IP Rights are Wildcard in Cross-Border Transactions

M&A practitioners must cultivate a sophisticated understanding of IP issues because the interplay of differing global IP laws can have a major impact on cross-border transactions. Despite efforts at global harmonization, decentralized global IP laws necessitate a familiarity with local laws that often can only be provided by local counsel.

Nevertheless, a general understanding of how variations in local laws can affect IP assets in a cross border deal, and the implications of those variations, is essential for drafting deal terms. For example, in jurisdictions that recognize “moral rights,” an author has rights to a work he or she created regardless of whether they own the economic rights.

Jurisdictions have varying laws regarding ownership of a work or invention when it is created by an employee. In the United States, if the work is created on behalf of an employer(“work-made-for-hire”), then the copyright belongs to the employer. Many jurisdictions do not recognize the work-made-for-hire doctrine. In some jurisdictions including France and Germany, in order to establish its ownership of an invention an employer is required to pay additional compensation (beyond salary) to the employee who created it.

Covenants and closing conditions are vital to ensure that a seller rectifies deficiencies with IP assets prior to closing. They must be drafted to take into account jurisdictional requirements such as maintenance and enforcement of IP between signing and closing, and to rectify ownership issues regarding employee or third party inventions.