SINGAPORE Law and Practice Contributed by: David He, Benjamin Teo, Kinnari Sahita and Binh Vong, Gunderson Dettmer Singapore LLP
Intellectual property Intellectual property (IP) diligence includes ensuring that: • all IP necessary to operate the business is properly owned and enforceable against infringing third parties; and • the company is not infringing third-party IP. Ownership diligence involves ensuring that: • all service providers who have contributed to the development of IP have assigned all inventions created in relation to their engage - ment without further action required to effect the assignment; • no other person (whether a joint venture part - ner, research institution, governmental body or otherwise) owns or may claim joint owner - ship of the company’s IP; • the company has proper policies in place for the protection of its codebase and its trade secrets; • the company has validly registered, and maintained its registrations for, all registrable IP, including copyrights, marks and patents; • the company has proper licences on sustain - able terms for requisite third-party IP, and has provided licences to use its IP under enforce - able and sustainable terms; and • the company is not using any open-source software subject to copyleft licences that would require the company to distribute/ reveal its source code. Non-infringement diligence involves confirming: • general compliance with third-party licences and no pending or threatened claims; • that the company has reasonable policies in place governing the use of open-source soft -
• exclusivity terms regarding inbound and out - bound licensing of technology, anti-competi - tion restrictions and other restrictions on the company’s business; • anti-assignment terms, which may delay a future exit (particularly if such transaction is structured as an asset sale); • burdensome warranties or covenants that are impractical for an early-stage start-up to satisfy; and • high liability caps or uncapped liability that could expose the company to extensive dam - ages in a breach, especially in businesses that may be more vulnerable to product liability claims, or companies that aggregate or store sensitive customer data. Acquisitions If the company has engaged in any past acqui - sitions or business combinations, or is in the process of negotiating such transactions, it is important for an investor to understand what contingent obligations the company may con - tinue to owe to the counterpart(ies), including: • any earn-out arrangements and other reten - tion or similar obligations to sellers’ employ - ees and founders; • escrow or holdback arrangements that may not be immediately recorded, but which the company will need to account for in the future, whether in cash or equity; and • breaches or potentially indemnifiable losses identified at closing, if a full audit cycle has not yet been completed on the target.
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