Chapter 3
Problem 3: Guiding Contair Through an Acquisition
Contair is conducting due diligence for a potential acquisition
of R. James & Co., a software consulting company. R. James has expertise
in creating software for other high-end vehicle manufacturers such as voice
activation for some audio, phone, and climate functions, and cruise control
that is designed to maintain a predetermined following distance from traffic
ahead. Contair would like to bring this kind of software design "in-house"
to cut costs and eliminate the competitor's ability to access the technology.
Review of several of R. James' prior contracts reveals that R. James has
often agreed to assign all intellectual property developed in performance
of the contract to its customers. For example, in one contract between
R. James and one of Contair's competitors, Veogri Autos, R. James has agreed
to assign all intellectual property "created, conceived, or prepared by
[R. James] in the performance of services" to Veogri. In addition,
R. James has warranted that all R. James' deliverables under the contract
are non-infringing and indemnified Veogri for all intellectual property
infringement claims arising from those deliverables.
Advise the president of Contair about the intellectual property risks associated
with the acquisition of R. James & Co. What methods would you suggest
for assessing the level of risk associated with the IP ownership clause
and the IP indemnity clause? How would you suggest that Contair mitigate
those risks both through continued due-diligence investigation and through
amendments to the proposed acquisition agreement?
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