Purchase agreement

Representations and warranties

In technology M&A transactions, is it customary to include representations and warranties for intellectual property, technology, cybersecurity or data privacy?

Representations and warranties in connection with IP, technology, cybersecurity and data privacy matters are customary and highly recommended in Swiss M&A technology transactions (either share deals or asset deals).

According to the Swiss Supreme Court, the regime applicable by law under the Swiss Code of Obligations only covers defects of the shares (in the case of a share deal) or the transferred assets and liabilities (in the case of an asset deal), but not of the underlying business, which makes the regime inappropriate for the sale of a company or a business.

It is therefore important, in this context, that the share or asset purchase agreement sets forth a detailed catalogue of representations and warranties as well as indemnification mechanisms to protect the buyer against possible damage and liabilities.

The exact content of the representations and warranties will mainly depend on the specifics of the transaction at hand, the findings made by the buyer during the due diligence and the negotiations between the buyer and the seller.

That being said, the following representations and warranties are often seen in practice:

  • ownership or proper licensing of the IT systems;
  • proper licensing of the third-party software under the IT systems;
  • absence of failures, viruses, bugs or equivalent issues affecting the IT systems;
  • existence of adequate back-up and disaster recovery procedures in relation to the IT systems;
  • ownership of the IP rights and absence of any encumbrances thereon;
  • proper filing and maintenance of the IP rights (including due payment of all registration and renewal fees or annuities);
  • absence of claims or judgements challenging, restricting or affecting the use, validity, existence or enforceability of the IP rights;
  • ownership of the software developed by the company;
  • absence of claims or judgements challenging, restricting or affecting the ownership or use of the software owned by the company;
  • absence of agreements limiting or restricting the ability of the company to use, exploit, assert or enforce any of its intellectual property rights;
  • absence of delivery, licence or disclosure of the source code for the software to any third party;
  • absence of specific requirements or restrictions related to any open source code contained in the software;
  • absence of infringement of the IP rights or software of the company;
  • absence of infringement of any third party intellectual rights by the company;
  • compliance with all good business practices and relevant legal requirements with respect to data protection and data security; and
  • absence of any claims or inquiries of any kind by a third party (including a data protection supervisory authority) of any breach by the company of any legal requirements with respect to data protection and data security.


In addition, the buyer often requests a confirmation from the seller that the company (in the case of a share deal) or the transferred business (in the case of an asset deal) complies with certain specific regulations, practices or standards, applying to certain technologies or business, such as the fintech or medtech fields.

The parties are also free to negotiate the definitions of ‘IT systems’, ‘IP rights’ and ‘software’ in the share or asset purchase agreement. Traditionally, the definition of ‘IP rights’ covers a relatively broad range of elements, such as patents (whether registered or not), trade names, trademarks, designs, logos, copyrights, domain names, trade secrets and know-how.

Customary ancillary agreements

What types of ancillary agreements are customary in a carveout or asset sale?

The agreements listed hereunder are relatively frequent in Swiss carve-out and asset deals:

  • transitional services agreements (eg, appointment of the seller as agent of the buyer in connection with certain limited services); 
  • licence agreements, in cases where the seller only grants a licence to the buyer, without transferring the underlying intellectual property rights; and
  • IP rights assignment and licence-back agreements, in cases where certain intellectual property rights are transferred to the buyer and immediately licensed to the seller.
Conditions and covenants

What kinds of intellectual property or tech-related pre- or post-closing conditions or covenants do acquirers typically require?

The following topics are often addressed either in the form of pre-closing conditions or closing actions:

  • remediation actions regarding the ownership/chain of title of IP, including assignment of IP rights from current and/or former employees, consultants, etc;
  • signing of new employment agreements with strengthened IP clauses in favour of the employer;
  • signing of ancillary agreements such as transitional licence agreements, services agreements and cooperation agreements, etc;
  • third-party consents, in cases where material agreements contain change of control or non-transfer clauses;
  • confirmation that all representations and warranties are true and correct (at least in all material aspects); and
  • specific covenants from the seller (eg, prohibition to dispose of specific assets without the buyer’s consent).


In the context of asset and carveout deals (less often in the case of share deals), the parties often also agree on certain post-closing actions or undertakings addressing the consequences of the transfer in relation to IP rights. The buyer may, for instance, undertake to announce and document the transfer with the relevant IP registries, in order to update the various IP registrations affected by the transfer.

Survival period

Are intellectual property representations and warranties typically subject to longer survival periods than other representations and warranties?

In share deals, intellectual property representations and warranties are generally treated as standard representations and warranties and not as fundamental ones, such as title to the company’s shares, for instance.

The duration of such representations and warranties will mainly depend on the negotiations between the parties, but typically between 18 and 24 months (with, more rarely, a possibility to go down to 12 months or, on the contrary, to extend the duration to 36 months).

In asset deals, particularly where registered intellectual property rights (eg, patents) are transferred, the duration of specific representations and warranties such as the title to or the right to use the relevant intellectual property rights can sometimes be extended to longer periods between five and 10 years, depending on the negotiations and the circumstances of the case at hand.

Breach of representations and warranties

Are liabilities for breach of intellectual property representations and warranties typically subject to a cap that is higher than the liability cap for breach of other representations and warranties?

Intellectual property representations and warranties are generally subject to a global liability cap, which applies to all representations and warranties given by the seller, subject to some (very) limited exceptions (the ‘fundamental’ representations and warranties, which include, for instance, the title to the company’s shares).

The global liability cap for standard representations and warranties is typically between 10 per cent and 20 per cent on auction process and between 20 per cent and 30 per cent of the purchase price on bilateral process, while the cap for fundamental representations and warranties is very often set at 100 per cent of the purchase price.

Are liabilities for breach of intellectual property representations subject to, or carved out from, de minimis thresholds, baskets, or deductibles or other limitations on recovery?

Liabilities for breach of intellectual property representations and warranties are generally subject to the de minimis thresholds, baskets and deductibles negotiated between the parties. It is rare that a specific regime is negotiated for breaches of intellectual property representations and warranties.


Does the definitive agreement customarily include specific indemnities related to intellectual property, data security or privacy matters?

Specific indemnities are not granted in all cases by the seller. They are usually negotiated by the buyer to be protected against specific and/or material issues identified during the due diligence. The rest of the risks related to the acquired company or business is addressed through representations and warranties, which, contrary to the specific indemnities, are generally subject to various contractual limitations and caps.

The subject matter of the specific indemnities is not standardised and mainly depends on the nature of the risks identified by the buyer (eg, identified data breach). In any case, the seller generally undertakes to fully indemnify the buyer against any damage and liability he, she or it may suffer in the event that the identified risks would materialise (including, for example, court costs and reasonable lawyers’ fees).

As mentioned above, the specific indemnities are generally not limited or qualified (including, in particular, by the buyer’s knowledge). It is also relatively rare that the specific indemnities are subject to the de minimis limitations negotiated among the parties. Prudent buyers, however, request often a specific cap in relation to given indemnities.

Walk rights

As a closing condition, are intellectual property representations and warranties required to be true in all respects, in all material respects, or except as would not cause a material adverse effect?


The answer to this question depends primarily on the outcome of the negotiations between the parties. In general, IP representations and warranties (as the rest of the representations and warranties) are given by the seller both at the date of signing and at the date of closing, with the same materiality threshold. The representations and warranties must, in principle, be accurate in all respects, subject to certain specific limitations or qualifications applying to a limited number of representations and warranties. In an auction context, a significant part of the representations and warranties are generally subject to a general materiality qualification.

In the current seller-friendly environment, sellers very often successfully resist the inclusion of bringing down closing conditions. In certain deals, they may succeed in getting a closing condition according to which no event shall have occurred up to the closing date that materially affects the given representations and warranties.