King’s College London - Commercialisation of IP [2022 – 2023] - Tutorial 3

Room: Bush House (SE) 1.01

Tutor: Ms Marianna Ryan

marianna.ryan@kcl.ac.uk

Please come having read the questions below and prepared to discuss them in class. Students will be
expected to discuss the questions in the tutorial.

1. Your client, Cosmo Kramer Ltd (“CK”), a company based in the UK is considering licensing
certain technology to a Japanese company. The agreement (drafted by the other side) states that
any disputes under the agreement will be resolved by the courts. CK is concerned about the cost
and difficulty of resolving any potential disputes which may arise.

Explain the advantages and disadvantages of the various forms of dispute resolution
(including the use of litigation) to deal any dispute arising under the technology licence.

There are several forms of dispute resolution available to parties in a technology license agreement,
including litigation, arbitration, and mediation. Each has its own advantages and disadvantages, which I
will outline below.

Litigation: Advantages:
 The decision of the court is binding and enforceable.
 The parties can appeal to a higher court if they disagree with the decision.
 The parties have access to all the legal tools available under the law, including discovery and
cross-examination of witnesses.
Disadvantages:
 Litigation can be time-consuming and expensive.
 The parties have less control over the process and outcome.
 The proceedings are public, and any sensitive information may become public knowledge.

Arbitration: Advantages:
 The parties can choose an arbitrator with expertise in the subject matter of the dispute.
 A binding and enforceable award – in all member countries to the Washington convention
 The proceedings are usually faster and less formal than litigation.
 The proceedings are private, and the parties can keep sensitive information confidential.

Disadvantages:
 The decision of the arbitrator is binding and enforceable, with limited avenues for appeal.
 The parties may have to pay for the cost of the arbitrator, which can be expensive.
 The parties have less access to legal tools than in litigation.

Mediation: Advantages:
 The parties can negotiate a settlement that is mutually beneficial.
 The proceedings are confidential, and the parties can keep sensitive information confidential.
 Mediation is usually faster and less expensive than litigation or arbitration.
 One to one conversation
Disadvantages:
• Settlement is voluntary and sometimes can b used to get the other side to disclose a case or a
weakness
 Mediation is non-binding, but can have an agreement and enforce it.
 and the parties may not be able to reach a settlement.
 The parties have less access to legal tools than in litigation or arbitration.
 If the mediation is unsuccessful, the parties will have to pursue other forms of dispute resolution.

GOOD FAITH NEGOTITATION:

ADJUCTICATION LIKE SJAL – COMPUTER SYSTEM – parties can have it in their contract

AND EXPERT DETERMINATION PROCESS: by specialized body and independent expert – evaluation
– more on technical side of thing. – binding form of ADR- further court order- appeal is limited.

In conclusion, the most appropriate form of dispute resolution for CK will depend on the specific
circumstances of the dispute. Litigation may be the best option if CK wants a binding decision, but it is
expensive and time-consuming. Arbitration may be a faster and less formal option, but it can also be
expensive. Mediation may be the best option if the parties want to negotiate a settlement, but it is non-
binding.

2. ABC Limited is a subsidiary company of XYZ Limited. XYZ Limited decided to sell the entire
issued share capital of ABC Limited. ABC Limited owns an IP portfolio comprising of 10 patents
and two registered trade marks (its name and logo). It also has a website and a domain name. You
were asked to conduct a due diligence for the Buyer, who is interested in purchasing ABC
Limited.

Explain what issues may come up in the due diligence process. What would you be
particularly concerned about?

Patent due diligence – specific issues

i. For licences in particular – scope of the licensed patents.
ii. Assess claims: too wide, risk of invalidity; too narrow, work around possibilities.
iii. Request and assess prior art; determine any validity issues for further consideration.
iv. Target’s licensing portfolio – quality & strength.
v. Infringement issues – against or by the target.
vi. Inventor records; lab notebooks; the target’s policies on identifying and assessing
patentable inventions.
vii. Freedom to operate searches.

Trade mark issues

i. Trade mark portfolio – its age, coverage, renewal records; encumbrances (existing
licences or security interests)
 ii. Target business: does the TM portfolio match the business portfolio?
iii. Assess the target, products and/or services.
iv. Any opposition/invalidity assertions or litigation.
v. Title to trade marks - use.
vi. Any unregistered rights – trade dress; passing off/goodwill issues.
vii. The registered marks – registered agreements or quality control issues.
viii. Independent trade mark search for identical or confusingly similar marks.

As part of the due diligence process, the following issues may come up:

i. Ownership and validity of the IP portfolio: It is important to verify the ownership of the IP
portfolio and ensure that the patents and trademarks are valid and enforceable. This includes
reviewing the registration certificates and conducting searches to identify any third-party claims
or infringements. Like prior art
ii. Licensing agreements: If any of the patents or trademarks are licensed to third parties, it is
important to review the licensing agreements to ensure they are valid and enforceable. This
includes checking for any restrictions on transferability or change of control provisions.
iii. Pending or threatened litigation: Any ongoing or potential litigation related to the IP portfolio
should be identified and reviewed. This includes assessing the potential risks and liabilities
associated with such litigation.
iv. Registration and renewal – to ensure in good standing and renewals done
v. Infringement: It is important to review whether any third parties are infringing on the patents or
trademarks owned by ABC Limited. This includes assessing the potential risks and liabilities
associated with any infringement.
vi. Website and domain name: The due diligence should also include a review of the website and
domain name owned by ABC Limited, including assessing any potential liabilities arising from
the website or domain name. – check ownership – evidence of ownership of domain name. –
check any renewals that are coming or paid for- cybersquatting claims.
vii. Regulatory compliance: If any of the patents or trademarks are subject to regulatory approval or
compliance, it is important to ensure that ABC Limited is in compliance with all relevant
regulations.
viii. Employee agreements: It is important to review the employment agreements of key employees
to ensure that they have assigned any rights related to the IP portfolio to ABC Limited and that
 they are not subject to any non-compete or non-solicitation provisions that could impact the
transaction.

Overall, I would be particularly concerned about the validity and enforceability of the patents and
trademarks owned by ABC Limited, as well as any ongoing or potential litigation related to the IP
portfolio. I would also be concerned about any potential infringement by third parties and any regulatory
compliance issues.

The due diligence process summarised :

 Identify what assets are owned by the target; and
 Whether it has good title to those assets (asset purchase) or shares (share purchase)
 Is the target bound by any contractual terms which affect valuation?
 Is target involved in litigation or disputes?

General challenges
Time available;
Volume of documentation;
Access to key staff;
Fragmented record keeping;
Territorial competence and translations; Key jurisdictions;
Key issues;
Cost constraints;
Confidentiality and team management.

3. William and Mary own all the shares in Toyland Ltd which makes children’s toys that it sells to
retailers all around the world as well as in its own chain of shops in the UK, Belgium and France.

William and Mary want to move out of making toys but to keep the chain of shops. The toys are
made of a special plastic that withstands a lot of wear: the process to make the plastic is protected
by a patent owned by Edward who has exclusively licensed the patent to Toyland. Once made,
the plastic has to be moulded by a secret process known only to William and Mary and two of
their most trusted employees. The toys sell well in a number of EU countries and some are
protected by UK and EU registered designs and are sold under UK and EU trade marks belonging
to Toyland.

The registered designs are owned by William because he paid for the registration fees. William
wants to continue to use these designs in a series of children’s books he plans to write after the
 toy manufacturing business has been sold because he is sure that parents will associate them with
the successful range of toys and thus be prepared to buy his books. The toy business uses a
valuable database of both the trade (who buy the toys) and retail customers (who buy toys in
Toyland’s shops) built up over the years. The database has been created by Mary’s sister who is
not employed by Toyland Limited but who merely helps out from time to time. You are
instructed to carry out due diligence on the business for your client.

• What specific due diligence questions would you need to ask?

• What are the most important due diligence issues you would need to address?
• What are the risks to your client if it proceeds to buy the business?
• How might those risks be minimised or overcome, either through the drafting of the
legal agreement(s) or otherwise?

As part of the due diligence process, the following specific questions should be asked:
1. Who owns the patent protecting the special plastic used to make the toys?
2. What are the terms of the exclusive license agreement with Edward, the patent owner?
3. Who knows the secret process to mould the plastic into toys?
4. Are there any non-compete or non-solicitation agreements in place with William, Mary, or the
two trusted employees who know the secret process?
5. Which registered designs are owned by William and which are owned by Toyland Limited?
6. Are there any pending or threatened infringement actions against Toyland Limited's registered
designs or trademarks?
7. Who owns the database of trade and retail customers, and what are the terms of use for the
database?

The most important due diligence issues to address are:

1. The validity and enforceability of the patent and license agreement protecting the special plastic
used to make the toys.
2. The confidentiality of the secret process to mould the plastic into toys, and the risk of disclosure
to competitors.
3. The ownership and registration of the trademarks and registered designs, and any potential
infringement risks.
4. The ownership and use of the customer database, and any potential data privacy issues.

The risks to the client if it proceeds to buy the business include:

1. The risk of losing the exclusive license agreement with Edward, which would impact the ability
to produce the special plastic used to make the toys.
2. The risk of losing the key employees who know the secret process to mould the plastic into toys.
 3. The risk of losing the rights to the registered designs and trademarks associated with the
successful range of toys.
4. The risk of losing the customer database and any associated goodwill.

To minimize or overcome these risks, the legal agreement(s) should include provisions addressing:
1. The transfer of the license agreement with Edward, including any consent or notice requirements.
2. The employment of the key employees who know the secret process, including any non-compete
or non-solicitation agreements.
3. The assignment of the registered designs and trademarks to the buyer, and any warranties or
indemnities relating to their validity and enforceability.
4. The transfer or use of the customer database, including any data privacy requirements.
5. Transition period-
6. Insurance
7. Warranties and indemnity – after identifying the risk- in the SPA

In addition to the legal agreements, the risks can be minimized by conducting thorough due diligence,
including identifying any potential intellectual property or data privacy risks, and developing a plan for
ongoing management and protection of the assets post-acquisition.

4. Your client, the University of Cumbashire is about to enter a Research Collaboration agreement
with an Indian company based in Bangalore. The University is concerned about the cost and
difficulty of resolving any disputes, which may arise between it and the Indian company. The
agreement will be subject to English law.

Explain to the University the benefits and drawbacks of having disputes dealt with by: (a)
mediation and (b) and arbitration.

(a) Mediation
Benefits:
1. Cost-effective: Mediation is usually less expensive than litigation or arbitration because it is less
formal and takes less time.
2. Confidential: Mediation is private and confidential, which means that the parties can discuss
sensitive or confidential information without it being made public.
3. Voluntary: Mediation is a voluntary process, which means that the parties can walk away at any
time if they feel that it is not working.
4. Flexible: Mediation can be tailored to the specific needs of the parties and can be used to resolve
a wide range of disputes.
 5. Experienced mediator – to avoid deadlock.
6. Transaction and deal making stage- can be used then.
7. Arranged quickly and cheaply.
8. Trigger condition for settlement for continuing relationship of parties

Drawbacks:
1. Non-binding: The mediator's decision is not binding, and the parties are not required to follow it.
2. Breakdown in the relationship
3. Lack of certainty- mediation doesn’t necessarily bring settlement.
4. Limited power: The mediator has limited power to compel the parties to cooperate, and there is
no enforcement mechanism for the mediator's decisions.
5. No guarantee of success: Mediation may not always result in a resolution of the dispute, and the
parties may need to resort to litigation or arbitration in the end.

(b) Arbitration
Benefits:
1. Private: Arbitration is a private process, which means that the proceedings and decision are not
made public. – CONFENDITALITY
2. Expertise: The parties can choose an arbitrator who has expertise in the subject matter of the
dispute, which can result in a more informed decision.
3. Binding: The decision of the arbitrator is binding on the parties, and there is a limited right of
appeal.
4. International recognition: Arbitration awards are recognized and enforceable in many countries,
which can be beneficial for parties involved in cross-border disputes.
5. TAILORED TO DISPUTE- ABILITY TO REFER DISPUTE TO DIFF FORUM
6. Rev easy to enforce
7. Can bring certainty – w/o jurisdiction issues
Drawbacks:
1. Cost: Arbitration can be more expensive than mediation because it is a formal process that
requires a trained arbitrator.
2. Lack of certainity
3. No precedence and res judicata
4. Subsequent delay bec of popular arbitration
 5. Limited discovery: The parties may not have the same level of access to evidence or witnesses as
they would in a litigation process.
6. Limited appeal rights: The parties have limited rights of appeal, which means that they are
generally bound by the decision of the arbitrator.

In summary, mediation can be a cost-effective and flexible way to resolve disputes, but it is non-binding
and there is no guarantee of success. Arbitration is a private and binding process that offers expertise and
international recognition, but it can be more expensive than mediation and may limit the parties' access to
evidence or appeal rights. Ultimately, the choice of dispute resolution method will depend on the specific
needs and circumstances of the parties involved.

5. “The Anglo-American process by which the shares or assets of companies with valuable IP rights
are acquired and which involves an extensive due diligence process and the negotiation of
warranties and indemnities to protect the interests of both vendor and purchaser, is expensive
and does not really protect either party”.

Do you agree with the statement or not? Use examples, wherever possible, to support your
reasoning.

I cannot agree with the statement that the process of acquiring companies with valuable IP rights through
due diligence and negotiations of warranties and indemnities is expensive and does not protect either
party. On the contrary, this process is crucial in protecting the interests of both parties, and while it may
involve expenses, it is a necessary investment to ensure a successful acquisition.

1. Protecting the purchaser: The due diligence process helps the purchaser to identify potential
issues with the target company's IP rights, such as gaps in ownership or infringement risks. This
can help the purchaser to make informed decisions about the value of the company and whether
to proceed with the acquisition. Negotiating warranties and indemnities can also provide the
purchaser with legal recourse if any issues arise post-acquisition. For example, if the target
company's patent is invalidated due to prior art, the purchaser may be able to seek
compensation from the vendor for breach of warranty.

2. Protecting the vendor: The due diligence process can also benefit the vendor by identifying any
weaknesses in their IP rights that need to be addressed before the acquisition. For example, if the
target company has not properly maintained its trade mark registrations, the due diligence process
may identify this issue, allowing the vendor to take steps to rectify it before the acquisition.
 Negotiating warranties and indemnities can also provide the vendor with protection against
claims by the purchaser, such as claims for breach of IP-related warranties.

3. Importance of IP rights: In many cases, the value of a company is largely based on its IP rights,
such as patents, trade marks, and copyrights.

Failing to conduct a thorough due diligence process and negotiate appropriate warranties and
indemnities can expose both parties to significant risks related to the ownership and validity of
these IP rights. This can lead to disputes and litigation, which are often much more expensive
than the due diligence process and negotiating warranties and indemnities.

In conclusion, while the process of acquiring companies with valuable IP rights may be expensive
and time-consuming, it is necessary to protect both parties from the significant risks associated
with IP ownership and validity. The due diligence process and negotiation of warranties and
indemnities are essential components of this process and can provide both parties with the
necessary protection to move forward with confidence.\

• To identify risk associated

• Negoatation of Warrienties and indemnities & remedies for such
• Provide certainity
• Use the rolls Royce case

OR

Firstly, due diligence provides the purchaser with an opportunity to assess the true value of the company
being acquired, including its IP assets. Without proper due diligence, the purchaser may be unaware of
any potential risks or liabilities associated with the company's IP, which could lead to significant financial
losses down the line. By conducting due diligence, the purchaser can identify any potential issues and
negotiate appropriate warranties and indemnities to protect their interests.

Secondly, the negotiation of warranties and indemnities helps to allocate risks between the parties. For
example, if the seller warrants that they have full ownership of the IP assets being sold, and it later turns
out that they did not, the purchaser may have the right to seek compensation from the seller. Similarly,
indemnities can provide a level of protection to the purchaser in case of any future claims or disputes
relating to the IP assets.
Lastly, the process of acquiring a company with valuable IP assets is not necessarily more expensive than
other types of acquisitions. While due diligence and negotiations may add to the costs, they are a
necessary investment to ensure the success of the acquisition and the protection of both parties'
interests. Moreover, the cost of not properly assessing and protecting IP assets can be much higher
in the long run.

In conclusion, the process of acquiring companies with valuable IP assets through due diligence and
negotiations of warranties and indemnities is not only necessary but also beneficial in protecting the
interests of both parties. While it may involve expenses, it is a worthwhile investment in the long run to
ensure the success of the acquisition.

6. Explain the issues, which must be considered by a patent owner when licensing the use of its
patent to someone else.

When licensing the use of a patent to someone else, a patent owner must consider several issues,
including:
1. Scope of the license: The patent owner must determine the scope of the license, which can
include exclusive or non-exclusive rights to use, manufacture, and sell the patented invention.
The license can also be limited to a specific field or territory. – EXTENT OF LICENSE
2. TERM AND Duration of the license: The patent owner must determine the duration of the
license, which can be for a fixed term or until the expiration of the patent.
3. LICENSE FEES- Royalty rates and payment terms: The patent owner must negotiate and
agree upon royalty rates and payment terms with the licensee. This can include upfront payments,
milestone payments, and ongoing royalties. – timing of payment
4. Quality control: The patent owner may want to include quality control provisions in the license
to ensure that the licensee is using the patented invention properly and maintaining the quality of
the products or services.
5. Infringement and enforcement: The patent owner must consider how to handle potential
infringement of the patent by the licensee or third parties. This can include provisions for
notification, cooperation, and enforcement. – like dispute resolution provisions
6. Termination: The patent owner may want to include termination provisions in the license to
address situations where the licensee breaches the agreement, or the patent owner wants to
terminate the license for other reasons.
 7. Confidentiality: The patent owner may want to include provisions for confidentiality to protect
any proprietary or confidential information shared with the licensee during the licensing process.
– NDAs etc.

Overall, a patent owner must carefully consider these issues and negotiate the terms of the license
agreement to protect their interests while allowing for the commercialization of the patented invention.