Reorganizing Your Subsidiaries? Pay Me Again For That Software!

A recent opinion from the U.S. Court of Appeals for the Sixth Circuit (Cincom Systems Inc. v. Novelis Corp., ___ F.3d ___, 92 U.S.P.Q.2d 1085 (6th Cir. 2009), serves as a strong reminder to those structuring and evaluating mergers, acquisitions, and even internal corporate reorganizations to carefully consider the impact of federal intellectual property laws on the transferability of licensed software and other licensed intellectual property. The counterintuitive result in the Cincom case was an award of almost $500,000 to a software vendor as damages for copyright infringement, despite a state merger statute that allowed assets held by a party to automatically vest in a successor company. The vendor succeeded in being paid twice for the same software, on the same machine, in the same building, essentially because the name over the customer's door had changed. A complete copy of the Court's decision may be found at http://www.ca6.uscourts.gov/opinions.pdf/09a0346p-06.pdf