Luxembourg: Intellectual Property Joint Ventures – Can Rivals Turn Into Valued Partners?

Compared with a typical research and development cycle the acquisition of IP often requires less resources (time and money). Depending on the IP status and asset maturity, the likelihood in a merger or acquisition increases that the developed products or services achieve commercial viability.

However we face limitations for mergers. Especially if two major market players think about collaboration opportunities, the selectable options might be restricted for example by anti-trust regulations. Hence, we need to search opportunities underneath full-scale mergers or acquisitions. More reasons/need for (sole) IP collaboration...

What are potential models for IP collaboration?

IP Licensing: Permission to use Intellectual Property transferred between two parties, the IP provider/owner and the recipient/licensee. For example technology licensing is an agreement where the owner of a technological Intellectual Property (the licensor) allows the other party (the licensee) to use, modify, or sell the technology, usually in exchange for compensation. More tightened, the licensor allows the licensee in a component business a product with embedded technology rights, i.e. to install and resell a core processor from the licensor in a computer produced by the licensee.

Contract R&D: One party sets the ambition, establishes the objective and pays. The other party conducts research to meet the objective. The roles and responsibilities are clearly set within the contract. We know them from all kind of supplier – customer relationships.

Joint Venture: Companies enter a JV and combine their IP assets as key contributions. An IP joint venture can involve patent and/or trademark sharing. It can be extended to an R&D JV. Limitations to a certain field of technology can occur. Such joint ventures are common.

Joint Ventures are the most collaborative models listed here, having four lifecycle stages:

  • Pre-contract, before the signature of the joint venture agreement
  • Contract, signing a joint venture agreement
  • Implementation, fulfilment of the JV contractual obligations
  • Termination, end of the JV contractual obligations

All stages incorporate distinct challenges. The JV parties must agree on the value of the contributed IP assets and balance contributions somehow in the contract. During the life of the partnership they have to work together. In this stage the JV partners assess regularly their respective responsibilities and royalties to adjust and maintain successful business collaboration. Joint ventures often operate like startup businesses incorporating similar uncertainties and risks. Even at the very beginning of the JV endeavor it has to be clarified how the exit of a partner and the termination of the JV will be organized and how the existing IP assets will be shared.

IP consultants involved in a transaction have the following responsibilities:

  • Understand the transaction and its implications for the involved parties, especially with regard to the IP assets and related liabilities
  • Conduct an IP due diligence (IP DD) to identify exactly what each company is contributing to the JV and to establish the legal strength of the IP rights
  • Assemble the DD results with insights from a technological analysis and a commercial assessment to an IP assessment of all parties, i.e. to determine if they cover the required technical field, products/services and geographic region
  • Develop an IP landscape for the JV and suggest options for future development Create the JV business model
  • Support contract creation and negotiation, including representations, warranties, covenants, licenses, transition agreements, exit rules
  • Support and coordinate post-closing IP tasks, i.e. prosecution and maintenance

Case study: Competitors turn into IP partners

In a project we saw two global players active in the same segment as major suppliers to the manufacturing industry. Developing new products and services based on similar technologies and addressing the same customer segments, both parties weakened their mutual IP position by opposing heavily to patents of the other company in the past. As the market situation becomes more challenging and new competitors emerge, both players feel that they need to protect their technologies and products more comprehensively. The companies decided to switch from an attitude of confrontation to a new age of collaboration. Due to expected conjoint market share they would not get an approval to merge their respective businesses in full. Instead they intended to work together as partners rather than to continue to hinder or even destroy IP value mutually as bearish competitors. Both parties entered discussions on creating an IP and R&D joint venture while keeping the product/service commercialization separate.

We were asked to run an IP assessment to determine the strengths and weaknesses of both parties' IP portfolios that will be transferred to the JV. The intention was to provide an unbiased view on the portfolios that cover the respective technologies and to perform a qualitative assessment split in three parts.

  • The legal assessment covered all aspects related to the selected IP rights status, ownership, patentability for pending decisions, freedom-to-operate analysis, scope of protection, potential circumvention and breadth of coverage, detectability and enforceability. The different patent families under consideration were evaluated and ranked in the appraisal.
  • In the commercial assessment we outlined the industry attractiveness market-, demand-, development-, and competitor-wise. We evaluated the position of both contributing parties with regard to market access, customer relation and value chain contribution. Recommendations were developed to enforce the identified strengths and to overcome the important weaknesses.
  • The technology assessment and patent landscape part comprised a thorough search definition of relevant attributes. The tool-based IP literature analyses retrieved existing and potentially new competitors, as well as stakeholders active in the same, alternative or adjacent technologies. We identified main levers from the patent landscape to drive the value chain and the technology development further.

Finally, the overall comparison confirmed the joint venture creation. The JV can become an enabler to leverage synergies, to benefit commercially and to resolve existing IP's legal weaknesses in the future.

Patent pools offer a particular way of IP sharing but not necessarily for collaborating. Patents are aggregated from different patent holders. The IP rights are made available to pool members and can be licensed even to non-members. The creation of a patent pool can save patentees and licensees time and money. In case of blocking patents, it offers a reasonable way for making the invention available.

Building a patent pool and other transaction types like acquisitions or target searches can be appropriately encouraged by an IP assessment. For example if a company pursues a sale of a subsidiary or business unit an IP assessment makes sense to design the carve-out transaction successfully. The carved-out business often shares IP assets with its parent and other affiliates. In this case, the assessment including an IP due diligence becomes critical to identify the assets transferring to the target company and those remaining with the seller. All parties have to determine licensing or other ways of providing IP to the carve-out or its buyer company, either for a transitional or long-term period.

Conclusion: Joint ventures and especially IP JV offer a valid opportunity for both partners to achieve their objectives in the collaboration without too much liabilities and risks. Based on clear contract terms the companies are able to benefit from the joint IP efforts in a fair manner. IP terms should not be too restrictive, and be creative enough to allow for the full economic potential to be unlocked by each of the partners. IP assessment results are valuable to determine the best way to create, run and even terminate transaction-based collaboration models.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions