Stephanie Martinez, L'14
As part of our spotlight on careers related to mergers & acquisitions, we’ve invited Stephanie Martinez, a Richmond Law graduate from the class of 2014, to share her experience. Stephanie specializes in intellectual property law, and she often works on the intellectual property issues related to mergers and acquisitions.
Can you describe the career path that led you to become an Intellectual Property Specialist working in Mergers and Acquisitions for McGuireWoods?
It is a bit of a winding one! I started out at a boutique intellectual property firm in Richmond, where I learned the ins and outs of trademark prosecution and enforcement work. Three years in, I lateraled to a midsize firm that focused on litigation. There I was involved more in business litigation matters, while still handling IP transactional work when I could. Although I really enjoyed working at my second firm, I quickly realized that a primarily litigation-focused practice was not for me. When the McGuireWoods opportunity came up, I took it. At McGuireWoods, my practice is almost exclusively transactional. Most of that work is as the IP specialist on M&A transactions. I also spend quite a bit of time drafting and revising agreements, including IP licenses and Master Services Agreements (MSAs). Finally, I maintain my clients’ trademark portfolios.
What is an IP Specialist's role in the typical M&A deal and how might she interact with lawyers from other practice groups?
An IP specialist’s role in an M&A transaction is dependent on if you are buy or sell-side. I typically represent buy-side. On buy-side, I am primarily tasked with determining what IP assets the target entity owns or licenses and if there are any concerns related to those assets. IP assets include both formally filed IP (trademarks, patents, and copyrights) and unregistered IP (common law trademarks, software, etc.). The sellers often are not aware of, or do not tell you, the IP assets that they own, so it requires some digging and asking the right diligence questions to discover all of the material IP assets. Once I’ve identified the IP assets, I also must determine whether there are any issues with the assets. Common issues that I see include: failure to secure rights from developers with proper IP assignments; title to IP assets in other parties’ names (often an affiliated entity or perhaps an individual that owns the target company); and the inability to assign license agreements pertaining to the target entity’s licensed IP (typically software). When I identify those issues, I work with the M&A deal team and the client to determine how we are going to address them. For example, we might require that the seller obtain confirmatory IP assignments from its developers or negotiate special indemnity for any claims that may arise from the failure to obtain assignments. Otherwise, I work with other specialists as may be needed—for example, I might reach out to the labor and employment specialist on a deal to provide me with information about the status of certain developers (employees versus contractors) and I also often discuss the general IP issues I see in a deal with the data privacy specialist.
How does your previous experience at a smaller firm IP practice differ from a larger firm's IP practice?
It mostly differs due to the type of work I do. At my first firm, I focused quite a bit more on trademark prosecution (i.e., preclearing, filing and obtaining registrations for trademarks). I also drafted and revised contracts, but they were for smaller matters. I was not involved in M&A transactions, which is the lion’s share of my work now.
What are the most frequent IP issues in M&A deals?
The target company’s failure to secure rights in its IP assets comes up fairly often and is usually the greatest IP hurdle in a deal if present. This typically relates to software companies that have engaged contractors for software development. Absent a written agreement with effective assignment language (or meeting the qualifications for a work made for hire), the contractor—not the company—owns any IP rights associated with his or her work. Additionally, often these developers are located outside the United States, meaning that any confirmatory IP assignments should comply with the developer’s local law, or they may not be enforceable. We generally require the seller secure confirmatory IP assignments from its developers prior to the transaction closing. We will often draft the actual assignment so as to ensure enforceability. If a developer is not available to execute a confirmatory assignment, then we try to determine the materiality of that developer’s contributions in order to advise the client on how best to proceed. As I mentioned earlier, we may negotiate for special indemnity, or the buyer may decide to assume the risk.
Another issue that comes up frequently is the inability to assign software licenses in an asset deal. Almost all software license agreements include anti-assignment clauses, even the general terms and conditions for Microsoft and other off-the-shelf programs. When a seller is acquiring the assets of a company, it often wants the software licenses for any software used internally in the business, so that the company can “stand on its own” from day 1 post-closing. But with anti-assignment clauses, that may not be possible, particularly if the software is crucial to the company’s business. There are a few ways to handle this issue, including obtaining consents to assign from the software vendors or having the buyer obtain its own license.
Do you have any advice for law students seeking to build a career in intellectual property? Any classes you recommend or perhaps that you wish you had taken?
I recommend taking as many of the practical courses as you can. Professor Erickson’s business litigation course was one of the best classes I took for learning practical skills. In addition, participate in a clinic, which will also provide you with real world experience. And, if you are interested in IP, take the IP-specific courses available at UR Law, beyond the fundamentals course. To the extent you are concerned about fitting all of this in with Bar classes—you will learn what you need to know for the Bar during Bar prep. If Wills & Trusts conflicts with Trademarks, and you are interested in IP, take Trademarks and learn Wills & Trusts during Bar prep.