White SW Computer Law
|Intellectual Property, Information Technology & Telecommunications Lawyers|
Melbourne Office - PO Box 452, COLLINS STREET WEST Victoria 8007 Australia
Sydney Office - GPO Box 2506, SYDNEY New South Wales 2001 Australia
Telephone: Melbourne Office - +61 3 9629 3709 Sydney Office - +61 2 9233 2600
Facsimile: Melbourne Office - +61 3 9629 3217 Sydney Office - +61 2 9233 3044
Email: firstname.lastname@example.org Internet: http://www.computerlaw.com.au
When looking to float or sell a business, potential investors and purchasers should conduct due diligence.
Due diligence involves, in part, looking at the financial and all other records which relate to the assets and liabilities of the vendor.
Intellectual property is often an essential part of the transaction and if it is not in order this can lead to expensive problems.
For example, does the business own the intellectual property subsisting in its software or does somebody else own those rights. For licenced products is the licence transferable to a new owner?
To look at these issues a more closely, we need to examine the law.
Copyright is the most common form of intellectual property right and arises automatically when a work is created. Copyright, for example in computer programs and other literary works, is governed by the Copyright Act 1968 (Cth) and vests in the author of the copyright work.
The author of software source code is the copyright owner subject to two important exceptions:
Copyright ownership gives rise to the exclusive right to do all or any of the following acts in relation to the computer program:
When conducting due diligence inquiries in relation to computer programs, the ownership and right to exploit the asset depends on issues such as:
There are other forms of intellectual property rights such as trade marks, patents, designs and circuit layouts that should also be investigated. Similar enquiries should be made in relation to the ownership of those assets.
As Intangible assets are easily transferable and mistakes can sometimes be made appropriate warranties and indemnities should be sought when purchasing such assets, especially unregistered rights such as copyright.
If a warranty, for example in relation to intellectual property ownership, is breached, you have the right to claim compensation for all loss which was foreseeable. If loss or damage is suffered which is indemnified then you have the right to claim compensation for all loss or damage whether it was foreseeable or not..
Remember warranties and indemnities only have value if the parties offering the warranty and indemnity are able to pay any claim which may be brought. Wherever possible, such warranties and or indemnities should be supported by insurance or personal guarantees to improve your chances of recovering loss or damage suffered as a result of the transaction.
Intellectual property can constitute a large component of a business' asset portfolio and purchasers need to ensure that their investment is protected by the necessary written records, warranties and indemnities to avoid costly litigation either pursuing the vendor for recovery of the purchase price and / or as a defendant in an intellectual property infringement claim commenced against the purchaser by the true intellectual property owner.