October 1, 2009
Transfer of Intellectual Property in a Merger
Nixon Peabody has a summary of a decision just handed down by the Sixth Circuit in Cincom Sys, Inc. v. Novelis Corp. The decision (below) is worth reading, especially if you are a young lawyer buried under a pile of assignment clauses deep in the back of the diligence room - though these days the diligence room is just as likely to be virtual. In any event, the court in Cincom expands the rule in the Sixth Circuit against the assignability of patents to software copyright licenses. So, where a software license is silent on the question of transfer to a third party, the presumption is that no assignment or transfer is permitted without the express permission of the licensor.
The court also interpreted Ohio General Corporation Law Sec. 1701.81 (A)(3) to include a "transfer" for the purposes of determining whether or not a merger is considered a "transfer" under the Ohio code. Notwithstanding the fact that amended code drops the word "transfer" from this provision, the court held that a merger constitutes a transfer by operation of law or otherwise. Here's the amended language that the court looked at:
(3) The surviving or new entity possesses all assets and property of every description, and every interest in the assets and property, wherever located, and the rights, privileges, immunities, powers, franchises, and authority, of a public as well as of a private nature, of each constituent entity, and, subject to the limitations specified in section 2307.97 of the Revised Code, all obligations belonging to or due to each constituent entity, all of which are vested in the surviving or new entity without further act or deed. Title to any real estate or any interest in the real estate vested in any constituent entity shall not revert or in any way be impaired by reason of such merger or consolidation.
If you're sitting in Ohio (or elsewhere in the Sixth Circuit) looking at assignment clauses, it's time to wake up.
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