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?

Yes, it is customary to include such representations and warranties. For example, the target would be asked to represent and warrant that it is the sole and absolute owner of the intellectual property being sold and that such intellectual property does not infringe any third-party rights. Similarly, with regard to data protection, the target would be asked to represent that it is compliant with all applicable data protection and privacy rules, including those notified under the Information Technology Act of India.

Customary ancillary agreements

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

These depend on the facts and circumstances of each matter. However, transitional trademark, cross-licensing and transition services agreements are used.

Conditions and covenants

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

Pre-closing conditions relating to intellectual property are typically that there is no material adverse change in the business or finances of the target owing to any intellectual property disputes or third-party claims, and there is no material challenge to any IP rights owned or used by the target by any third party, including any action for revocation of any patent. As far as post-closing covenants are concerned, these would typically provide for liquidated damages for breaches, such as any misrepresentations, and indemnity for any costs incurred and losses suffered.

Survival period

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

Yes, the periods typically extend to at least to the life of the exclusive rights granted by law, which are generally for more than a decade in most cases, as compared to the standard representations and warranties, which are generally limited to much shorter periods.

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?

This depends on the facts and circumstances of each case. However, generally, the caps are higher. The caps could be a significant percentage of the purchase price or even the full purchase price if the target has no other significant assets other than the intellectual property.

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?

This depends on the facts and circumstances of each case. Generally, liability for breach of IP representations is not taken lightly.


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

Yes. The indemnities would require the seller to indemnify the acquirer and hold them harmless from all costs charges including reasonable fees of attorneys, expenses and losses that arise as a direct or indirect result of the breach of any of the terms and conditions of the acquisition agreement, including any misrepresentations by the seller.

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 IP representations and warranties are generally required to be true in all respects. However, the walk right, depending on the bargaining position of the parties and their risk appetite, would be negotiated to be triggered by a misrepresentation having caused or likely to cause a material adverse effect on the target as determined by the purchaser.