Study Of Cross-border Mergers And Acquisitions Of Patent Issues

To study the patent transaction from the perspective of cross-border merger & acquisition (M & A) is a somewhat new area. The patent-related transaction issues during cross-border M&A include due diligence and evaluation of patent, mode of patent transaction and anti-trust investigation. By introducing the method of comparative institution analyses, this dissertation is aimed to make a systematic research on the patent transaction during the cross-border M&A and is trying to propose some useful suggestions to the problems arising from theoretical and practical prospects. The relevant management, economics and legal theories are used in the analysis. Besides introduction and conclusion, this dissertation includes five chapters.In chapter 1, the interrelation among patent system, technology development and cross-border M&A is analyzed. From the historical perspective, the creation and development of patent system is crucial to the technology progress. The developed patent system promotes the new technology to appear, adds more values to patents, facilitates the transaction of patent worldwide and hence makes the patent important intangible property of different ages. Innovation of patent system brings comprehensive progress in all technological fields, which makes technologies more interrelated and dependent, so the integration and concentration of different technologies is inevitable. And the M&A is one of the effective ways of integrating and concentrating technologies. In this internet and digital era, the cross-border use of technology is really convenient, so the integration of technologies happens not only in one country but also in different countries, which is so-called cross-border problems arising from technology progress. From the cross-border theory of FDI School and strategy M&A theory, technology is the core factor considered in M&A. From the practical perspective, cross-border M&A and the international application of patent share some common fluctuation waves. The active areas of cross-border M&A is in conformity with the active areas of non-residence applications of PCT. So patent system, technology progress and cross-border M&A must share some relevance.In chapter 2, patent due diligence and evaluation for cross-borer M&A are studied. A complete patent due diligence shall include the identification of patent assets, relevant risks of patent transaction and evaluation, evasion of risks, synergies of different patents and the effective usage of post-M&A patent assets. The specific content of patent due diligence include identifying the substantially important patent technology of the M&A, accessing and reviewing all relevant materials of the identified patent, validity and sufficiency checking. The most commonly used method of patent due diligence is collecting and analyzing the patent related information. Based on the patent legal system, supported by patent technology, patent evaluation is aimed to provide a definite economic value for certain patent. The patent evaluation has some legal, exclusive, risky and uncertain characters. Generally, the often used patent evaluation methods include industry standards, rating method, rules of thumb, discounted cash flow method, advanced valuation methods (Monto Carlo and Real Options) and auctions. The above-mentioned methods can be classified as cost base methods, market based methods, income based methods and changing risks based methods. The ranking method and Real Options method are most appropriately methods used for evaluating patents because of their qualitative analysis advantages. Georgia Pacific Factors and CHI method are two kinds of applications of the ranking method. CHI method focuses on technological factor but neglects market development; while Georgia Pacific Factors pays more attention to market situations, but lack quantitative analysis. Mixing Georgia Pacific Factors and CHI method together may be a valid way of evaluating patents.In chapter 3, Patent-related transactions during cross-borer M&A are studied. The patent systems of different countries share some procedural and substantive similarities due to signing of international patent treaties, such as Paris Convention, TRIPS agreement and PCT. Though some similarities exist, the difference is still large for the patent system. The difference and similarities of different patent regimes are sure to influence the value of patents and transaction cost for patent transfer during cross-border M&A.The patent related transactions during cross-border M&A include patent licensing, ownership or controlling right transfer of patents. Whether mode is adopted depends on willingness of concerned parties, technology situation and transaction arrangement. Ownership or controlling right transfer and licensing both enjoy some advantages and disadvantages. The licensing agreement can be classified as exclusive license, sole license and simple license. Therefore the licensing agreement can also be classified as explicit licensing and implied licensing. Ownership or controlling right transfer of patent during cross-borer M&A can be done through patent asset and stock acquisitions. Cross-border licensing of patent has no difference from domestic licensing except that outflow of specific patent is restricted in some countries and the proper law needs to be considered. Cross-border and domestic patent-related asset and stock acquisitions also share some similarities, but patent-related asset and stock acquisitions is more controlled by national laws and the proper law generally is local law. Tax is a critical factor in technology transfer during cross-borer M&A. As for the transnational technology transfer, the different tax levying policy of different countries may bring double taxation burden for the transaction parties, so the relevant parties shall pay special attention to the tax laws of different countries. Therefore through some accurate and considerate arrangement of transaction structure, some tax burden may be reduced.In chapter 4, the anti-monopoly problem of patent related issues during cross-borer M&A is studied. As for the relationship between patent and anti-trust law, three opinions exist. Some scholars think that patent law shall prioritize the antitrust law, and some scholars think antitrust law shall prevail. This dissertation thinks that the balanced relation between patent and antitrust law shall be the best choice. The triggering balance standard shall be cost and benefits analysis. Efficiency shall be the goal of antitrust review of patent licensing and convergence. As for the patent licensing during cross-borer M&A, the antitrust review shall be done through economic analysis. The rule for antitrust review of patent licensing shall include per se illegal and reasonable analysis. Cross-border and domestic patent licensing share similar antitrust view standards. And the antitrust view of patent concentration shall be no different from other properties, but the unique character of patent shall be considered. The patent concentration under antitrust law includes acquisition of substantially important patent assets or controlling stock of a company which boasts important patent assets. Cross-border and domestic patent concentration also apply similar antitrust review standards. The remedies for patent related transaction during cross-border M&A are used for some transaction having an antirust effect, which can be remedies by taking some special measures. The remedies methods comprise of structural and non-structural ways and more non-structural method is used for patent related antitrust analysis. For the patent related cross-border M&A which has global impact, the global consumer welfare shall be considered.In chapter 5, the patent related problems during M&A of domestic enterprises by foreign investors and overseas M&A by Chinese investors are studied. This dissertation thinks that the legal norms related with patent transaction during foreign M&A can be classified as regulative and encouraging ones. The regulative norms are restrictive because its limitations on the domestic or overseas transfer of patents, while encouraging norms are used to facilitate the patent transfer. All those norms in China are not good to patent transactions and some reforms are needed. In China, a unified and authoritative reviewing organ for foreign investment shall be established; uniform application of foreign investment policy is needed. China shall encourage foreign investors to transfer its patent technology during M&A. China also needs to enhance its antitrust, anti-unfair and national securities review of patent transaction during M&A. China may write its own antitrust guidelines for licensing and concentration of patent, clarify its reviewing standards for national securities. The overseas utilizations of patent by Chinese investors may be blocked because of antitrust, national economic securities and other restrictive measures by foreign governments. The Chinese investors can make best use of the derivatives value of patent assets during overseas M&A. Chinese government shall confer more market status to its companies and reduce its micro-intervention of market in order that the Chinese companies can easily passed relevant regulating reviews. Therefore Chinese companies shall be cautious during overseas patent acquisitions; special attention shall be paid to due diligence, coordination of technologies and relevant tax arrangements.