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Intellectual Property Library
Assets & Finance: Auditsand Valuation of
Intellectual Property
Internal Controls, Materiality, and Investment
Lisa M. Brownlee
For Customer Assistance Call 1-800-328-4880
Mat #41123349
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2012 Thomson Reuters
This publication was created to provide you with accurate and authorita-tive information concerning the subject matter covered; however, this pub-lication was not necessarily prepared by persons licensed to practice lawin a particular jurisdiction. The publisher is not engaged in renderinglegal or other professional advice and this publication is not a substitutefor the advice of an attorney. If you require legal or other expert advice,you should seek the services of a competent attorney or other professional.
ISBN #978-0-31-4608536
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Dedication
This book is dedicated to my family.
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About the Author
Lisa M. Brownlee is presently in private consultingpractice. In addition to this treatise, she authored andregularly updates Intellectual Property Due Diligence inCorporate Transactions: Investment, Risk Assessment andM a n ag e me n t w i th W e st , a n d F e de r al A c qu i si t io nRegulations: Intellectual Property and Related Rights withLaw Journal Press, a division of ALM. She also presents liveCLEs for West and for its related company, Federal Publica-tions, and has presented webcasts for WestLegal Ed Center:Intellectual Property Due Diligence and Ethics: AvoidingEthics and Securities Violations (together with Andrew J.Hollander); How to Chase Down and Defeat Cyber Criminals;Patent Law Update: In re Bilski and Progeny; and Intel-lectual Property Due Diligence and Audit Boot Camp.
Ms. Brownlee earned her B.A. degree from PennsylvaniaState University in 1983, an M.A. degree in English in 1986from the University of Washington and her J.D. degree fromthe Seattle University School of Law, where she was LeadArticles Editor of the Law Review. Upon graduation, Ms.
Brownlee associated with one of the (then) top three Seattlerms, where she developed expertise in international intel-lectual property and computer law, and advised on interna-tional trademark, copyright, and trade secret protection andenforcement.
In 1993 Ms. Brownlee was awarded a fellowship at theMax Planck Institute for Intellectual Property, Competitionand Tax Law in Munich. In 1994 Ms. Brownlee relocated toAmsterdam, The Netherlands, where she associated withone of the major Dutch law rms (now dissolved) and com-menced writing this treatise. She founded, developed, andmanaged the rms intellectual property due diligencepractice, assisting the corporate nance/M&A department,
and managed all aspects of legal due diligence. She alsofounded, developed, and managed the rms internationalInternet/e-commerce law practice. As account manager, Ms.Brownlee managed the rm-wide service of multinational
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computer, E-commerce, merchandising, entertainment andnancial industry clients. She has experience advising on allaspects of European e-operations, including e-sales and dis-tribution, and best e-practices. In addition, Ms. Brownleehas developed and negotiated a full range of computerhardware, software, and Internet contracts, includinglicense/shrink-wrap and click-through agreements, ASPagreements, on line communications policies, distributionand VAR agreements. Another important aspect of herpractice was advising on Benelux, European and interna-tional trademark protection and enforcement and on interna-tional registration, management and protection of domainnames. She also advised on complex patent licensing and
dispute matters.In 2001 Ms. Brownlee became Of Counsel to MorrisonFoerster, LLP in their Brussels Oce. In 2003 Ms. Brownleecompleted a sabbatical in Belize, where she consulted onimplementation of new intellectual property laws in accor-dance with GATT TRIPs, with the rm of Glenn D. Godfrey& Company, the ndings of which were published in theTrademark Reporter.
Ms. Brownlee has served on numerous internationalprofessional association editorial, advisory, and directorialboards, including the Board of Directors of the ComputerLaw Association, the BNA E-Commerce Law Report Advi-sory Board, and the Editorial Board of the Trademark
Reporter.
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Acknowledgements
The Author is pleased to introduce four contributingauthors, whose contributions have been instrumental inensuring that this text presents the most insightful,comprehensive, and state of the art view on each of theirspecialized aspects of IP/business practices.
ROBERT F. REILLYMr. Reilly contributed Chapter 6, Valuation of Intel-lectual Property. He is a managing director of WillametteManagement Associates. His practice includes valuationconsulting, economic analysis, and nancial advisoryservices. He specializes in the valuation, lost prots/damagesanalysis, and transfer price estimation of intellectual prop-erty for transaction, taxation, nancing, bankruptcy, ac-counting, litigation, and planning purposes. Mr. Reillyearned an MBA degree in nance and a BA degree in eco-nomics both from Columbia University. He is a certied pub-lic accountant/accredited in business valuation/certied innancial forensics, certied management accountant,
chartered nancial analyst, and certied business appraiser.He can be reached at (773) 399-4318 [email protected]
DAVID GAUNTLETTChapter 7 (Insuring IP Assets) was authored solely by
David A. Gauntlett, the principal of Gauntlett & Associates(http://www.gauntlettlaw.com) in Irvine, California. Mr.Gauntlett is a 1979 graduate of Boalt Hall School of Law,University of California at Berkeley, where he served as amember of the California Law Review. He received his B.A.from the University of California at Irvine, magna cum laude.Mr. Gauntlett represents policyholders in insurance cover-
age disputes regarding complex business litigation and intel-lectual property matters presently pending in 30 states. Mr.Gauntlett also serves as an expert witness for policyholderson insurance coverage for intellectual property lawsuits. He
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was Chair of the Special Committee on Insurance for the IPSection of the ABA, newsletter editor and Chair Emeritusfor the IP Committee of the Torts and Insurance PracticeSection of the ABA, and Vice-Chair of the IP Owners As-sociations Insurance Committee. Mr. Gauntlett is a highlyrecognized published author in the area of insurancecoverage.
ANDREW J. HOLLANDERMr. Hollander contributed substantial material to the
Securities and Exchange Commission regulations discus-sions in Chapter 1 and to the patent law discussions inChapter 5. Mr. Hollander is of counsel at K & L Gates LLP.
He represents clients on issues relating to patents, trade-marks, copyrights, trade secrets, e-commerce, the Internet,licensing, and launching and managing brands. Mr. Hol-lander also advises on portfolio management strategies, IPdue diligence, and mergers and acquisition transactions. Aformer chief IP counsel of a multibillion dollar company, hemanages several global trademark portfolios comprisingtrademarks in more than 140 countries. His diverse industryexperience includes computer software and hardware issues,and online services, travel, health and beauty aids, consumerpackaged goods, and nancial institutions. He is registeredto practice with the U.S. Patent and Trademark Oce. Heearned a J.D. from Cornell University, B.A. from Wesleyan
University, and M.S. from Fordham University.
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Preface
When I started practicing intellectual property law twodecades ago, the Internet was essentially non-existent andbiotechnology law was in its infancy. In intellectual propertylaw, some things have changed tremendously, and much hasstayed the same.
I have provided domestic U.S. as well as international(EU/NL) legal counsel to scores of multinational companiesin nearly every major IP-intensive industry, from entertain-ment, merchandising/famous branding, and e-commerce/e-distribution/telecommunications, to privacy/encryptioncompanies and biotech/GMO concerns. What is remarkableto me about the evolution of the intersection of IP and busi-ness is this: nearly every aspect of IP law, on essentially thesame topics, is as in-ux today as it was in the late 1990s.Protection of famous marks, disputes over and registrationof domain names, international copyright duration andprotection in the e-environment, rst to invent, rst-(inventor)-to-le, and prior user rights: all of these are butexamples of where the law was and remains in incredible
ux.What has changed considerably is the volume of lawsgoverning these rights, the ever-increasing intensity ofSupreme Court and Federal Circuit focus on cases involvingthese laws, and the increase in the stakes involved inproperly protecting, exploiting, and enforcing these rights.Even setting aside the volumes of EU and member countrylaws on IP and related topics passed in the last two decades,the expansion of intellectual property laws domestically andworldwide is vast. Reasonable minds can dier about the ef-fects of the proliferation of laws and regulations governingthese rights. From a practical standpoint, the intangiblenature of these rights, coupled with the increasingly volume
and complexity of laws and regulations governing them,compels corporate and banking/nance lawyers as well asnon-lawyer advisors and the stakeholders themselves, tobecome fully educated on these topics in this vast category of
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invaluable assets.Despite laws attempts to tame these rights into some-
thing intangible, if not tangible, these rights can best bedescribed as consistently, if not predictably, amorphous.They are products of the human mind. As such, these rightswill always be recalcitrant to denitive delineation, quanti-cation, and valuation. This is not to say the task is impos-sible, just a bit complex. The more our clients know aboutthe indenite, evolving nature of these rights, the better it isfor us and them: IP is as risk-fraught today as two decadesago. It is also as interesting and rewarding.
The purpose of this book is to educate business andnance professionals on the key aspects of intellectual prop-
erty law, and discuss how these rights are treated from anasset perspective: how they are created, exploited, litigated,valued, insured and reported. The book also aims to highlightkey changing areas of intellectual property law, in particularpatent law, and assess how those changes will impact invest-ments in several key intellectual property-driven industries.Understanding the fundamental principles of intellectualproperty assets is critical to understanding the contexts inwhich they function. This book strives to aid in theseunderstandings.
I value your input and suggestions on topics you thinkare helpful and/or otherwise in this book. All views expressedin this book are the authors and reect her personal views
in her individual capacity. Nothing herein shall be deemedto represent the views of her clients.
Lisa M. Brownlee
February 2010
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Table of Contents
CHAPTER 1. CONDUCTING AN IP DUEDILIGENCE AUDIT: AN INTRODUCTION
I. PRELIMINARY MATTERS
1:1 Introduction
1:2 Fundamental issues for all transactions
1:3 Structure of the transaction
II. ASSET PURCHASE TRANSACTIONS
1:4 Acquisition of assetsGenerally
1:5 Denition of assets and liabilities
1:6 Asset acquisitions involving retained or divided rights
1:7 IP-related employees in asset acquisitions
1:8 Asset purchases compared with share acquisitions
1:9 Successor liability in asset acquisitions
III. STATUTORY MERGERS ANDCONSOLIDATIONS
1:10 Statutory mergers and consolidations, generally
IV. FINANCING TRANSACTIONS
1:11 Financing transactions involving less than completeownership
1:12 Fundamental risks
1:13 Managing risks in the investment document
1:14 Loans and security interests in nancing IPcompanies/transactions
V. TRANSACTIONS INVOLVING PUBLICLYTRADED COMPANIES
1:15 Securities-regulated entities and transactionsGenerally 1:16 Due-diligence standards
1:17 Disclosure requirements
1:18 Requests for condential treatment
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VI. OTHER TRANSACTIONS REQUIRING DUEDILIGENCE
1:19 Joint ventures
1:20 Licensing transactions
1:21 Purchasing assets in bankruptcy proceedings
1:22 Preparation for sales and other divestitures
1:23 Internal audits for asset management
VII. SECURITIES REPORTINGREQUIREMENTS OF SARBANES-OXLEY
1:24 Sarbanes-Oxley and IP management and reportingobligations
1:25 Sarbanes-Oxley Section 302, Executive Certication ofFinancial Reports
1:26 Sarbanes-Oxley Section 404, Internal Controls
1:27 Sarbanes-Oxley Section 409, Material Events
1:28 Attorney-client privilege, securities law, and SECprofessional conduct rules
1:29 SEC Attorney Conduct Rules Issued Pursuant toSarbanes-OxleyAttorneys subject to the rule
1:30 Appearing and practicing
1:31 Issuer
CHAPTER 2. INTRODUCTION TOINTELLECTUAL PROPERTY
I. PATENTS
2:1 Generally
2:2 Constitutional basis for rights
2:3 Statutory provisions
2:4 Regulations
2:5 Common law rights
II. TRADEMARKS, SERVICE MARKS, TRADEDRESS, AND TRADE NAMES
2:6 Generally
2:7 Constitutional basis for rights 2:8 Statutory provisions
2:9 Regulations
2:10 Common law rights
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2:11 Trademarks, service marks, and trade names as propertyrights
III. DOMAIN NAMES
2:12 Generally
2:13 Constitutional basis for rights
2:14 Statutory provisions
2:15 Regulations
2:16 Common law rights
2:17 Domain names as property right
IV. COPYRIGHTS
2:18 Generally 2:19 Constitutional basis for rights
2:20 Statutory provisions
2:21 Regulations
2:22 Common law rights
V. SEMICONDUCTOR CHIPS
2:23 Generally
2:24 Constitutional basis for rights
2:25 Statutory provisions
2:26 Regulations
2:27 Common law rights 2:28 Semiconductor chips as property right
VI. TRADE SECRETS
2:29 Generally
2:30 Constitutional basis for rights
2:31 Statutory provisions
2:32 Regulations
2:33 Common law rights
CHAPTER 3. PRELIMINARY MATTERSIN IP AUDITS
I. PRELIMINARY MATTERS
3:1 Introduction and checklist of important issues
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II. CONFIDENTIALITY AND INTELLECTUALPROPERTY
A. IN GENERAL
3:2 Background 3:3 Condentiality pertaining to the fact of the transaction 3:4 Trade secrets and proprietary information 3:5 Plant tours, product demonstrations, and interviews;
outside experts 3:6 Condentiality obligations toward third parties
B. ATTORNEY-CLIENT PRIVILEGE ANDWORK PRODUCT DOCTRINE
3:7 Attorney-client privilege and work product doctrine,generally 3:8 Attorney-client privileges and intellectual property 3:9 Work product doctrine and intellectual property
documentation 3:10 Disclosures resulting in waiver of privilege
C. COMMON INTEREST AND SUCCESSORSIN INTEREST DOCTRINES
3:11 Common interest doctrine 3:12 Successor in interest doctrine
III. LETTERS AND AGREEMENTS BETWEEN
THE BUYER AND THE TARGET COMPANY 3:13 Letters of intent/memorandums of understanding 3:14 Condentiality agreements between Buyer and Target
Company
IV. DUE DILIGENCE TEAM MEMBERS
3:15 Due diligence team members, generally
3:16 Buyer's due diligence team members
3:17 Domestic counsel
3:18 Intellectual property counsel
3:19 Outsourcing of due diligence tasks
3:20 Target Company due diligence team members
3:21 Legal control of due diligence teams
V. SCHEDULING THE IP DUE DILIGENCE
3:22 Scheduling the IP due diligence, generally
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3:23 Activity duration estimates
3:24 Project start and nish times
3:25 Schedule calculations
3:26 IPDD schedulingIPDD schedule control
3:27 IPDD cost planning and performance
3:28 Project cost estimate
3:29 Project budgeting
3:30 Determining actual cost
VI. IPDD PROJECT COMMUNICATION,DOCUMENTATION, ANDRECORDKEEPING
3:31 IPDD project communication and documentation,generally
3:32 Meetings
3:33 Project documentation and recordkeeping
3:34 Internal memorandums
3:35 Interim progress reports
3:36 Final report
CHAPTER 4. CONDUCTING AN IPAUDIT
I. OVERVIEW AND PROJECT OBJECTIVE
4:1 Overview 4:2 Dening the project objective
4:3 Organization and production of documents
II. INTELLECTUAL PROPERTY DUEDILIGENCE CHECKLIST
4:4 Intellectual property due diligence checklist andexplanations
4:5 Checklist denitions
4:6 Agreement
4:7 Business
4:8 Dispute
4:9 Document 4:10 Employees
4:11 Exploit
4:12 Intellectual property
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4:13 Target company
4:14 Checklist general items
4:15 List of relevant company personnel
4:16 List of Target Company contact individuals
4:17 Market information
4:18 Scope of documents produced
4:19 Intellectual property budget
4:20 Foreign-language documents
4:21 Internet considerations
III. PRODUCTION AND CONTROL OFDOCUMENTS
4:22 IPDD project communication and documentation;
document review 4:23 Target Company's perspective on the due diligence
4:24 Overview of document procedures
4:25 Target Company's position on drafting and responding tothe intellectual property due diligence checklist
4:26 Minimizing risk of misplaced and lost documents
4:27 Data room procedures
4:28 Virtual data rooms
CHAPTER 5. ANALYZING THE RESULTSOF IP AUDIT
I. PRELIMINARY MATTERS 5:1 Introduction and checklist of important issues
II. PATENTS
A. ASSETS ELIGIBLE FOR PATENTPROTECTION
5:2 Overview
5:3 Subject matter
5:4 Utility
5:5 Priority
5:6 Novelty
5:7 Nonobviousness 5:8 In-use and on-sale bars
5:9 Enablement under 35 U.S.C.A. 112
5:10 Patentability opinions
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B. SCOPE OF RIGHTS 5:11 Basic rights granted under patent law
5:12 Duration of rights
5:13 Limitations on rights
C. OWNERSHIP
5:14 Overview
5:15 Joint inventorship
5:16 Improper attribution of joint inventorship
5:17 Inventions created by Target Company employees
D. ADEQUATE PROTECTION
5:18 Overview
5:19 Enforcement and failure to enforce
5:20 Whether use of inventions depends on preexisting orthird-party rights
5:21 In-bound licenses and cross-licenses
5:22 Dependent patents and improvements
5:23 Whether the Target Company's inventions are adequatelyprotected
5:24 Target Company's invention disclosure and reviewpolicies and proceduress
5:25 Geographic scope of patents
5:26 Claims in, and prosecution history of, the Target
Company's patents
E. PROPER EXPLOITATION
5:27 Introduction
5:28 Licenses and patent misuse
5:29 Litigation
5:30 Infringement
5:31 Misuse in enforcing patents
III. TRADEMARKS, SERVICE MARKS, ANDTRADE NAMES
A. ASSETS ELIGIBLE FOR TRADEMARKPROTECTION
5:32 Introduction
5:33 Marks that qualify for U.S. registration
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5:34 What is not protectable as a federal mark?
5:35 Rights in unregistered marks
5:36 Trade names and commercial names
5:37 State trademark registrations
B. SCOPE OF RIGHTS
5:38 Introduction
5:39 Strength of marks
5:40 Famous marks
5:41 Rights conferred by a federal supplemental registration
5:42 Rights conferred by state trademark registration
5:43 Common law rights
5:44 Trade name rights
5:45 Duration of rights 5:46 Exceptions to rights
5:47 Concurrent use registrations
5:48 Consent agreements
5:49 Exemptions from liability
C. OWNERSHIP
5:50 Introduction
5:51 Initial ownership
5:52 Joint ownership
5:53 Marks created by employees
5:54 Marks created by independent contractors
5:55 Assignments 5:56 Recordation of assignments and liens
D. ADEQUATE PROTECTION
1. Administrative Matters
5:57 Introduction
5:58 Registrations, applications, and related documents
5:59 Federal and state registration
5:60 Statements of use/incontestability
5:61 Intent-to-use applications
5:62 Oppositions, cancellations, and interferences
5:63 Statute of limitations, laches, estoppel, and acquiescence
2. Is Use of Mark Dependent on Third-PartyRights?
5:64 Introduction
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5:65 Scope of license and exclusivity 5:66 Change of control, assignability, and rights of
termination
5:67 Enforcement and defense of marks
5:68 Options
3. Does Scope of Mark Adequately protect theTarget Company's Actual Use?
5:69 Overview
5:70 Prosecution history of the Target Company's markregistrations
4. Proper Exploitation
5:71 Overview
5:72 Naked licenses 5:73 Genericness and changed use of mark
5:74 Use of the and symbols
5:75 Abandonment
5. Is Mark Likely to Become Subject ofLitigation?
5:76 Introduction
5:77 Trademark clearance and infringement searches
5:78 Trademark watching services
IV. COPYRIGHTS
A. ASSETS ELIGIBLE FOR COPYRIGHTSPROTECTION
5:79 Overview
5:80 Denition of rights
5:81 Works protectable under copyright
5:82 Requirement of originality: qualitative and quantitative
5:83 Whether the work is xed in a tangible medium ofexpression
5:84 Works and information excluded from copyrightprotection
5:85 Internet considerations
B. SCOPE OF RIGHTS 5:86 Introduction
5:87 Right to reproduce the copyrighted work in copies orphonorecords
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5:88 Right to prepare derivative works based upon thecopyrighted work
5:89 Right to distribute copies by sale or other transfer, or byrental, lease, or lending
5:90 Right to perform or display works publicly 5:91 Right to authorize or license the doing of any exclusive
right
5:92 Moral rights
5:93 Duration of rights
5:94 Limitations on rights
5:95 The fair use doctrine
5:96 Exhaustion of rights
5:97 Additional limitations
C. OWNERSHIP 5:98 Overview
5:99 Initial authorship
5:100 Joint authors
5:101 Assignments
5:102 Recordation of assignments and conicting assignmentsand transfers
5:103 Assignment of jointly authored works
5:104 Scope of assigned rights and the copyright divisibilityprinciple
5:105 Termination of assignments
5:106 Priority between conicting transfer of ownership and
nonexclusive license
D. ADEQUATE PROTECTION
5:107 Introduction
5:108 Registration of copyrights
5:109 Registration formalities
5:110 Maintenance of copyrights
5:111 Statute of limitations, laches, and estoppel
5:112 Customs recordation
5:113 Derivative works and compilations
5:114 Use of copyright notices: the and symbols
5:115 Proprietary markings: sales to the U.S. government
5:116 Whether use of Target Company's copyrights is
dependent on preexisting or third-party rights 5:117 Derivative works of preexisting works
5:118 Collective works, compilations, and contributionsthereto
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5:119 Inbound licenses and cross licenses
5:120 Rights of termination
5:121 Whether the scope of the copyrights suciently protectsthe products of the Target Company
5:122 Whether the copyrights have been properly exploited
5:123 Shareware, freeware, and open source distribution
5:124 Whether the copyrights are, or are likely to become, thesubject of litigation
V. TRADE SECRET AUDIT
A. ASSETS ELIGIBLE FOR TRADE SECRETPROTECTION
5:125 Overview 5:126 Value
5:127 Not generally known and not readily ascertainablethrough proper means
5:128 Subject of reasonable eorts to maintain secrecy
B. SCOPE OF RIGHTS
5:129 Introduction
5:130 Duration of rights
5:131 Exceptions to rights
C. OWNERSHIP
5:132 Initial ownership 5:133 Joint ownership
5:134 Trade secrets created by employees
5:135 Assignment
D. ADEQUATE PROTECTION
5:136 Overview
5:137 Use of nondisclosure/noncompete agreements withemployees
5:138 Special circumstances
5:139 Misuse of trade secrets
5:140 Statute of limitations, laches, and estoppel
5:141 Whether use of the trade secrets is dependent onpreexisting or third-party rights
5:142 Whether the scope of trade secret law sucientlyprotects the products of the Target Company
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5:143 Whether the trade secrets have been properly exploited
5:144 Whether the trade secrets are, or are likely to become,the subject of litigation
5:145 Internet considerations
CHAPTER 6. VALUATION OFINTELLECTUAL PROPERTY ASSETS 6:1 Overview
6:2 Identication of intellectual property
6:3 Patents
6:4 Trademarks
6:5 Copyrights
6:6 Trade Secrets
6:7 The intellectual property commercialization process,goodwill, and intellectual properties generally
6:8 Common terms of intellectual property licenseagreements
6:9 Common terms of other intellectual property contracts
6:10 Typical parties to the intellectual propertycommercialization process
6:11 Factors that the valuation analyst should consider
6:12 Factors related to whether the subject intellectualproperty is valuable
6:13 Reasons to analyze commercial intellectualproperty-general
6:14 Reasons to value commercial intellectual property-specic
6:15 Generally accepted intellectual property valuationapproaches and methods
6:16 Market approach valuation methods
6:17 Market approach valuation principles
6:18 The market approach valuation process
6:19 Cost approach valuation methods
6:20 Denition of intellectual property cost
6:21 Intellectual property cost components
6:22 Cost new less depreciation
6:23 Income approach valuation methods
6:24 Measures of commercial intellectual property income
6:25 Income approach valuation methodsSummarized
6:26 Direct capitalization procedures 6:27 Yield capitalization methods
6:28 Income tax amortization adjustment
6:29 Remaining useful life analysis
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6:30 Expected eect on the income approach valueindication
6:31 Expected eect on the cost approach value indication
6:32 Expected eect on the market approach valueindication
6:33 Common factors inuencing intellectual propertyexpected RUL
6:34 Valuation synthesis and conclusion
6:35 Illustrative example of the cost approach and theincome approach
6:36 Illustrative example fact set and analysis assumptions
6:37 Selection of valuation approaches and methods
6:38 Cost approach analysis
6:39 Cost approach valuation variables
6:40 Income approach analysis 6:41 Valuation variables
6:42 Income approach valuation analysis
6:43 Value conclusion
6:44 Illustrative example of the market approach
6:45 Illustrative example fact set and analysis assumptions
6:46 Market approach valuation variables
6:47 Guideline intellectual property license search procedures
6:48 Guideline patent license agreement royalty rates
6:49 Illustrative example of a royalty rate adjustment grid
6:50 Market approach valuation analysis
6:51 Summary and conclusion
CHAPTER 7. INSURING IP ASSETS 7:1 Overview
7:2 Buyer's rights to acquire coverage under the policies oftarget company
7:3 Coverage for intellectual property and business tortclaims
7:4 When does buyer obtain the benets of targetcompany's insurance coverage?
7:5 Benets available to a buyer under target company'spolicy
7:6 When should buyer add target company as anadditional insured under its policies?
7:7 Target company's interests in analyzing its potentialcoverage for pre-acquisition activities
7:8 Retention of target company coverage that mayrespond to present liability exposure
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7:9 Target company's opportunities to pursue insurancethat will cover post-acquisition claims for pre-acquisition activities
7:10 Insurance coverage opportunities where a targetcompany has licensed intellectual property and assumedindemnity obligations thereunder
7:11 Types of intellectual property claims that may fall withintarget company's insurance coverage
7:12 Evaluating policies to gauge potential coverage forintellectual property torts
7:13 Insurer denials should be scrutinized and challenged
7:14 Advertising injury coverage must be analyzed in light ofa three-part test
7:15 Patent infringement coverage
7:16 Copyright infringement coverage 7:17 Trademark infringement coverage
7:18 Trade secret misappropriation coverage
7:19 Pertinent exclusions and their impact on coverage
7:20 First publication exclusion
7:21 Knowledge of falsity exclusion
7:22 Exclusion for advertisers, broadcasters, or publishers
7:23 Intellectual property exclusions
7:24 Events that may trigger coverage under a third-partyliability or intellectual property defense policy
7:25 Receipt of demand to cease and desist from infringementor to license under asserted intellectual property rights
7:26 Receipt of complaint
7:27 Receipt of a counterclaim or third-party claim 7:28 Entry of judgment
7:29 An insurer's denial of its insured's tender extinguishesinsured's duty to provide further information aboutadditional developments in the underlying action
7:30 Events that may trigger coverage under a third-partyliability or intellectual property defense policyNoticeof appeal
7:31 Courts have held that where facts originally tendered tothe insurer are incompletely alleged but later clariedwith more specicity, the insurer's defense duty istriggered and relates back to the original tender
7:32 When assessing oense-based coverage, courts have held
it of no moment that the facts tendered to the insurerwere raised in dierent forums
7:33 How to pursue IP litigation in conjunction with coverage
7:34 Whom to pursue coverage litigation against
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7:35 What to pursue relief for in a coverage action 7:36 Events that present an opportunity to aid client's
intellectual property enforcement strategy through apursuit policy
7:37 Ten questions intellectual property owners and attorneysshould ask regarding insurance coverage
7:38 Analysis of insurance coverage products that addressintellectual property disputes
7:39 Procuring insurance coverage for pursuit of infringers
7:40 Policy providers
7:41 Procuring insurance for defense of intellectual propertylawsuits
7:42 Advertising liability policy
7:43 Directors and ocers insurance coverage
7:44 Errors and omissions policies 7:45 Selecting the coverage that suits the company
7:46 New opportunities to address risks frommergers/acquisitionsRegulations and warrantiesinsurance
7:47 Documents typically required for representations andwarranty insurance
7:48 Issues raised by representations and warranty insurance
7:49 Checklist for negotiations
7:50 Conclusion
CHAPTER 8. TRANSACTIONS
INVOLVING IP ASSETS 8:1 Overview 8:2 Intellectual property due diligence report
8:3 Intellectual property-related conditions to closing
8:4 Postclosing contractual obligations
8:5 Security interests and other contingent rights in subjectintellectual property
8:6 Intellectual property management participation
8:7 Technology cooperation and escrow agreements
8:8 Short-form intellectual property assignments,legalization, and recordation
8:9 Schedules of assets and liabilities
8:10 IP Representations, warranties, and disclosures
8:11 Post-transaction intellectual property audit
CHAPTER 9. IP ASSET MANAGEMENT 9:1 Overview
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9:2 Intellectual property compliance committee
9:3 Preserving current assets
9:4 Litigation activities
9:5 Portfolio organization
9:6 Prioritization of assets
9:7 Intellectual property legal budgeting
9:8 Internal policies and procedures
9:9 Promoting the growth of the intellectual property assets
FORMS
Form A. Nonbinding Letter of Intent (Buyer to TargetCompany)
Form B. Buyer-Target Company Condentiality Agreement
Form C. Intellectual Property Due Diligence Checklist
Form D. Checklist of Trade Secret Protection Measures
Form E. Intellectual Property Due Diligence Report Outline
Form F. Target Company Representations and WarrantiesPertaining to Intellectual Property
Form G. Intellectual Property-Related Conditions to Closing
Form H. Checklist for Court Acceptance of Defendant Relianceon Validity/Infringement Opinions as Defense toWillful Infringement
Form I. Factors Used in Determining Applicability of Attorney-Client Privilege to Communications with Patent
Agents
Form J. Checklist of Key Rules for Insurance Policyholders inCoverage Disputes
Form K. Intellectual Property Attorney's Checklist forCommunications with Insurance Carriers
Form L. Insurance Policy Forms Checklist: Target CompanyInsurance Coverage
APPENDICES
Appendix 1. Key Provisions of Statutes Relating to Sarbanes-Oxley Act
Appendix 2. Laws and Regulations Governing IntellectualProperty Ownership and Transfers
Appendix 3. U.S. Patent Reform An Analysis of H.R. 1908and S. 1145
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Appendix 4. Industry Impact of Proposed Patent Law Reform: AWar Without Winners?
Table of Laws and Rules
Table of Cases
Index
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