asset acquisitions - Jackson Walker LLP

Section 3.25(d) requires disclosure of information that will enable the buyer todetermine whether the seller has patents for the technology used in its businesses and howlong any such patents will remain in force; it will also enable the buyer to do its own validityand infringement searches, which the buyer should do if the seller’s representations aresubject to a knowledge qualification or if the patents are essential to the buyer.The buyer should seek assurances that the seller’s patents are valid. For a patent tobe valid, the invention or discovery must be “useful” and “novel” and must not be “obvious.”Very few inventions are not “useful”; well-known examples of inventions that are not“useful” are perpetual motion machines and illegal devices (such as drug paraphernalia). Toqualify as “novel” the invention must be new; a patent cannot be granted for an inventionalready made by another person, even if the person seeking the patent made the inventionindependently. An invention is “obvious” if the differences between the invention sought tobe patented and the prior art are such that the subject matter of the invention as a wholewould have been obvious at the time the invention was made to a person having ordinaryskill in the art to which the subject matter pertains.To determine conclusively that an invention is not “obvious” requires knowledge ofall prior art. It is difficult even to identify all prior art relevant to the invention, much less tomake judgments about what would have been obvious to a person having reasonable skill insuch art. Thus, although the seller may in good faith believe that its patents are valid, thosepatents are subject to challenge at any time. If someone can establish that the inventioncovered by a patent does not meet these three criteria, the patent will be invalid. Because ofthe difficulty in conclusively determining the validity of a patent, the seller will want to adda knowledge qualification to the representation concerning validity. Whether the buyeragrees to such a qualification is a question of risk allocation.If the buyer agrees to a knowledge qualification, it may want to conduct a patentsearch in the PTO (and, if appropriate, the European Patent Office and other foreign patentoffices) to identify all prior art and obtain a validity opinion. However, such searches andanalysis of their results can be costly and take time.The buyer should ensure that the terms of the seller’s patents have not expired andthat all necessary maintenance fees have been paid. In general, the term of a utility or plantpatent is twenty years from the date of application. Special rules apply to patents in force onor applications filed before June 8, 1995. Patents that were in force on June 8, 1995 andpatents issued on applications filed before that date have a term equal to the longer ofseventeen years from the date of grant or twenty years from the date of application. Theterm of a design patent is fourteen years from the date of grant. Maintenance fees in designon utility patents must be paid during the six-month period beginning on the third, seventhand eleventh anniversary of the date of grant. Maintenance fees need not be paid on plantpatents or design patents.In many states, an invention made by an employee is not necessarily the property ofthe employer. The buyer should verify, therefore, that the seller has perfected title to allpatents or patent applications for inventions made by its employees. In addition, the sellershould have written agreements with its employees providing that all inventions, patentapplications, and patents awarded to employees will be transferred to the seller to the fullextent permissible under state law.3148166v1- 100 -