The acquisition of a business, whether via the purchase of
either its shares or its assets, often involves the transfer of
intellectual property. Generally, in the former scenario, the
transfer of IP is by operation of law, whereas in the latter case,
the specific intellectual property rights subject to the transfer
are specifically detailed, usually in a schedule to the purchase
agreement governing the deal. In either case, the careful attention
must be paid to the IP during the diligence phase in order to
effectively capitalize on the full value of the IP's intangible
Below is a non-exhaustive list of issues that ought to be
considered in the context of the purchase or sale of IP:
Determine whether proper vesting of title has occurred in the
case of intellectual property created by employees or independent
contractors of the business.
Delineate the scope of intellectual property licenses that the
target business has rights under.
Understand the scope of the risk of acquisition of the
intellectual property in light of any sources of potential
intellectual property infringement.
Understand the royalty obligations of the target business.
Understand the tax implications that arise from obtaining title
to the intellectual property as opposed to licensing such rights
from a third party.
Understand the tax implications that arise from any involvement
in the rights acquired of jurisdictions where tax treaties have
Understand when the acquisition of intellectual property assets
constitutes prohibited anti-competitive acts under sections 78 and
79 of the Competition Act. These sections aim to prevent acts that
have or is likely to have the effect of preventing or lessening
competition substantially in a market by a person with substantial
or complete control of a class or species of business.
Determine whether the acquisition of the intellectual property
falls within the requirement for merger reporting of asset
acquisitions under Part IX of the Competition Act. This Part
provides for the reporting of asset acquisitions where amounts
relating to the parties' assets and revenues exceed specified
Identify the jurisdictions that the intellectual property
rights pertain to and determine whether each jurisdiction requires
a separate assignment of rights.
Note the implications of the timely recording of the transfer
of intellectual property rights in each jurisdiction, for example,
implications on the continued ownership of the rights (for example,
in the case of trademarks), the availability of infringement
actions, and the receipt of other benefits that flow from the
rights (for example, royalties).
The author would like to thank Larissa Leong, summer
student, for her assistance in preparing this legal
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The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should be
sought about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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