SWITZERLAND Trends and Developments Contributed by: Marco Toni and Lara Pafumi, Loyens & Loeff
the due diligence process in a technology M&A transaction. Specifically, these include IP, soft- ware and IT in general, and employees. The core value of tech companies naturally lies in their intangible assets. IP due diligence therefore plays a central role and usually involves determining the portfolio and extent of IP owned by the target. Legal IP due diligence often goes along with technical due diligence of the target’s IP, especially in technology-driven industries. A clear understanding of the technology in ques- tion is necessary for the determination of what IP rights may and should be in place. IP due dili- gence should also cover prior, current or emerg- ing disputes in connection with the company’s IP portfolio. During the due diligence process, the software owned and used by the target company needs to be identified. The purpose of this is to deter- mine the type of the software, the identity of its developers, and the ownership of the software claimed by the target, as well as to verify the licensing of the software and to assess the legal- ity of the efforts to market it. Corporate IT environments are becoming increasingly complex, not least owing to the rise of AI. In this context, IT due diligence is becom- ing crucial. The goal is to ensure that risks such as system vulnerabilities and data breaches are identified early. It is also important to ensure that the integration or divestiture process does not disrupt critical business processes. As regards employees, the due diligence will include a review of the employment contracts – in particular, those of the founders and other key employees. In the context of IP and technology, it is critical to determine the existence of any employee-generated IP or technology. As part of
the due diligence process, the ownership rights to such intangible assets must then be clarified. According to Swiss employment law, inventions and designs produced by the employee in the course of the employee’s work for the employer and during the performance of the employee’s contractual obligations belong to the employer. Furthermore, the employer may acquire inven- tions and designs created by the employee in the course of the employee’s work for the employer – but not during the performance of the employee’s contractual obligations – against reasonable compensation. However, if the employee creates works pro- tected by copyright, it is necessary to distin- guish between software and other copyrighted works. If software is created by an employee while discharging professional duties and in ful- filling contractual obligations, the Swiss Copy- right Act grants exclusive rights to the employer. Regarding other works protected by copyrights, the so-called creator principle is applicable and the rights are not automatically transferred to the employer. For more details on copyrights and information on how to deal with works protected by copyrights created by contractors or other third parties, including software, please refer to the subsection on IP protection later in this article. Another aspect to consider is that technology transactions frequently involve a strong wish on the part of the buyer to continue collaborating with the seller. This is a way to secure key com- petencies and know-how and also an effective tool to implement a non-compete clause under Swiss law. Typically, in such cases, the seller remains in a management position.
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