1 October 20, 2009 A CORPORATE REORGANIZATION? DON’T LEAVE YOUR IP LICENSES BEHIND Robert Seitter Chris Dervishian

2 A CORPORATE REORGANIZATION? DON’T LEAVE YOUR IP LICENSES BEHIND AGENDA I. When are Licenses Transferable? II. Are Licenses Transferred in a Merger? III. Steering Clear of Transfer Restrictions

3 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

4 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

5 Are Licenses Transferred in a Merger? PPG v. Guardian Forward Merger - Patent

6 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 Statute All property deemed to be transferred to and vested in surviving or new corporation.  6 th 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 9 th Circuit -> each company to a merger continues as an entity in new company.

7 Are Licenses Transferred in a Merger? Cincom v. Novelis Forward Merger - Copyright

8 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

9  Ohio Merger Statute All property “vested in surviving or new corporation without further act or deed.” (Term “transfer” removed from prior statute.)  6 th Circuit Quoting 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.”

10 Are Licenses Transferred in a Merger? Cincom v. Novelis Consequences of Failed Transfer  No License -> Copyright Infringement  Injunction & Actual Damages

11 Are Licenses Transferred in a Merger? SQL Solutions v. Oracle Reverse Triangle Merger - Copyright

12 Are Licenses Transferred in a Merger? SQL Solutions v. Oracle  Transfer? YES  Consequences of Failed Transfer –SQL Breached –Oracle was legally entitled to terminate

13 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?

14 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

15 Restriction to Particular Computer/Location?  Changing Computers/Location => Breach  Use after breach = IP Infringement Solution -> Move/Change with written notice Steer Clear of Transfer Restrictions One Division Combines With Another

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