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Print articleDrafting Patent Acquisition Agreements
April, 2022 - William Smith
Companies may purchase third party technology from time to time. When acquiring patents from outside the company, or from related entities, there are important factors to be considered. Here are certain issues for buyers when preparing a patent acquisition agreement.
The buyer should first determine that all the record owners of the purchased Intellectual Property are party to the patent acquisition agreement. A particular patent may be assigned to a subsidiary of the seller. In that case, the buyer must require that the subsidiary be a party to the agreement and the subsidiary is directly obligated to transfer ownership of that patent. Although recitals generally do not have any direct legal consequences, acquisition agreements may include them to provide context such as the general background and purpose of the agreement.
Depending on the circumstances and specific terms of the transaction, the parties may wish to include additional details. The agreement may be part of a related transaction or to settle a dispute. The parties may wish to include a summary of the background. If there is a grant-back license by the buyer to the seller, the parties may wish to include the basic terms of that license.
The buyer may want to avoid any indication that the seller’s rights in the acquired patents may be incomplete or qualified, by including a reference to “all right, title, and interest” in and to the acquired patents, as opposed to all “of Seller’s” right, title, and interest. Conversely, the seller may prefer to include the latter modifier if it owns the patents jointly with other parties or otherwise has less than unqualified absolute patent ownership. The seller typically negotiates for the inclusion of this language on the basis that it can only sell what it actually owns.
The patent assets that are to be transferred by the seller to the buyer must be identified. They may be the patent assets identified on a schedule to the agreement. The buyer typically seeks to include all patents disclosing and covering the same inventions and should include language to ensure that it acquires the entire patent portfolio concerning a particular area of technology. The seller, on the other hand, may wish to avoid transferring patent assets having only a tangential relationship to the relevant technology. In particular, the seller may be wish to exclude continuation-in-part and divisional patent assets and other patent assets that relate to different technology, even if they are part of a patent family related to benefit or priority chain. The parties should therefore ensure that the asset schedule identifies the complete list of key patent assets being transferred and include language that is tailored to the particular facts and the parties’ objectives.
The agreement should also include a section that provides for the transfer of patent rights associated with any outstanding patent license grants by the seller as licensor, in favor of third party licensees, or third party licensors to the seller as exclusive licensee.
The parties must determine whether any of the patent licenses to be transferred contain anti-assignment provisions. If there are any required consents, the buyer should require the seller to obtain the parties' consent to the licenses before executing the agreement and represent that necessary consents have been obtained, and deliver copies of the consents to the buyer on or before execution of the agreement.
Patent-related claims and causes of action that accrued before the date of assignment do not automatically transfer to the buyer with the corresponding acquired patents. Claims must be expressly assigned. Therefore, the buyer should ensure that the definition of Acquired Rights specifically includes all patent-related claims and causes of action, whether accruing before or after the transaction. The failure to include them as part of an assignment of patents and related rights may prevent the buyer from being able to exploit the acquired patent assets. Thus it is important to provide for the transfer of the right to sue and collect damages for ongoing or future infringement of the assigned patent assets and, optionally, for past infringement. This clause should be included in the acquisition agreement even if the respective rights also may be covered by other provisions. If the seller is retaining pre-acquisition claims or causes of action relating to the acquired patent assets or specific claims or causes of action, the seller should expressly exclude them from the Acquired Rights definition.
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The buyer should first determine that all the record owners of the purchased Intellectual Property are party to the patent acquisition agreement. A particular patent may be assigned to a subsidiary of the seller. In that case, the buyer must require that the subsidiary be a party to the agreement and the subsidiary is directly obligated to transfer ownership of that patent. Although recitals generally do not have any direct legal consequences, acquisition agreements may include them to provide context such as the general background and purpose of the agreement.
Depending on the circumstances and specific terms of the transaction, the parties may wish to include additional details. The agreement may be part of a related transaction or to settle a dispute. The parties may wish to include a summary of the background. If there is a grant-back license by the buyer to the seller, the parties may wish to include the basic terms of that license.
The buyer may want to avoid any indication that the seller’s rights in the acquired patents may be incomplete or qualified, by including a reference to “all right, title, and interest” in and to the acquired patents, as opposed to all “of Seller’s” right, title, and interest. Conversely, the seller may prefer to include the latter modifier if it owns the patents jointly with other parties or otherwise has less than unqualified absolute patent ownership. The seller typically negotiates for the inclusion of this language on the basis that it can only sell what it actually owns.
The patent assets that are to be transferred by the seller to the buyer must be identified. They may be the patent assets identified on a schedule to the agreement. The buyer typically seeks to include all patents disclosing and covering the same inventions and should include language to ensure that it acquires the entire patent portfolio concerning a particular area of technology. The seller, on the other hand, may wish to avoid transferring patent assets having only a tangential relationship to the relevant technology. In particular, the seller may be wish to exclude continuation-in-part and divisional patent assets and other patent assets that relate to different technology, even if they are part of a patent family related to benefit or priority chain. The parties should therefore ensure that the asset schedule identifies the complete list of key patent assets being transferred and include language that is tailored to the particular facts and the parties’ objectives.
The agreement should also include a section that provides for the transfer of patent rights associated with any outstanding patent license grants by the seller as licensor, in favor of third party licensees, or third party licensors to the seller as exclusive licensee.
The parties must determine whether any of the patent licenses to be transferred contain anti-assignment provisions. If there are any required consents, the buyer should require the seller to obtain the parties' consent to the licenses before executing the agreement and represent that necessary consents have been obtained, and deliver copies of the consents to the buyer on or before execution of the agreement.
Patent-related claims and causes of action that accrued before the date of assignment do not automatically transfer to the buyer with the corresponding acquired patents. Claims must be expressly assigned. Therefore, the buyer should ensure that the definition of Acquired Rights specifically includes all patent-related claims and causes of action, whether accruing before or after the transaction. The failure to include them as part of an assignment of patents and related rights may prevent the buyer from being able to exploit the acquired patent assets. Thus it is important to provide for the transfer of the right to sue and collect damages for ongoing or future infringement of the assigned patent assets and, optionally, for past infringement. This clause should be included in the acquisition agreement even if the respective rights also may be covered by other provisions. If the seller is retaining pre-acquisition claims or causes of action relating to the acquired patent assets or specific claims or causes of action, the seller should expressly exclude them from the Acquired Rights definition.
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