M&A AND AN IMPORTANT STEP ABOUT LEGAL ASSESSMENT INTELLECTUAL PROPERTY

Intellectual property rights include copyrights and related rights, trademarks, patents, rights to industrial designs, utility solutions, layout designs of semiconductor integrated circuits, commonly regarded as a companys intangible assets. However, these intangible assets are becoming more and more "tangible" now, they are important to the buyers consideration as well as the success of the entire corporate merger and acquisition (M&A) transaction .

According to the authorities, in the integration trend, performing legal due diligence related to the assets and intellectual property of the target company is especially important in a merger and acquisition transaction. import. Indeed, through the due diligence process, the buyer can discover potential risks related to the intellectual property of the target company, assist in asset valuation, brand valuation. as well as the value of the transaction in general.

Unfortunately, in many deals buyers devote limited or formal attention to the legal due diligence of intellectual property assets. Instead, they focus primarily on issues related to the capital structure, asset ownership, and debt of the target company.
An intellectual property due diligence report will cover and analyze many related issues. However, this article only outlines a few of the most important common problems of the due diligence process.

Pre-assessment work

Intent to conduct due diligence is usually mentioned initially in the form of an Intent or an Open Letter, a Memorandum of Understanding or terms sheet, before the parties involved in the negotiation process and to sign contracts for merger and acquisition transactions.
In the above documents or agreements, the parties may make certain requests regarding intellectual property rights as a prerequisite for completing the agreement.
In addition, the purchaser and the target company should also sign a confidentiality agreement for the transfer of important information related to the enterprises intellectual property rights.

Determination of ownership of intellectual property
When conducting a legal due diligence on IP assets, consultants will verify ownership of the target company over existing and identifiable IP assets. In which, for intellectual property rights established on a registration basis, the assessor will check against the issued qualifications (for example, trademark registration certificate if the intellectual property is mark or industrial design registration certificate if the target company owns the intellectual property that is an industrial design ...). In the event that the enterprises intellectual property belongs to the category of intellectual property that does not require or cannot apply for a protection title (for example, trade secrets or copyrights and related rights), the buyer should check check that the target company meets the statutory requirements to be considered the owner of these intellectual property objects.

In the process of determining ownership of common intellectual property objects, the appraisal party should pay attention to the industrial relations within the target company. In it, the parties should note that Vietnam is a country with a strong tendency to protect workers. Although the current Intellectual Property Law states that the owner of copyright in works created by an employee will only belong to the employer, unless the parties otherwise agree, the employee in fact still owns moral rights to the works they create (for example, the right to name the work, the right to protect the integrity of the work ...).
For tech companies, the appraisal performers also need to check whether the target companys products or services (such as websites, software, online platforms ...) are written. , tested and developed by current or former employees, are third-party developers made based on written agreements under which all intellectual property rights relate to the property. Will the product or service be delivered to the target company.

In addition, the buyer should also ensure that, after acquiring the target company, this party will not need any additional consent, assignment or waiver from any third party in order to use or transfer intellectual property rights associated with company products and services.

Identify potential disputes

In Vietnam, community awareness of respect and enforcement of intellectual property rights is generally limited. For that reason, the risk of potential disputes regarding intellectual property is quite high and difficult to determine. Therefore, prior to an acquisition of the target company, the purchaser should ensure that the intellectual property assets of the target company are not and will not be subject to a dispute or infringement of intellectual property rights. third party intelligence. A typical example might be a target company using certain intellectual property under a license agreement with restricted capital transfers of members or shareholders in the target company. In this situation, the transfer of capital or shares to a buyer may cause the target company or its capital contributors or shareholders to become involved in disputes under the licensing agreement. wisdom mentioned above.

In most transactions, the seller must ensure that the target companys products or services have not and currently do not infringe any third party rights or interests in relation to intellectual property. has never received any request from a third party regarding the acquisition of a license to use any intellectual property

Compliance with contractual obligations

Obligations related to intellectual property rights are one of the common obligations commonly provided in current commercial contracts, such as licensing agreements, franchise agreements, and co-distribution, agency contract ... Normally, a party to a contract (usually the owner of the intellectual property related to the respective product or service of the contract) will set out one or one restrictions to the other party regarding the use of such intellectual property rights (scope of work used, scope of territory ...), or even the right to register ownership objects New intelligence to form in the future (especially common in franchise contracts).

In a merger and acquisition transaction, if the target company is bound by too many of the above restrictions, especially intellectual assets that are critical to the target companys operations, the acquisition value will be significantly affected. Consequently, through legal due diligence on intellectual property rights, the buyers consultants will check whether the target company is bound and in compliance with its obligations under these agreements. not to give the right advice for the transaction.

Regulations of foreign laws

In a cross-border merger and acquisition transaction, the parties must pay close attention to the intellectual property of the other party. The reason is because intellectual property laws reflect a very high territorial nature. Each country will have different regulations and approaches on intellectual property rights that apply in its territory.
To avoid undesirable risks, parties must ensure that they understand and comply with different local regulations.

According to The SaiGon Times