A financially distressed, European manufacturing business was selling its proprietary design software assets. The acquiring fund was not willing to proceed with the transaction without a number of assurances, including that the seller owned the software code and that it did not infringe third party intellectual property rights.

Due to time and budgetary restraints, neither party had commissioned independent expert intellectual property due diligence. The buyer was particularly concerned with protecting itself against the risks arising out of using and integrating the software package with its systems; the risk of the software infringing third party intellectual property rights; use of open source code in non-compliance with license requirements; challenges to ownership of the code and validity challenges to registered/granted intellectual property rights, including trade marks. Without the financial covenant of the insurance policy, the sale would not proceed.

The buyer of a design software asset from a financially distressed seller asked us to provide it with an insurance solution to cover a full suite of intellectual property warranties and an associated indemnity in the asset purchase agreement.

In the absence of either sell or buy side intellectual property due diligence, using our in-house intellectual property expertise and sophisticated data driven underwriting systems, we worked with the buyer to develop a deep understanding of the intellectual property risks associated with the assets and the additional information required from the seller in order to provide a risk transfer solution. An insurance policy was issued to the acquiring company, covering the intellectual property indemnity given by the seller thereby giving the buyer the comfort it required to be able to use and integrate the software with its own solutions. In addition, the seller was able to cap its liability at €25,000 and use the sale proceeds to fund its core business. Our policy was for a period of 6 years and provided €3m of cover. Further, as we undertook the diligence in-house, and provided guidance to the buyer and seller as to what information to look for, we saved the parties valuable time and expense, enabling them to focus on closing the deal.