Whilst accounting and taxation issues are often key drivers behind restructuring corporate groups, it is also often worth considering intellectual property ownership and licensing issues that might arise from the restructure.
Asset protection
Certain structures can be implemented to reduce the risk that intellectual property assets will be exposed to claims by other parties. For example, a separate legal entity can hold the intellectual property and licence it to entities within the group to afford some protection.
Enforcement
What is also often overlooked is which entity within a corporate group has the legal right to bring infringement proceedings, should a competitor be using the intellectual property without authority of the owner.
For example, in respect of a patent, only the owner of that patent or an exclusive licensee of that patent has the right to enforce infringements. It follows that if a subsidiary company is a non-exclusive licensee, it has no right to bring patent infringement claims.
The US case of LP v GSE Lining Technology, Inc. 383 F.3d 1202 (Fed Cir 2004) illustrates how this could be an issue. In that case, the holding company owned the relevant patents and granted a non-exclusive licence to one of its subsidiaries. The holding company sued a competitor for lost profits resulting from infringement of its patent. However, as the subsidiary was the trading entity, not the holding company, the Court on appeal did not allow the holding company to sue for lost profits incurred by its subsidiary.
If the licence within the corporate group had been an exclusive one, the trading entity would most likely have been able to recover lost profits.
Summary
When restructuring within a corporate group, the following issues should be considered:
- What is the appropriate entity to hold the intellectual property?
- Are licenses of intellectual property documented properly?
- What rights has the licensee been granted under a licence? Is the licensee able to enforce its rights in the event of any infringement?\
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