The link between IP and IT in business

Intellectual property (IP) and information technology (IT) arrangements give rise to a number of issues in an intra-group reorganisation and/ or a share sale.

It is particularly important to make sure that IP and IT are dealt with properly if the reorganisation is taking place as a precursor to the sale of part of the group or the liquidation of a group company which prior to the reorganisation owned or licensed IP. As is the case in any transfer of IP, it is essential for the group to identify the IP necessary to operate effectively after the reorganisation and if applicable to expand its business. The group should investigate the following:

• IP owned and used by the proposed transferor;
• IP owned by the proposed transferor but licensed to third parties;
• IP owned by third parties and licensed to the proposed transferor. 

IP which may be the subject of licences include obvious arrangements such as software licences and trade mark licences and also less obvious arrangements such as research and development arrangements, collaboration agreements and trade mark co-operation agreements. Other IP and IT arrangements which do not necessarily involve the licensing of IP include facilities management agreements, disaster recovery agreements and software support and maintenance agreements. If the business holds or benefits from any group or shared licences this will also need to be reviewed to make sure the proposed transferor and relevant group companies or connected businesses will continue to enjoy the benefit of these licences post-reorganisation.

In the context of a share sale, consideration should be given to whether the sale triggers any change of control clauses in any licenses thereby enabling the licensor to terminate the licence. A prospective buyer will need to conduct a risk assessment to assess the likelihood of such a trigger being exercised and therefore whether the buyer would be able to conduct its business once the purchase has taken place. 

In any IP audit, it will be easier to identify registered IP as opposed to unregistered IP. There are a number of industries where the principal assets are unregistered IP, for example, software producers, publishers, fashion, media and entertainment businesses and in such cases, identification of the relevant assets will be vital. Unregistered IP will include any rights protected by copyright, unregistered trade marks such as branding or trading names, know-how and/ or rights protected by the law of confidence.