Dear listeners, welcome back to The Lawyers Talk, the podcast channel of BLawyers Vietnam. I am Quang Thai, and joining me today is Anh Thu. We are very happy to see everyone again for today’s podcast.
Continuing the topic on due diligence of intellectual property in M&A transactions of technology companies in Vietnam, today Ms. Thu and I will share two special cases that enterprises and investors may encounter.
Guest
Hello Mr. Thai and listeners, I am Anh Thu, very pleased to join you in today’s podcast. I hope that today’s topic will help our dear listeners identify special cases, thereby allowing you to grasp the issues when implementing due diligence of intellectual property in technology companies.
The first special case is one that Mr. Thai mentioned in the previous podcast episode. Specifically, when conducting due diligence of intellectual property in a technology company, the enterprises and investors should review the status and the mortgage/ encumbrance history of such intellectual property.
So, how does a particular intellectual property become a collateral?
Host
First of all, I confirm that an intellectual property cannot become collateral under Vietnamese law. Specifically, Article 105 of the Civil Code 2015 stipulates that property includes objects, money, valuable papers, and property rights. Among these, property rights are rights which are able to be valued in money, including property rights to subjects of intellectual property rights, and right to use land and other property rights. Based on this, intellectual property itself cannot be considered collateral; only the property rights to subjects of intellectual property rights can be identified as property, and thus may become collateral.
For example, the right to use or to allow others to use a trademark is a property right, which can be used as collateral to perform obligations.
Guest
I am not clear to which types of property rights to subjects of intellectual property rights may be used as collateral under Vietnamese law. Please explain more about this.
Host
To help our listeners and Thu follow more easily, I would like to share 02 types of collateral which are property rights to subjects of intellectual property rights. The first type is property rights to subjects of copyright (such as computer programs and data collections owned by technology companies). Specifically, the IP Law 2022 stipulates that the copyright owner of computer programs and data collections has the right to transfer ownership of:
- First, property rights to computer programs, data collections;
- Second, right to publish or allow others to publish computer programs and data collections.
to other organizations and individuals pursuant to a contract or in accordance with a relevant provision of law. On the basis of being able to transfer these property rights, technology companies can completely use these property rights as collateral to perform their obligations.
The second type of collateral is property rights to subjects of industrial property rights (patents, industrial designs, layout designs, trademarks, trade names, trade secrets). Accordingly, the IP Law 2022 stipulates that the owner of industrial property rights has the right to transfer their ownership right to another organization or individual, within the scope of protection. However, it should be noted that the transfer of industrial property rights must satisfy specific conditions as prescribed by the IP Law 2022. For example, a trademark can only be transferred to an organization or individual who meets the conditions for the person having the right to register that trademark. Therefore, the secured party must satisfy the above conditions for the trademark to become collateral and be able to enforce the handling of the collateral later.
Guest
With the two types of collateral that you just mentioned, what should enterprises and investors pay attention to when conducting due diligence in M&A transactions?
Host
In addition to the content that enterprises and investors need to pay attention to when assessing intellectual property that we mentioned in the previous podcast, I would like to propose some contents listeners should consider in the case a target technology company (called “Target Company”) using property rights to subjects of intellectual property rights as collateral:
- Firstly, enterprises and investors still need to check the industrial property protection title and copyright registration status; ensure that the Target Company is the owner of the intellectual property rights; and check the scope, protection period, and validity of the protection title.
- Secondly, review the list of property rights to subjects of intellectual property rights used as collateral, including checking the validity of the guarantee agreement (notarized or not), and the content of the secured obligations and the agreement on handling collateral in case of violation. At the same time, verify the registration of the guarantee agreement to assess the validity against third parties.
- Next, consider the possibility of transferring intellectual properties—which have property rights used as collateral—to enterprises and investors after M&A transactions (transfer conditions according to the provisions of the IP Law 2022).
- Finally, check and evaluate the risk of disputes with the secured party or with other related parties, related to the collateral being property rights to subjects of intellectual property rights.
Guest
Thank you Mr. Thai for explaining my concerns. I think that this has helped us better understand the content to note when conducting due diligence in cases where the Target Company has intellectual property used as collateral. And as Mr. Thai introduced at the beginning of the podcast, besides this case, there is another special situation that enterprises and investors need to pay special attention to, which is when the intellectual property is created by the Target Company’s employees or contractors.
Host
This is also a very common case in practice but is easily overlooked during due diligence. So in this case, what should we pay attention to when conducting due diligence. Please share more about this.
Guest
First of all, I think it is necessary to affirm that subjects of intellectual property rights, such as inventions, industrial designs, works such as computer programs, data collections, etc., are all directly created by individuals or groups of individuals. So, if that creative process takes place in the form of a task assigned by a technology company—for example, the company invests funds, provides facilities and assigns work to employees of that technology company, or hires a creative contractor—then will the intellectual property rights belong to that technology company or the individual who directly creates?
To answer that question, we need to first learn the provisions of the IP Law 2022 on this particular case.
For the creation of computer programs and data collections protected in the form of literary works, the technology company owns the right to publish or allow others to publish the computer programs and data compilations in the following cases:
- First, the technology company assigns the task of creating computer programs and data collections to creators who are employees of the technology company; or
- Second, the technology company enters into a contract with the creator of the computer program or data collector.
In the two cases I just mentioned, the direct creators (whether employees or contractors) will enjoy moral rights to the computer programs they create, including:
- First, giving titles to the computer programs;
- Second, attaching their real names or pseudonym to the computer programs, if their real names or pseudonyms are acknowledged when the computer programs are published or used;
- Thirdly, protecting the integrity of the computer programs to forbid other persons to modify, edit or distort the computer programs causing harm to the honour and reputation of the direct creators.
Host
Thank you! I noted 02 cases as you mentioned and 03 moral rights over computer programs by direct creators (whether employees or contractors).
So, for intellectual properties such as patents or industrial designs, do these intellectual properties confer any moral or property rights on the individuals who directly create them?
Guest
Please allow me to explain more about this issue. For intellectual properties such as inventions, industrial designs, and layout designs, technology companies have the right to register for protection to become the owner of such industrial property objects when investing funds and material means for the direct creator in the form of job assignment or hiring. Accordingly, the owner of an invention, industrial design or layout design in this case is the technology company that is granted a protection title for the respective industrial property object by the competent authority.
Although not as deeply personal as literary or artistic works, individuals who directly create inventions, industrial designs, and layout designs are still recognized as the creator, and have the following moral rights:
- Firstly, to be named as creators in invention patents, utility solution patents, industrial design patents or certificates of registered design of semi-conducting closed circuits;
- Secondly, to be acknowledged as creators in documents in which inventions, industrial designs or layout designs are published or introduced.
In addition, the direct creator are also entitled to receive remuneration from the technology company as agreed between the parties. The IP Law 2022 specifies the remuneration levels as follows:
- First, creators are entitled to receive 10% of the profit gained by the owner from the use of the invention, industrial design or layout design;
- Next, creators are entitled to receive 15% of the total amount received by the owner in each payment for licensing of the invention, industrial design or layout design before paying the tax in accordance with the regulations.
Host
Regarding the special case that you mentioned, what should enterprises and investors pay attention to when conducting due diligence of intellectual property?
Guest
In this particular case, I suggest enterprises and investors consider the following:
- First, it is necessary to identify and compile the inventions, industrial designs, layout designs, computer programs, and data collections owned by the Target Company that were created by employees and/or contractors;
- Next, it is necessary to list and review documents recording the “assignment, hiring, or assignment” of the creation of inventions, industrial designs, layout designs, computer programs and data collections between the Target Company and employees/contractors; for example, employment contracts, job descriptions, and contractor agreements;
- It is also important to examine the internal regulations or agreements regarding remuneration for creator of inventions, industrial designs, layout designs, computer programs, and data collections of the Target Company, as well as the actual payment of such remuneration to the individuals who directly created these intellectual property;
- Finally, it is necessary to make a list of disputes that are occuring related to the creation of intellectual property by employees and contractors, such as the payment of remuneration, if any.
When considering the contents that I have just presented, I think that enterprises and investors will minimize many risks and more accurately assess the value of the Target Company. From there, they can make more appropriate decisions in their M&A transaction.
Host
Thank you Ms. Thu for sharing with our listeners the things to keep in mind when conducting due diligence intellectual property in this particular case!
Dear listeners, we have reached the final stage of the topic “Due diligence of Intellectual Property in M&A transactions of technology companies in Vietnam”. I hope this has brought you a lot of useful information.
If you have any questions or concerns, please leave a comment below. Or for more information about BLawyers Vietnam, please visit our website below the podcast screen of The Lawyers Talk.
Guest
Thank you for listening. Goodbye and see you in the next episodes.
The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at info@blawyersvn.com. We would love to hear from you.
Date: 27 August 2025
