In­tel­lec­tual prop­erty a key fac­tor in any M&A

Vi­tal to iden­tify such as­sets prop­erly in any com­mer­cial trans­ac­tion in Africa

Business Day - Business Law and Tax Review - - FRONT PAGE - VICKY STIL­WELL

IT IS well known that there is a grow­ing amount of merg­ers and ac­qui­si­tions (M&A) and other com­mer­cial ac­tiv­ity tak­ing place in Africa, with SA be­ing recog­nised in­creas­ingly as the gate­way to Africa.

In­tel­lec­tual prop­erty (IP) is more of­ten than not one of the last le­gal is­sues to be con­sid­ered in any M&A or other com­mer­cial trans­ac­tion. This is sur­pris­ing, given that ev­ery com­pany or busi­ness has at least one trade­mark and that IP, par­tic­u­larly brands and trade­marks, are usu­ally a com­pany’s most valu­able as­sets.

Com­pa­nies need to en­sure, in any M&A or other com­mer­cial trans­ac­tion, that rel­e­vant IP is iden­ti­fied prop­erly, that its va­lid­ity and en­force­abil­ity is in­ves­ti­gated and ver­i­fied and that it is dealt with appropriately in the agree­ments drafted.

The first step in this process should be to un­der­take a proper IP due dili­gence in­ves­ti­ga­tion in which ap­pro­pri- ate ques­tions are di­rected to the tar­get en­tity, de­tailed and mean­ing­ful re­sponses to those ques­tions are elicited, and agree­ments with IP im­pli­ca­tions are an­a­lysed fully. Independent searches should be car­ried out to ver­ify the ex­is­tence and sta­tus of any statu­tory reg­is­tra­ble IP such as patents, trade­marks, reg­is­tered de­signs and plant breed­ers’ rights. In SA this is a straight­for­ward process as cur­rently not all of the South African Com­pany and IP Com­mis­sion’s (CIPC) records are elec­tronic and man­ual searches are pos­si­ble. The records are eas­ily ac­ces­si­ble and are up to date.

The va­lid­ity and en­force­abil­ity of all rel­e­vant reg­is­tered IP must also be as­sessed prop­erly. As far as patents are con­cerned, SA has a de­posit patent reg­is­tra­tion sys­tem. There­fore, pro­vided that the rel­e­vant forms are prop­erly com­pleted and the req­ui­site fees are paid, the patent will be granted in SA. There is no sub­stan­tive ex­am­i­na­tion as to the nov­elty or in­ven­tive­ness of the sub­ject mat­ter of an in­ven­tion and, as a re­sult, a patent that is reg­is­tered in SA does not nec­es­sar­ily mean that it is valid and en­force­able in this coun­try. It is, there­fore im­por­tant that a proper as­sess­ment of the nov­elty of an in­ven­tion and the va­lid­ity and en­force­abil­ity of any South African patents for such in­ven­tion be car­ried out as part of an IP due dili­gence in­ves­ti­ga­tion.

Although searches for reg­is­tered IP can be done fairly eas­ily in SA, this is un­for­tu­nately not the case in the rest of Africa. In most other African coun­tries, IP reg­istries do not have elec­tronic or com­put­erised records and the man­ual, pa­per records are usu­ally not up to date, par­tic­u­larly as far as re­newals, changes of pro­pri­etor or ap­pli­cant name, li­censees and trans­fers of own­er­ship are con­cerned. This means, firstly, that it is dif­fi­cult to iden­tify reg­is­tered IP. Se­condly, it is dif­fi­cult to ver­ify the sta­tus of such IP with any cer­tainty. Lastly, IP due dili­gence in­ves­ti­ga­tions in these coun­tries are usu­ally ex­pen­sive and time-con­sum­ing. These fac­tors should not de­tract from the im­por­tance of ob­tain­ing as much in­for­ma­tion as pos­si­ble on reg­is­tered IP in African ju­ris­dic­tions.

In many African coun­tries it is manda­tory for li­censees to be recorded on the rel­e­vant of­fi­cial reg­is­ter. A fail­ure to do so can re­sult in the good­will flow­ing from the use of the trade­mark ac­cru­ing to the li­censee and not to the reg­is­tered pro­pri­etor which, in turn, can re­sult in the pro­pri­etor be­ing un­able to en­force its rights. This is an­other rea­son why it is im­por­tant to carry out proper IP due dili­gence in­ves­ti­ga­tions in African ju­ris­dic­tions.

Due to the chal­lenges faced in con­duct­ing mean­ing­ful IP due dili­gence in­ves­ti­ga­tions into reg­is­tra­ble or reg­is­tered IP in African coun­tries it is im­por­tant that strong and com­pre­hen­sive war­ranties be ob­tained from the pro­pri­etor(s) of any rel­e­vant African IP in

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