Intellectual Property: What should Operators watch out for? Part 2

Intellectual Property: What should Operators watch out for? Part 2

We asked our experts…

This week, we’re following up on our conversation with Felicia Solomon regarding the Intellectual Property (IP) landscape in Kenya.

Below is part 2 with a focus on future trends in IP and M&A activity.

What Future trends in IP law should Kenya businesses be preparing for?

Kenyan businesses should anticipate and prepare for the following future trends in IP law:

1. Technological advancements: Rapid developments in technology, including artificial intelligence, blockchain, and biotechnology, will present new challenges and opportunities for IP protection, requiring updated legal frameworks and strategies.

2. Globalization and cross-border enforcement: Increasing international trade and digital commerce will necessitate enhanced collaboration and harmonization of IP laws across jurisdictions to address issues such as online piracy, counterfeiting, and jurisdictional disputes. One such harmonization effort is the African Continental Free Trade Area (AfCFTA) Protocol on Intellectual Property Rights, which was adopted on February 2023 by Member States of the AfCFTA. The protocol seeks to promote access to knowledge and technology transfer by emphasizing cooperation and the importance of using the flexibilities provided in existing international Intellectual Property Rights regimes. The protocol also seeks to establish a coherent IP rights policy as well as a harmonized system of IP protection in Africa, and it will be interesting to see how the same is actualized.

3. Emerging IP issues: Addressing emerging IP issues, such as the protection of indigenous knowledge, traditional cultural expressions, and genetic resources, will require proactive measures to balance innovation with respect for cultural heritage and biodiversity.

4. Alternative dispute resolution mechanisms: Embracing alternative dispute resolution mechanisms, such as mediation and arbitration, for resolving IP disputes efficiently and cost-effectively, reducing reliance on traditional litigation.

What roles does IP play in the valuation of companies during mergers and acquisitions?

In mergers and acquisitions, intellectual property often plays a critical role in the valuation and due diligence process. Key considerations include:

1. Assessment of IP portfolio: Conducting a thorough review of the target company's IP assets, including patents, trademarks, copyrights, and trade secrets, to ascertain their value, enforceability, and potential risks.

2. Evaluation of third-party rights: Identifying any existing licensing agreements, encumbrances, or infringement claims related to the target company's IP assets that may impact the transaction or future operations.

3. Mitigation of risks: Implementing strategies to address any identified risks or deficiencies in the target company's IP portfolio through renegotiation of agreements, indemnification clauses, or remediation efforts.

4. Integration planning: Developing a comprehensive plan for integrating the acquired IP assets into the acquiring company's portfolio and operations, including updating ownership records, maintaining IP registrations, and aligning IP strategies with business objectives.

5. Merger Filing: Some assignments of IP assets may also trigger the requirement to file merger applications, particularly where the assets being assigned result in a change of control of a business. Therefore, it is important to consider the impact of acquiring IP assets, particularly in instances where the parties may not want to merge their businesses.

What are the red flags CFOs should look out for?

Red flags Chief Financial Officers (CFOs) should look out for include:

• Undisclosed IP-related liabilities or litigation

• Inadequate documentation or record-keeping regarding IP assets

• Lack of clarity regarding ownership or licensing rights

• Potential conflicts with third-party IP rights that could impede post-acquisition activities

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