1. The Role of an IP Attorney in a Deal
AIPLA
Corporate Committee
The Role of an IP Attorney in a Deal
Lacy L Kolo Ph.D.
Partner, IP & Technology Group

2. IP Due Diligence in a Deal
Merger & Acquisition Committee Year in a Deal lecture series on topics that come up in IP due diligence
Goal: Equip you with information to help with issue spotting, conflict resolution and ways to better support your team
Intangible assets are part of every deal, and lack of or poorly conducted due diligence can materially effect the outcome of the deal
Why conduct IP due diligence?
Discover potential problems
Assess material risks
See how the risk impacts the deal
M&A Committee is dedicated to providing our members with knowledge about this specialized transactional practice
Lecture series covers the large topics that an IP attorney should know when involved in a transaction

3. Topics covered today
Scope: The role an IP attorney plays varies by scope and importance of IP to a deal
Is IP is a deal driver?
Is IP a small component of the deal?
Communication: Efficiently and effectively get your message across
Staying out of the weeds
Communicating issues to others effectively – including those who do not know IP
Privilege: Maintaining privilege for analyses and communications regarding the deal

4. IP Scope
Before you start, ask the 5 W’s:
WHO
WHAT
WHEN
WHERE
WHY

5. Scope: ask WHAT WHAT are the business goals?
Employees and their know-how
Contracts and relationships (supply chain, distribution)
Patented technology
Reputation in the marketplace
Non-patent IP related to technology and/or services
Goal: Tease out if IP is a core component of the deal, or ancillary to the deal

6. Scope: ask WHAT WHAT is the structure of the deal?
Stock purchase, asset purchase, JDA, other?
Stock purchase has different concerns from an asset purchase
Example: Asset purchase - must list all IP, including unregistered IP, on schedule
Stock purchase - can just put registered IP on a schedule
WHAT IP is involved in the deal?
Registered IP:
Patents Trademarks Copyrights
Unregistered IP:
Inventions Trademarks Copyrights
Trade Secrets Software Contracts
Media rights Data Rights

7. Asking WHAT - applied Scenario 1:
Business goal is to acquire a business unit of a company with technology covered by patents and trade secrets. The company is well-known in the industry by its trademarks.
Asset deal, so need to make sure all unregistered and registered IP is investigated and listed on the schedules
Need to find out if trademarks are part of the deal (purchase or license)
Scenario 2:
Business goal is to acquire a new company run by former Fortune 100 company employees that your leadership believes are creating the next Fortune 100 company competitor.
Stock purchase, so many not need to list all unregistered IP
Employee invention needs to be investigated

8. Scope: Ask WHY WHY ask WHY?
Helps you understand what leaders expect your role to be
Helps shape scope – if leaders expect a deep dive into the IP, then you should budget time and review accordingly
WHY did the business leaders bring you in on the deal?
Are they looking for assistance with just confirming the high level issues, such as ownership, chain of title, checking liens, status of IP?
Are they looking for assistance with issue spotting on all IP issues?
Are they looking for confirmation the IP covering the technology is valid and enforceable?

9. Communication: ask WHO and WHEN
Why ask WHO and WHEN? Asking WHO and WHEN helps prevent ineffective communication, which can lead to disruption, confusion and uncertainty
WHO
WHO is on the team
WHO do you report to
WHO is available for responding to questions on your side
WHO is available for responding to questions on the other side, and can they communicate directly with you
WHEN
WHEN are the internal deadlines
WHEN are reports generated and pushed out to leaders
WHEN is the tentative close
Are there any schedule limitations for key players in the deal

10. Your resources: asking WHERE
Why ask WHERE? Helps you discover what document resources are available to you, and if there are other resources that you do not have access to.
WHERE
WHERE documents located?
WHERE do document requests go to?
Are there any other documents that you are not seeing?
Practice Tip: Sometimes leaders try to limit access to data room to keep people out of the weeds, and only give them limited information.
Find out if you are seeing the full data room.
Give your leader a checklist of questions or document requests. Offer to run through the list and explain why you feel those questions or requests
are important.

11. Communication: apply the 5Ws
Communication golden rules
Communicate frequently
Communicate consistently
Communicate honestly
Depending on size of transaction and scope, may want to develop and regularly update a memo discussing the status of IP due diligence review, status, and outstanding questions
Once you have confirmed your chain of communication, stick with it
Bad news does not smell better with time!
Report out new (bad and good) quickly and clearly

12. Communication: apply the 5Ws
Translate into plain English for the non-IP persons
For example, compare:
Other examples:
“patent may be unenforceable due to possible inequitable conduct”
“Alice motion”
Prior art
Documents or publications that were available to the public before the patent was filed
Likely invalid under 102
The patent is likely invalid because the invention claimed in the patent was publicly known before the patent was filed

13. Privileged Information
Do you want to access to another party’s attorney-client privileged information, or allow your privileged information to be reviewed by the other side?
Pros and cons:
May save the reviewer significant time and money
Information may highlight nuances of an issue that the reviewer may not be as familiar with
Disclosure of privileged information to a third-party will result in a waiver of the attorney-client privilege, whether or not the transaction is consummated

14. Privileged Information
How do you handle privileged material?
Ask the party with the privileged information to give non-privileged summaries based on publicly known or non-privileged information
Handle risk in the reps and warranties
Enter into a common interest agreement

15. Privilege: Common Interest Agreement
Idea: disclosure of privileged information to a third party will not result in a waiver if the third party has sufficient community of legal interest with the disclosing party
Question: Can the parties enter into an enforceable common interest agreement that will protect the privilege if challenged?
Answer: It depends
Have to show that the asserted interest is legal and not solely commercial. In other words, it is highly dependent upon the facts and circumstances
Highly dependent on the jurisdiction

16. Privilege: Common Interest Agreement
Some jurisdictions are more favorable to common interest agreements
Delaware
New York
Other jurisdictions, outcome is more uncertain
Schaeffler v. U.S., 806 F.3d 34 (2d Cir. 2015)
Schaeffler Group entered into an €11 billion loan agreement with a consortium of banks to finance an offer for Continental AG’s stock. The Schaeffler Group shared its attorney-client privileged and work product materials on tax issues and the potential for IRA challenge with the bank consortium under a confidentiality agreement
IRS issued a subpoena, but the Schaeffler Group withheld those privileged documents on the basis of the common interest privilege and work product doctrine
Second circuit: Privilege was NOT waived - this was a “legal problem albeit with commercial consequences”

17. Privilege: Common Interest Agreement
Practice tips
Vet common interest agreement carefully, and ensure the agreement extends obligations into perpetuity
Be cautious – assume disclosure of privileged information will result in privilege waiver
Only disclose information where risk of privilege waiver is clearly outweighed by the need for efficiency or cost-savings
Identify each privileged document to be disclosed
If possible, see what non-privileged information can be given to help the reviewer conduct their own legal analysis
If leaders decide disclosure is necessary, delay disclosure to end of negotiations (deal can fall through!) and only disclose among attorneys, not among non-attorneys
Supports the position that the privileged disclosure is for a common legal interest instead of a purely economic interest

18. Privilege: Does the privilege transfer?
Scenario: One company acquires another, does the attorney-client privilege transfer to the purchaser?
Fully acquires the company – yes
Acquisition of assets – it depends
Privilege can transfer to the purchaser if they acquire enough of the prior company, or if common interest doctrine can be applied
Very fact specific

19. Conclusion
Always ask the 5 Ws to find out the scope of the deal and your role
Communicate frequently, consistently, honestly, and in plain English
Watch for privilege waiver

20. Questions?