Strategies for Safeguarding Intellectual Property During Mergers and Acquisitions Beyond Non-Competition Agreements
In the dynamic world of business acquisitions, Indian companies are adapting to new strategies to protect and retain their assets in the absence of enforceable non-compete agreements. This shift has led to a focus on intellectual property protections, data protection, and contractual arrangements beyond non-competes.
Recent court rulings, such as the one made by the Delhi High Court on June 25, 2023, have confirmed the unenforceability of non-compete clauses. However, the courts have also acknowledged that companies can protect certain assets by employing various methods.
One such method is the use of confidentiality and non-disclosure agreements, designed to limit the misuse of sensitive information. Companies are also implementing data protection frameworks that ensure compliance with data privacy laws, such as India's DPDP Act, to maintain trust and value in the acquired assets.
Contractual safeguards against unauthorized use or transfer of intellectual property are another strategy. These measures help preserve the value and control of acquired digital and intellectual assets. Furthermore, integration practices are being implemented to preserve the value of these assets during the transition period.
Data protection, in particular, has become critical in M&A processes due to the DPDP Act. This requires mechanisms like data audits, appointing Data Protection Officers, and maintaining compliance frameworks—which also act as protective barriers around valuable digital information during acquisitions.
Notable companies such as Alvarez & Marsal, Linkrunner, Monetize360, Sai Parenterals, Incuspaze, and Counselect have recently received funding, which could be used to implement these protective strategies in their acquisitions.
Elsewhere, developments in the business landscape include South Africa's Infra Impact Investment Managers planning to acquire a waste management firm, and India considering easing bank ownership rules due to growing foreign interest.
This shift towards alternative methods for protecting assets in acquisitions underscores the evolving nature of business strategies in India. While the specific assets that can be protected through these methods are not yet detailed, it is clear that companies are focusing on safeguarding their intellectual property and maintaining data privacy to secure their competitive edge.
[1] Source for detailed information on these methods and their implementation. [2] Source for the Delhi High Court's ruling on the unenforceability of non-compete clauses.
- In the face of unenforceable non-compete agreements, companies are turning to alternative methods in finance and business, such as implementing data protection frameworks, confidentiality and non-disclosure agreements, and contractual safeguards against unauthorized use or transfer of intellectual property, to protect their assets and maintain their competitive edge.
- The need to safeguard valuable digital information during acquisitions has led to an increased focus on data protection, as demonstrated by the implementation of data audits, the appointment of Data Protection Officers, and the maintenance of compliance frameworks under the DPDP Act, in conformity with data privacy laws.
