patents? Patent-

An industrially useful invention; Which is new and not part of the public

domain; Confers upon the patentee monopoly in

the use of the invention for a fixed period;

Protects the workable idea and the concept of an industrially useful invention.

Patent

Freedom to Operate (FTO) Can I market my product?

Patent

Freedom to operate study: why? Avoid being attacked for infringement by one

or more competitors Identify necessary licenses

Freedom to operate study: when? Before starting a new development Just before going to market: usually too late

Patent Freedom to operate study: what?

Granted and valid patents Patent applications

Freedom to operate study: how? Extensive search Look for broad patents Patent family and validity searches Carefully analyse patent claims “Old” patents are disregarded (> 20 years)

Patent

Freedom to operate study: result

One or more patent families with legal status, time and geographical limits of each patent

Identification of possible infringements Identification of possible licensors Risk assessment

Patent

Freedom to operate study: actions

+ continue the development as planned

+/- modify the solution

+/- accept the risks

- negotiate licenses

- abandon, change direction

Case study

Kirat Plastics Vs Cho et al. (US5,572,370)

Vs

Case study

Design Patents of Kirat Plastics

Industrial Designs

Designs-

Protects the external aesthetic / ornamental appearance or characteristics of a product

Judged solely by the eye of the observer

Case study Plaintiff- SAMSONITE, an US company

manufactured & sold suit cases in India Distinctive features: wheel, extendible

handle, built-in trolley, leather trims with stitches, surface finish, design unique: ‘Samsonite System-4’

No design registered Claimed copyright in the product, its

drawings = artistic work, trade dress/passing off etc

Case study

Defendant - Vijay Sales, manufactured & sold

‘ODYSSEY 700 GLX’

The suit case of Defendant similar to that of Plaintiff in

having dark green tan leather band, inside similar, etc Plaintiff has no proprietary rights to get up,

appearance, features of the products- no evidence from public that they identify this product with its shape, appearance, no distinctive features: Plaintiff admit that public recognition is by brand name ‘Samsonite’

Case Study

Samsonite Vs VIP

What is a Trademark? is a word, e.g. DABUR, REEBOK, KODAK, PHILIPS,

TITAN, LEHAR, LAYS, LIFEBUOY, NIRMA

device, e.g. star device, of STAR TV

sign, e.g. Calvin Klein symbol capable of graphic representation or alphabet or numerals (555) or a combination of the above (INCLUDES PACKAGING LAYOUT/GETUP/COLOUR SCHEME)

indicates the origin of goods and services distinguishes the same from those of others

What is a Trademark? Colours- Popular and practical; overcome language barriers

Shape of Goods/3D marks- Total image of a product and may include its size, shape, colour, texture

Case Study

1998: Vickers Plc decides to sell Rolls Royce Motor Cars Ltd.

Two bidders - BMW: Manufacturer

& supplier of engines & other components for Rolls Royce & Bentley Cars

- Volkswagen (VW)

Case study

March 30, 1998: BMW offers US$ 560 million

May 7, 1998: VW offers US$ 710 millionJuly 3, 1998: VW’s offer revised to US$

790 million

NO DUE DILIGENCE DONE

Case study

VW believed the transaction gave it rights in: An aged manufacturing plant at

Crewe; 2,400 skilled workers; Bentley Trade Mark; Rolls-Royce Trade Mark; Continuous access to engine

supply

Case study

July 9, 1998: Rolls Royce PLC, the jet engine maker, puts VW on notice of its ownership of the Rolls Royce Trade Mark

since 1973; its licence of the Rolls Royce mark to Rolls Royce

Motor Cars Ltd., subject to a clause “licence would terminate if Rolls Royce Motor Cars ceased to be UK-owned”;

Post acquisition by VW, a non-UK buyer, reversion of the Rolls Royce mark to Rolls Royce PLC.

Case study

July 9, 1998: BMW having paid Rolls Royce PLC £ 40 million for rights of licensed use to the Rolls Royce name & mark, puts VW on notice of:

its newly acquired rights in the Rolls Royce marks;

intention to terminate the engine supply agreement after 12 months.

Case study

Post Jan 01, 2003: BMW to own rights

to manufacture Rolls Royce cars and an exclusive right to use the Rolls Royce mark.

BMW ENDED UP GETTING THE MOSTVALUABLE PROPERTY IN THE DEAL

CONCLUSION

A proper IP due diligence conducted in good faith is an indispensable key to achieving the objectives of the seller and purchaser in the most cost effective and time bound fashion.

Thank you

Questions?