UK National Security and Investment Act – Impact on Intellectual Property
On 29 April 2021, legislation giving powers to the UK Government to scrutinise transactions on grounds of national security (the UK National Security and Investment Act, "NSIA") was enacted into UK law. The NSIA includes various provisions relating to mandatory and voluntary notifications of transactions that may be relevant to UK national security, including transactions relating to intellectual property (IP) in sensitive areas of technology.
A formal commencement date for the notification regime put in place by the NSIA is yet to be announced but is likely to be in late 2021. Ahead of this, we here provide a brief summary of key aspects of the Act and potential implications for transactions relating to IP:
- A mandatory notification and approval system is introduced for planned acquisitions of over 25% of shares or voting rights in a company, in specific sensitive sectors of the economy (including e.g. artificial intelligence, communications, synthetic biology, full list here). The UK Government will need to be notified in advance of planned acquisitions in order for clearance to be provided. Significant civil and criminal penalties may be applied for non-compliance.
- "Call-in" powers are introduced, allowing retrospective inspection of transactions (irrespective of sector/industry) that have taken place on or after 12 November 2020 and that have not been notified to the Government, but which may raise national security concerns.
- A voluntary notification regime applies (irrespective of sector/industry) where a transaction (a so-called "trigger event") may give rise to a national security risk. The definition of a "trigger event" is expansive and may capture for example gaining control of IP in a sensitive area of technology, including assignment or licensing of such IP. Voluntary notification by the relevant parties allows for certainty that a transaction will not be subsequently called-in for review (possible up to 5 years after completion).
It remains to be seen how the broad provisions of the NSIA will be implemented practically in terms of their scope and in relation to formal aspects of notification processes. Further guidance should hopefully be provided by late 2021, with secondary legislation and statutory guidance to be published by the Government. In the meantime, businesses should be aware of the potential impact of the NSIA, for example when entering into applicable transactions in relation to IP in a sensitive area of technology. Assessment may be needed as to whether there may be a risk of a later call-in of the transaction, and whether steps should be taken to mitigate this.