PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
MEMORANDUM
To: Victoria Chambers, Responsible Partner Leonard Ashford, Of Counsel, Emerging Company & Venture Capital Practice Nina Reyes, Senior Associate, Emerging Company & Venture Capital Practice Calderwood & Harkness LLP
From: Peter Vassiliev, Lead Associate, intellectual Property Practice Wendy Schultz, Working Associate, intellectual Property Practice Calderwood & Harkness LLP
Date: December 20, 2023
Re: intellectual Property Due Diligence — Skybridge Fintech Ltd.
Matter No.: 1009-00001
Client: Skybridge Fintech Ltd. ("Skybridge" or the "Company")
Transaction: $60,000,000 Convertible Note Bridge Financing
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I. Executive Summary
This memorandum sets forth the findings of the intellectual property due diligence review conducted by Calderwood & Harkness LLP in connection with the proposed $60,000,000 convertible note bridge financing of Skybridge Fintech Ltd. (the "Company"), led by Ridgeline Ventures Fund IV, L.P. ("Ridgeline" or the "Lead Investor"), with anticipated participation from existing investors Halcyon Growth Equity and Beacon Hill Capital Partners (collectively, the "Investors" and, together with the financing, the "Transaction"). This memorandum is intended for use by the engagement team and authorized client contacts in evaluating the Company's intellectual property position as part of the overall diligence process for the Transaction.
Scope of Review. Our review encompassed the full breadth of Skybridge's intellectual property portfolio, including its patent portfolio (issued patents and pending applications), trademarks and service marks (federal registrations, pending applications, and common law marks), copyrights (registered and unregistered), trade secrets and proprietary technology, domain names, and proprietary technology related to the Company's cloud-based payments orchestration and embedded lending platform (the "Platform"). The scope of our engagement was expanded, as authorized by Engagement Letter Amendment No. 1 dated December 1, 2023, to include review of the Company's open-source software usage practices and a more detailed analysis of the Company's inbound and outbound technology licensing arrangements.
Documents and Information Reviewed. We reviewed materials produced by the Company in response to (i) the Due Diligence Request List dated November 13, 2023, and (ii) the Supplemental Due Diligence Request List dated December 6, 2023. These materials were provided by Priya Ramanathan, General Counsel of Skybridge, and Elena Vasquez, Chief Technology Officer and Co-Founder of Skybridge. A complete list of the documents reviewed is set forth on Exhibit F hereto. In addition, we conducted public record searches and interviews with key Company personnel, as described in Section II below.
Overall Assessment. Based on our review, the Company maintains a substantive and strategically developed intellectual property portfolio that is generally well-aligned with its core business operations and technology platform. We note the following key strengths:
• Substantial Proprietary Technology. The Company has developed significant proprietary technology underlying its payments orchestration engine and embedded lending capabilities, including proprietary algorithms for payment routing optimization and risk scoring methodologies that represent meaningful competitive advantages in the mid-market fintech space.
• Core Patent Filings. The Company holds eight (8) issued U.S. utility patents and has eleven (11) pending U.S. patent applications covering key aspects of its Platform technology. The issued patents are current on all maintenance fee obligations, and the pending applications are progressing through prosecution without material adverse rejections.
• Comprehensive Trademark Portfolio. The Company maintains a well-organized portfolio of seventeen (17) U.S. trademark registrations and five (5) pending applications covering its primary brand names, product names, and associated design marks. The registrations are in good standing and collectively provide strong brand protection across the Company's principal goods and services classes.
We also note the following areas requiring attention:
• IP Assignment Gaps. Our review identified certain gaps in the chain of title for intellectual property created by the Company's co-founders, Arjun Mehta and Elena Vasquez, prior to the Company's incorporation in 2017, as well as incomplete assignment documentation for several early-stage independent contractors. These matters are analyzed in detail in the companion IP Ownership & Assignment Analysis memorandum, which will be delivered on December 22, 2023.
• Open-Source Software Usage. The Company's Platform incorporates a significant number of open-source software components, including certain components licensed under copyleft licenses (specifically, the GNU Lesser General Public License ("LGPL") and the Mozilla Public License ("MPL")). While we did not identify any current use of components licensed under the GNU Affero General Public License ("AGPL")—which would present heightened risk given the Company's SaaS delivery model—further review and ongoing monitoring of open-source usage is warranted, as discussed in Section VIII below.
• Kelvantis Security Interest. The Loan and Security Agreement dated August 15, 2022, between the Company and Kelvantis Lending Corp. ("Kelvantis") includes a broad definition of "Collateral" that encompasses intellectual property assets. The interplay between this security interest and the proposed Transaction should be addressed in connection with the Note Purchase Agreement. This matter is cross-referenced to the Kelvantis covenant analysis memorandum dated November 28, 2023, prepared by the financing team.
Companion Memoranda. This memorandum should be read in conjunction with the following companion memoranda, which address related topics in greater detail:
• IP Ownership & Assignment Analysis Memorandum (to be delivered December 22, 2023) — detailed analysis of assignment chains with founders Arjun Mehta and Elena Vasquez, employees, and independent contractors.
• Litigation & Threatened Claims Diligence Memorandum (dated December 19, 2023) — analysis of pending and threatened litigation, including IP-related disputes.
• Material Contracts Diligence Summary (dated December 18, 2023) — summary and analysis of material commercial agreements.
• Kelvantis Lending Corp. Covenant Analysis Memorandum (dated November 28, 2023) — analysis of covenants and restrictions under the Company's existing credit facility.
• Insurance Coverage Review Memorandum (to be delivered December 23, 2023) — review of the Company's insurance coverage, including any IP-specific policies.
Company Background. Skybridge Fintech Ltd. was incorporated on March 14, 2017, as a Delaware corporation (C-corp), Delaware Division of Corporations File Number 6384291, Employer Identification Number 83-2147605. The Company is headquartered at 1400 Market Street, Suite 2200, Wilmington, Delaware 19801, with additional offices in New York, New York and San Francisco, California. As of the date of this memorandum, the Company employs approximately 310 full-time employees, of whom approximately 185 are members of the engineering and product development teams. The Company operates a cloud-based payments orchestration and embedded lending platform that serves mid-market e-commerce companies, enabling them to optimize payment processing across multiple payment service providers and to offer embedded lending products to their end customers. As of the third quarter of 2023, the Company reports an annualized gross payment volume ("GPV") of approximately $4.2 billion and annual recurring revenue ("ARR") of approximately $78 million.
II. Methodology and Scope of Review
A. Documents and Records Reviewed
In conducting this diligence review, we reviewed the following categories of documents and records, each of which was produced by the Company through its General Counsel, Priya Ramanathan, or its Chief Technology Officer, Elena Vasquez, in response to our Due Diligence Request List dated November 13, 2023, and our Supplemental Due Diligence Request List dated December 6, 2023:
1. Internal IP Schedule/Register. The Company's internal intellectual property schedule and register, maintained by the General Counsel's office, which catalogs the Company's patents, trademarks, copyrights, domain names, and related filings (the "IP Register"). The IP Register was last updated on November 30, 2023, and was supplemented by email correspondence from Ms. Ramanathan dated December 8, 2023, and December 14, 2023.
2. Patent Prosecution Files and Correspondence. Complete prosecution files for all issued U.S. patents and pending U.S. patent applications, including specifications, claims, prosecution histories, office action responses, inventor declarations, assignment documents, and correspondence with outside patent counsel (Quelston & Ling LLP).
3. Trademark Registration Certificates, Applications, and Prosecution Files. Certificates of registration, application files, prosecution histories, specimens of use, declarations of continued use and incontestability, and related correspondence for all U.S. trademark registrations and pending applications.
4. Copyright Registrations and Copyright-Related Agreements. Certificates of registration for any works registered with the U.S. Copyright Office, together with any agreements relating to the ownership, licensing, or assignment of copyrights.
5. Domain Name Registrar Records. Registrar account summaries, registration confirmations, and WHOIS records for all domain names held by or on behalf of the Company.
6. Employee Invention Assignment and Proprietary Information Agreements. Template and executed copies of the Company's standard Confidential Information and Invention Assignment Agreement ("CIIAA"), as well as any non-standard employment agreements containing IP-related provisions. We reviewed executed CIIAAs for all current employees as well as a representative sample of former employees (focusing on engineering and product personnel).
7. Contractor and Consultant IP Assignment Agreements. Template and executed copies of the Company's standard Consulting Agreement and Independent Contractor Agreement, including IP assignment provisions, as well as any non-standard contractor agreements containing IP-related provisions.
8. Technology License Agreements (Inbound and Outbound). All technology license agreements under which the Company is either a licensee (inbound licenses) or a licensor (outbound licenses), including SaaS subscription agreements, API access agreements, and software development kits ("SDK") license terms.
9. Open-Source Software Inventory and Usage Policies. The Company's open-source software inventory (as compiled by the engineering team in response to our Supplemental Due Diligence Request List), the Company's Open-Source Software Usage Policy (version 3.1, dated September 2023), and records of open-source review and approval processes.
10. Non-Disclosure Agreements (Material NDAs with IP Implications). Executed copies of material non-disclosure and confidentiality agreements between the Company and third parties, focusing on those containing provisions relating to the disclosure or protection of proprietary technology and trade secrets.
11. Prior IP Due Diligence Reports. IP diligence reports and memoranda prepared in connection with the Company's prior financing rounds, including:
(a) Series A financing (2018) led by Crestpoint Seed Partners — IP diligence memorandum prepared by Whitfield & Boone LLP dated June 12, 2018;
(b) Series B financing (2020) led by Halcyon Growth Equity — IP diligence memorandum prepared by Whitfield & Boone LLP dated February 28, 2020;
(c) Series C financing (July 2021) led by Ridgeline Ventures Fund III, L.P. and Beacon Hill Capital Partners — IP diligence memorandum prepared by Calderwood & Harkness LLP (the firm's prior engagement) dated June 22, 2021.
A complete list of the documents reviewed is set forth on Exhibit F hereto.
B. Public Record Searches
In addition to our review of the documents and records produced by the Company, we conducted the following public record searches:
1. USPTO Patent Database Searches. We searched the United States Patent and Trademark Office ("USPTO") Patent Full-Text and Image Database (PatFT) and Patent Application Full-Text and Image Database (AppFT) for all patents and patent applications naming Skybridge Fintech Ltd. as assignee, as well as patents and applications naming the Company's co-founders, Arjun Mehta and Elena Vasquez, as inventors. We also reviewed the USPTO Patent Assignment database to confirm recorded assignments of patents and patent applications to the Company.
2. USPTO Trademark Database Searches. We searched the USPTO Trademark Electronic Search System (TESS) for all trademark registrations and applications in the name of Skybridge Fintech Ltd., as well as for potentially conflicting marks in relevant classes.
3. Copyright Office Records Search. We searched the records of the U.S. Copyright Office for any registrations in the name of Skybridge Fintech Ltd. or its co-founders.
4. Domain Name WHOIS Searches. We conducted WHOIS lookups for all domain names identified in the Company's IP Register to confirm registration details, ownership, and expiration dates.
5. Relevant Litigation Docket Searches. We searched federal and state court dockets, as well as PTAB and TTAB records, for any proceedings involving the Company's intellectual property. The results of these searches are cross-referenced to the Litigation & Threatened Claims Diligence Memorandum dated December 19, 2023, prepared by the litigation team.
C. Interviews Conducted
We conducted interviews with the following Company personnel in connection with our diligence review:
1. Elena Vasquez, CTO & Co-Founder (interview conducted December 4, 2023, via videoconference). Ms. Vasquez provided an overview of the Company's technology architecture, the development history of the Platform, key proprietary algorithms and trade secrets, and the Company's software development processes and practices. Ms. Vasquez also addressed questions regarding the provenance of code developed prior to the Company's incorporation and the use of third-party and open-source components.
2. Priya Ramanathan, General Counsel (interviews conducted November 29, 2023, and December 11, 2023, via videoconference). Ms. Ramanathan addressed questions regarding the Company's IP agreements, licensing arrangements, enforcement history, IP-related disputes, insurance coverage, and the Company's processes for managing and protecting its intellectual property.
3. Engineering Leadership (interview conducted December 7, 2023, via videoconference, with Daniel Kim, VP of Engineering, and Sarah Chen, Director of Platform Engineering). Mr. Kim and Ms. Chen provided information regarding the Company's open-source software usage, code provenance, development environment and practices, and internal controls for managing access to proprietary source code and trade secret information.
D. Limitations. The scope of this memorandum, and the conclusions expressed herein, are subject to the following limitations:
1. Reliance on Company-Provided Materials. Our review was based on documents, records, and information provided by the Company in response to our diligence requests and during the interviews described above. We have not conducted an independent technical audit of the Company's source code, nor have we independently verified the completeness or accuracy of the information provided by the Company. To the extent that documents or information material to our analysis were not produced by the Company or otherwise made available to us, our conclusions may be affected.
2. No Patent Prior Art Analysis. We have not conducted an independent prior art search or invalidity analysis with respect to any of the Company's issued patents or pending patent applications. Our assessment of the Company's patent portfolio is based on a review of the prosecution histories and the face of the issued patents and pending applications, and we have relied on the analyses and opinions of the Company's outside patent prosecution counsel, Quelston & Ling LLP, as reflected in the prosecution files.
3. No Freedom-to-Operate Opinion. This memorandum does not constitute a freedom-to-operate opinion with respect to the Company's products or services. While we have noted certain third-party patent risks identified in the course of our review, a comprehensive freedom-to-operate analysis was not within the scope of our engagement.
4. Foreign IP Registrations. The Company's foreign intellectual property registrations and filings, if any, are noted in this memorandum for informational purposes. However, the analysis of foreign intellectual property laws and the validity or enforceability of foreign registrations is outside the scope of this engagement. Should a foreign-law analysis be required, we recommend engaging appropriate local counsel in the relevant jurisdictions.
5. Temporal Limitations. Our review reflects the state of the Company's intellectual property portfolio and related matters as of the date of this memorandum. Subsequent events, filings, or developments may affect the conclusions expressed herein.
III. Patent Portfolio
A. Issued Patents
Based on our review of the Company's IP Register, the patent prosecution files provided by Quelston & Ling LLP, and our independent search of the USPTO Patent Assignment database, the Company holds eight (8) issued U.S. utility patents, as set forth in the table below and in further detail on Exhibit A hereto:
All eight issued patents are assigned to Skybridge Fintech Ltd. as the assignee of record with the USPTO. We confirmed this through our independent review of the USPTO Patent Assignment database. The assignments were recorded in a timely manner following issuance.
The patents collectively cover key aspects of the Company's core technology, including: (i) payment routing optimization algorithms that enable intelligent selection and sequencing of payment processing providers based on cost, reliability, and transaction characteristics; (ii) embedded lending risk scoring methodologies that employ machine learning techniques for real-time credit assessment in point-of-sale lending contexts; (iii) API-based payment orchestration architecture that provides the foundational infrastructure for the Platform's multi-provider integration capabilities; and (iv) real-time transaction reconciliation processes that enable the Company to provide merchants with unified reporting across multiple payment channels.
Maintenance Fee Status. All issued patents are current on maintenance fee payments. We note the following upcoming maintenance fee deadlines:
• US 10,482,117: 8-year maintenance fee due November 19, 2027 (with 6-month grace period)
• US 10,614,503: 8-year maintenance fee due April 7, 2028 (with 6-month grace period)
• US 10,891,274: 4-year maintenance fee due January 12, 2025 (with 6-month grace period)
• US 11,023,856: 4-year maintenance fee due June 1, 2025 (with 6-month grace period)
• US 11,178,491: 4-year maintenance fee due November 16, 2025 (with 6-month grace period)
• US 11,334,922: 4-year maintenance fee due May 17, 2026 (with 6-month grace period)
• US 11,501,378: 4-year maintenance fee due November 15, 2026 (with 6-month grace period)
• US 11,689,714: 4-year maintenance fee due June 27, 2027 (with 6-month grace period)
The most proximate maintenance fee deadline is for US 10,891,274, with the 4-year maintenance fee due on January 12, 2025. We recommend that the Company confirm that its patent counsel, Quelston & Ling LLP, has this deadline calendared and that payment procedures are in place.
B. Pending Patent Applications
The Company has eleven (11) pending U.S. patent applications, as set forth in the table below and in further detail on Exhibit A hereto:
These pending applications cover next-generation features of the Platform, including enhancements to the payments orchestration engine (cross-border optimization, contextual routing intelligence, distributed ledger integration), extensions of the embedded lending capabilities (credit line management, explainable AI-based decision engines, lending marketplace functionality), and ancillary platform features (fraud detection, merchant onboarding, analytics, and compliance automation).
Provisional Applications. Two of the eleven pending applications (Application Nos. 18/178,992 and 18/254,318) are provisional applications. The conversion deadline for Application No. 18/178,992 is June 22, 2024, and the conversion deadline for Application No. 18/254,318 is September 8, 2024. We recommend that the Company coordinate with Quelston & Ling LLP to ensure that timely decisions are made regarding the conversion of these provisional applications to non-provisional applications. Failure to convert within the 12-month statutory period would result in the loss of the priority dates associated with these provisional applications.
Prosecution Status. As reflected in the table above, four (4) of the non-provisional applications have received office actions from the USPTO. We reviewed the prosecution history for each and note the following:
• Application No. 17/234,561 received a non-final office action citing prior art references under 35 U.S.C. §§ 102 and 103. Quelston & Ling LLP has indicated that it believes the prior art can be distinguished through claim amendments, and a response is due March 12, 2024.
• Application No. 17/312,089 received a final office action maintaining rejections under 35 U.S.C. § 103. Quelston & Ling LLP is evaluating options, which include filing a response after final, filing a Request for Continued Examination ("RCE"), or appealing to the Patent Trial and Appeal Board ("PTAB"). A response or appeal is due January 4, 2024. We understand from Ms. Ramanathan that Quelston & Ling LLP intends to file an RCE with amended claims.
• Application No. 17/512,334 received a non-final office action, and a response was filed on November 20, 2023. The examiner's next action is pending.
• Application No. 17/738,455 received a non-final office action citing prior art under 35 U.S.C. § 103 as well as a rejection under 35 U.S.C. § 101 (patent-eligible subject matter). The § 101 rejection is based on the examiner's position that certain claims are directed to an abstract idea without sufficient inventive concept. Quelston & Ling LLP has indicated that it plans to argue the § 101 rejection under the Alice/Mayo framework, relying on the technical specificity of the claimed real-time decision engine architecture. A response is due May 1, 2024.
We note that the § 101 rejection in Application No. 17/738,455 is not unusual for fintech-related patent applications and does not, in our assessment, indicate a fundamental deficiency in the application. However, § 101 rejections in this technology area can be difficult to overcome, and the outcome remains uncertain.
C. Foreign Patents and Applications
Based on our review of the Company's IP Register and discussions with Ms. Ramanathan, Skybridge does not currently hold any issued foreign patents. The Company filed one Patent Cooperation Treaty ("PCT") application (PCT/US2019/051872) on September 18, 2019, corresponding to U.S. Patent No. 10,482,117 (Dynamic Payment Routing Optimization). The PCT application entered the national phase in the following jurisdictions:
• European Patent Office (EPO): Application No. EP 19 862 471.3. The application was filed but was subsequently abandoned following receipt of a communication under Article 94(3) EPC (examination report) in March 2021. The Company elected not to respond, and the application lapsed.
• United Kingdom: A national phase entry was made via the EPO application. Following the lapse of the EPO application, the UK designation also lapsed.
• Canada: Application No. CA 3,113,478. The application remains pending. We understand from Ms. Ramanathan that the Company intends to maintain this application and that Canadian patent counsel has been retained.
No other foreign patent applications have been filed. We note that the Company's decision not to pursue European patent protection for its core payment routing technology may warrant reconsideration in connection with any future international expansion plans. However, for purposes of the current Transaction, the absence of European patent protection does not, in our view, constitute a material deficiency, as the Company's operations and revenue are currently concentrated in the United States.
D. Patent Encumbrances and Licenses
Security Interests. As noted in Section I above, the Loan and Security Agreement dated August 15, 2022 (the "Kelvantis LSA"), between the Company and Kelvantis Lending Corp. ("Kelvantis"), contains a broad definition of "Collateral" that includes, among other things, "all intellectual property, including but not limited to patents, patent applications, trademarks, trademark applications, copyrights, copyright applications, trade secrets, licenses, and all goodwill associated therewith." Based on our review of the Kelvantis LSA and the related UCC-1 financing statement filed with the Delaware Secretary of State on August 18, 2022 (Filing No. 2022-5837461), Kelvantis holds a first-priority perfected security interest in all of the Company's intellectual property assets, including its patent portfolio.
The Kelvantis LSA contains customary negative covenants restricting the Company's ability to sell, transfer, assign, or exclusively license its intellectual property without Kelvantis's prior written consent. The Kelvantis LSA also contains a change-of-control provision that triggers an event of default upon certain changes in the Company's ownership or control. We understand from the financing team that the convertible note issuance contemplated by the Transaction is not expected to trigger the change-of-control provision under the Kelvantis LSA, but we recommend that this conclusion be confirmed in coordination with the Kelvantis covenant analysis prepared by Leonard Ashford and Nina Reyes, dated November 28, 2023.
We did not identify any other recorded security interests, liens, or encumbrances on the Company's patent assets based on our review of the USPTO Patent Assignment database and Delaware UCC records.
Outbound Patent Licenses. Based on our review, the Company has not granted any standalone outbound patent licenses to third parties. The Company's standard SaaS subscription agreement includes a limited, non-exclusive, non-transferable license to use the Platform, which implicitly includes a license under the Company's patents to the extent necessary for customers to use the Platform as intended. This is a standard SaaS licensing construct and does not, in our view, present any concerns.
Inbound Patent Licenses. The Company holds the following inbound patent licenses:
• Veridian Networks, Inc. Patent License Agreement (effective March 1, 2020). Non-exclusive, worldwide license to U.S. Patent No. 9,872,344 (relating to certain payment tokenization methods). Royalty-bearing license with a fixed annual royalty of $175,000. Term is co-extensive with the life of the licensed patent (expiring approximately 2036). The agreement does not contain a change-of-control or anti-assignment provision.
• DataStream Analytics LLC Cross-License Agreement (effective August 15, 2021). Reciprocal non-exclusive, royalty-free cross-license between Skybridge and DataStream covering certain transaction analytics patents. The agreement contains a termination-upon-change-of-control provision, which is discussed further in Section IX below.
Freedom-to-Operate Considerations. We have not conducted a comprehensive freedom-to-operate analysis. However, we note the following based on our review of the Company's files:
• Quelston & Ling LLP prepared a patent landscape analysis dated April 2021, which identified a cluster of patents held by Nexus Payment Technologies, Inc. ("Nexus") relating to multi-acquirer payment routing that could be relevant to certain aspects of the Company's payment routing technology. Quelston & Ling LLP concluded in its analysis that the Company's technology was designed to operate outside the scope of the identified Nexus patents, but noted that certain Nexus patent claims were broad and that the risk could not be entirely eliminated. No formal freedom-to-operate opinion was issued.
• Ms. Ramanathan confirmed that the Company has not received any cease-and-desist letters or other communications from Nexus or any other third party asserting patent infringement. However, we recommend continued monitoring of Nexus's patent portfolio, particularly in light of recent Nexus patent filings identified in our USPTO search (Application Nos. 18/045,612 and 18/112,889, both filed in 2023).
E. Assessment. The Company's patent portfolio is, in our assessment, materially aligned with the Company's core business and technology, providing meaningful protection for its payment routing optimization technology, embedded lending risk scoring methodology, and API-based orchestration architecture. The eight issued patents and eleven pending applications collectively cover the principal technological innovations underlying the Platform.
We note the following observations and recommendations:
1. Portfolio Strength. The issued patents provide coverage across the Company's two primary product lines (payments orchestration and embedded lending), and the pending applications extend this coverage to next-generation capabilities, including cross-border optimization and AI-based decision engines. The portfolio reflects a systematic prosecution strategy that has been executed by Quelston & Ling LLP since the Company's early stages.
2. Coverage Gaps. We identified potential gaps in patent coverage relating to (i) the Company's merchant onboarding and risk profiling technology (addressed by pending Application No. 17/667,218, which is still awaiting a first office action), and (ii) the Company's data analytics and anomaly detection capabilities (addressed by pending Application No. 18/101,447). We recommend that the Company consider whether additional filings may be warranted to protect recent innovations in its compliance automation and multi-currency settlement features, particularly in light of the Company's reported plans to expand into cross-border payment processing.
3. § 101 Risk. The pending § 101 rejection in Application No. 17/738,455 is a recognized risk in fintech patent prosecution. We recommend that the Company and Quelston & Ling LLP carefully craft the response to emphasize the technical, rather than purely financial, aspects of the claimed invention.
4. Provisional Conversion Deadlines. The Company should ensure that decisions regarding the conversion of the two provisional applications (Nos. 18/178,992 and 18/254,318) are made well in advance of the respective June and September 2024 deadlines.
5. Maintenance Fee Monitoring. The upcoming 4-year maintenance fee for US 10,891,274 (due January 12, 2025) should be docketed and tracked.
IV. Trademarks and Service Marks
A. Registered Trademarks
The Company holds seventeen (17) U.S. trademark registrations with the USPTO, all in the name of Skybridge Fintech Ltd. The registrations cover the Company's primary brand, product names, and associated design marks. A complete schedule of the Company's trademark registrations is set forth on Exhibit B hereto. Key registrations are summarized below:
All registrations are in good standing with the USPTO. The Company has timely filed all required post-registration maintenance documents, including declarations of continued use under Section 8 of the Lanham Act and, where applicable, declarations of incontestability under Section 15 of the Lanham Act. The SKYBRIDGE word mark and design mark (Reg. Nos. 5,614,283 and 5,614,291) have been declared incontestable, providing enhanced protection against challenges to validity.
All registrations are in the name of Skybridge Fintech Ltd. We confirmed this through our review of the USPTO Trademark Assignment database. We did not identify any assignments from third parties or individuals that might suggest a break in the chain of title.
B. Pending Trademark Applications
The Company has five (5) pending U.S. trademark applications with the USPTO:
We note the following with respect to the pending applications:
• SKYBRIDGE GLOBAL (Serial No. 97/412,338). This application was published for opposition on October 17, 2023. The opposition period will expire on January 16, 2024. No opposition or extension of time to oppose has been filed as of the date of this memorandum. Assuming no opposition is filed, registration should proceed on a normal timeline.
• FLOWLEND (Serial No. 97/412,345). The examining attorney issued a non-final office action on September 5, 2023, citing a likelihood of confusion with a prior registered mark, "FLOWLENDING" (Reg. No. 6,145,223), owned by FlowLend Capital LLC, in Class 36. The Company's trademark counsel, Karen Li of Calderwood & Harkness's trademark group, is evaluating the basis for the refusal and has indicated that she intends to argue that the marks are distinguishable based on the differing nature of the services (the Company's embedded lending platform versus FlowLend Capital LLC's consumer lending services) and the distinct trade channels. A response is due March 5, 2024. The outcome of this prosecution is uncertain, and we recommend that the Company consider alternative marks or a consent agreement with FlowLend Capital LLC if the refusal is maintained.
• PAYNEXUS (Serial No. 97/734,882). We note that this mark shares certain similarities with the name "Nexus Payment Technologies, Inc.," which is the entity identified in Section III.D above as holding potentially relevant payment routing patents. While the trademark analysis is distinct from the patent analysis, we recommend monitoring whether Nexus Payment Technologies, Inc. holds any trademark registrations or applications for marks containing "NEXUS" in the relevant classes. Our preliminary search did not identify any directly conflicting Nexus trademark registrations, but this should be monitored.
C. Common Law Trademarks
In addition to its registered marks, the Company uses several unregistered marks in commerce, including product feature names, marketing slogans, and internal product code names that have become externally facing. Based on our review, the following unregistered marks are used prominently by the Company:
• "PayPath" — used in connection with a specific payment routing feature of the Platform
• "LendReady" — used in connection with a pre-qualification feature of the embedded lending engine
• "Smart Reconciliation" — used in connection with the Platform's transaction reconciliation dashboard
• "One Platform. Every Payment." — marketing tagline used in advertising and promotional materials
• "Built for Commerce" — marketing tagline used on the Company's website and trade show materials
These common law marks derive some protection from the Company's use in commerce, but they lack the enhanced protections and presumptions afforded by federal registration. Given the commercial significance of "PayPath" and "LendReady" as customer-facing product feature names, we recommend that the Company consider filing federal trademark applications for these marks to strengthen its enforcement posture.
D. Foreign Trademark Registrations
The Company holds four (4) foreign trademark registrations, as follows:
The Company also has two pending trademark applications with the European Union intellectual Property Office ("EUIPO") for the SKYBRIDGE word mark (Application No. 018,734,592) and design mark (Application No. 018,734,601), both filed on May 17, 2023, in Classes 36 and 42. Both applications are currently undergoing examination.
E. Trademark Agreements
Our review identified the following trademark-related agreements:
1. Coexistence Agreement with SkyBridge Capital, LLC (effective April 8, 2019). The Company entered into a trademark coexistence agreement with SkyBridge Capital, LLC, a New York-based investment management firm, pursuant to which the parties agreed to coexist in the marketplace using their respective "SKYBRIDGE" marks, subject to certain use restrictions. Under the agreement, the Company agreed to limit its use of the SKYBRIDGE mark to financial technology, payment processing, and related SaaS services, and to refrain from using the mark in connection with investment management, fund administration, or hedge fund advisory services. SkyBridge Capital, LLC agreed to refrain from using its mark in connection with payment processing, payment orchestration, or embedded lending technology. The agreement is perpetual and does not contain a termination provision, other than for material breach.
2. Trademark License Agreement with Pinnacle Commerce, Inc. (effective September 1, 2022). The Company granted Pinnacle Commerce, Inc. ("Pinnacle"), a strategic partner, a non-exclusive, non-sublicensable license to use the SKYBRIDGE and SKYBRIDGE PAY marks in connection with Pinnacle's co-branded checkout experience for Pinnacle's e-commerce merchant customers. The license is royalty-free, has a three-year term expiring August 31, 2025, and includes customary quality control provisions. The agreement does not contain a change-of-control provision.
We did not identify any other trademark coexistence agreements, consent agreements, or settlement agreements, nor any other trademark license agreements (inbound or outbound).
F. Assessment. The Company's trademark portfolio is, in our assessment, well-developed and provides comprehensive brand protection across the Company's primary product lines and services. The portfolio includes federal registrations for the core brand (SKYBRIDGE in both word and design form), all major product names, and several feature and sub-brand names. The coexistence agreement with SkyBridge Capital, LLC appropriately addresses the most obvious potential source of brand confusion.
We note the following observations and recommendations:
1. The pending FLOWLEND application (Serial No. 97/412,345) faces a likelihood-of-confusion refusal that may require negotiation of a consent agreement or consideration of an alternative mark. The Company should discuss this matter with trademark counsel promptly.
2. The Company should consider filing federal trademark applications for the "PayPath" and "LendReady" product feature names, which are currently used as common law marks and are commercially significant.
3. The PAYNEXUS application should be monitored for potential conflicts with Nexus Payment Technologies, Inc.
4. Foreign trademark protection is currently limited to Canada, the United Kingdom, and pending EU applications. If the Company plans to expand its operations internationally, additional foreign filings should be considered.
V. Copyrights
A. Registered Copyrights
Based on our search of the U.S. Copyright Office records and our review of the Company's IP Register, the Company holds three (3) copyright registrations with the U.S. Copyright Office:
All three registrations are in the name of Skybridge Fintech Ltd. The registrations cover specific versions of the Company's core platform software and developer documentation. We note that these registrations represent only a subset of the Company's copyrightable works, and that the Company has not registered copyrights for subsequent versions of its platform software, its marketing materials, or its other copyrightable works.
B. Unregistered Copyrights
The Company is the author and owner of a substantial body of unregistered copyrightable works, including:
• Proprietary Software Code. The source code for the Platform, including the payments orchestration engine, the embedded lending engine, the API gateway, the merchant onboarding system, the analytics and reporting modules, and related microservices and infrastructure code. Ms. Vasquez estimated during our interview that the Platform codebase comprises approximately 2.4 million lines of code developed by the Company's engineering team since 2017.
• Algorithms and Data Models. The proprietary algorithms underlying the Company's payment routing optimization, risk scoring, fraud detection, and reconciliation capabilities, to the extent embodied in copyrightable expression (as distinct from uncopyrightable ideas, processes, or mathematical concepts).
• APIs and SDKs. The application programming interfaces ("APIs") and software development kits ("SDKs") made available to customers and partners for integration with the Platform.
• Technical Documentation and User Manuals. Internal and external technical documentation, including system architecture documentation, API reference materials, integration guides, user manuals, and training materials.
• Website Content. The content of the Company's website (www.skybridgefintech.com and related subdomains), including text, graphics, images, videos, and other materials.
• Marketing Materials. Brochures, white papers, case studies, blog posts, social media content, and other marketing and promotional materials.
Copyright protection in the United States subsists automatically upon the creation and fixation of an original work of authorship in a tangible medium of expression. 17 U.S.C. § 102(a). Registration with the U.S. Copyright Office is not required for copyright protection to exist, but registration provides significant enforcement benefits, including the ability to seek statutory damages and attorneys' fees in an infringement action (17 U.S.C. §§ 412, 504(c), 505) and the establishment of a prima facie presumption of validity if registration is obtained within five years of first publication (17 U.S.C. § 410(c)).
C. Copyright Ownership
Works Created by Employees. Under the work-for-hire doctrine codified at 17 U.S.C. § 101, works created by employees within the scope of their employment are deemed to be "works made for hire," and the employer is considered the author and owner of the copyright from the time of creation. Based on our review, the Company's standard CIIAA includes express provisions confirming that all works created by employees in the course of their employment are works made for hire and, to the extent any such works do not qualify as works made for hire, assigning all rights in such works to the Company. We reviewed executed CIIAAs for a representative sample of the Company's engineering and product personnel and confirmed that the work-for-hire and assignment provisions are present and properly executed.
Works Created by Contractors and Consultants. The work-for-hire doctrine has a narrower application to works created by independent contractors. Under 17 U.S.C. § 101, a work prepared by an independent contractor qualifies as a work made for hire only if (i) the work falls within one of nine enumerated categories of works, and (ii) the parties have expressly agreed in a signed written instrument that the work shall be considered a work made for hire. Where these requirements are not met, copyright ownership vests in the independent contractor unless there is a valid written assignment of the copyright to the commissioning party.
Our review identified several instances where the Company's early-stage contractor agreements (executed in 2017 and early 2018) lacked adequate IP assignment provisions or contained ambiguous language regarding the scope of assignment. These matters are analyzed in detail in the companion IP Ownership & Assignment Analysis memorandum to be delivered on December 22, 2023. We identified six (6) contractors who performed development work on early versions of the Platform and whose agreements require remediation through confirmatory assignment agreements.
Founder Works. We also note that certain elements of the Platform were developed by co-founders Arjun Mehta and Elena Vasquez prior to the Company's incorporation on March 14, 2017. The Company's records include a Founder intellectual Property Assignment Agreement dated March 14, 2017 (the "Founder IPAA"), executed by both Mr. Mehta and Ms. Vasquez, purporting to assign to the Company all intellectual property conceived, developed, or reduced to practice by the founders prior to the Company's incorporation that relates to the Company's business. Our preliminary review of the Founder IPAA has identified certain issues relating to the specificity of the description of assigned works and the consideration recited in the agreement. These issues are addressed in the companion IP Ownership & Assignment Analysis memorandum.
D. Copyright Licenses
Inbound Content Licenses. The Company holds inbound licenses for certain third-party content used in its Platform and marketing materials, including stock photography and illustration licenses from Ostrander Enterprises (Standard License) and font licenses from Larkspur Enterprises We did not identify any material inbound copyright licenses that present unusual risk.
Outbound Licenses. The Company's standard SaaS subscription agreement grants customers a limited, non-exclusive, non-transferable, non-sublicensable license to access and use the Platform during the subscription term. The agreement expressly reserves all intellectual property rights in the Platform to the Company and prohibits customers from copying, modifying, reverse-engineering, or creating derivative works of the Platform. The agreement includes appropriate confidentiality provisions covering the Company's proprietary technology.
E. Assessment. The Company's copyright position is generally sound, supported by its registered copyrights in key versions of its platform software and developer documentation, the work-for-hire doctrine applicable to employee-created works, and the IP assignment provisions in its employee and contractor agreements. However, the following areas warrant attention:
1. Contractor Assignment Gaps. As noted above and detailed in the companion IP Ownership & Assignment Analysis memorandum, certain early-stage contractor agreements lack adequate IP assignment provisions. We recommend that the Company obtain confirmatory assignments from the identified contractors prior to or concurrent with the closing of the Transaction.
2. Founder Assignment Issues. The Founder IPAA requires further analysis and may benefit from a confirmatory assignment to address the issues identified. This is discussed in the companion memorandum.
3. Registration of Key Works. The Company has registered copyrights in only two versions of its platform software (Version 2.0 and Version 1.5) and its developer documentation. We recommend that the Company consider registering copyrights in its current platform versions and other key works to strengthen its enforcement posture and preserve the ability to seek statutory damages and attorneys' fees in the event of infringement.
VI. Trade Secrets and Proprietary Technology
A. Identification of Key Trade Secrets
Based on our interviews with Ms. Vasquez and the Company's engineering leadership, and our review of the Company's internal documentation, we identified the following categories of information that the Company treats as trade secrets and proprietary technology:
1. Proprietary Payment Routing Algorithms and Optimization Logic. The Company has developed proprietary algorithms for dynamically routing payment transactions across multiple payment service providers based on a multi-factor optimization model that considers transaction cost, authorization rates, processing speed, provider reliability scores, geographic factors, and merchant-specific parameters. Ms. Vasquez described these algorithms as the "core engine" of the Platform and the Company's primary source of competitive differentiation in the payments orchestration market.
2. Embedded Lending Risk Models and Underwriting Algorithms. The Company has developed proprietary risk scoring models and underwriting algorithms for its embedded lending products, incorporating machine learning techniques trained on transaction-level data to assess creditworthiness in real time at the point of sale. These models represent significant R&D investment and are considered highly proprietary.
3. Customer Data Analytics and Processing Methodologies. The Company has developed proprietary methodologies for analyzing and processing transaction data to generate insights for merchants, including anomaly detection algorithms, predictive churn models, and revenue optimization analytics.
4. Platform Architecture and Infrastructure Configurations. The specific architecture, configuration, and deployment methodologies of the Platform, including the Company's microservices architecture, container orchestration configurations, data pipeline designs, and infrastructure-as-code templates, represent trade secret information.
5. Business and Financial Information. The Company's pricing models, fee structures, customer acquisition cost data, customer lists and profiles, vendor terms and rates negotiated with payment service providers, and internal financial projections and business plans constitute trade secret information.
B. Trade Secret Protection Measures
We reviewed the Company's trade secret protection measures and found that the Company has implemented a multi-layered program for protecting its proprietary information:
Employee Onboarding and Offboarding Procedures. All employees are required to execute the Company's standard CIIAA upon hire, which includes confidentiality obligations, non-disclosure provisions, and invention assignment clauses. The Company conducts onboarding training that covers the Company's policies regarding the protection of confidential and proprietary information. Upon termination or departure, the Company's HR team conducts an exit interview that includes a reminder of the departing employee's continuing obligations under the CIIAA, collection of Company equipment and access credentials, and revocation of access to all Company systems, code repositories, and internal communication tools. Ms. Ramanathan confirmed that the Company's exit interview process has been consistently followed since its implementation in early 2020.
Contractor and Consultant NDA/Assignment Agreements. All independent contractors and consultants engaged by the Company are required to execute a confidentiality and IP assignment agreement prior to beginning work. The Company's standard form includes non-disclosure obligations, restrictions on use of confidential information, and assignment of all work product and intellectual property. As noted in Section V.C above, certain early-stage contractor agreements lacked adequate provisions, but the Company has used its current standard form consistently since mid-2018.
Physical and Digital Access Controls. The Company employs the following access controls to protect its proprietary technology and trade secrets:
• Code Repositories. All source code is maintained in a private Tidewater Solutions instance with role-based access controls ("RBAC"). Access to specific repositories is granted on a need-to-know basis, with engineering managers responsible for approving access requests for their teams. Multi-factor authentication ("MFA") is required for all repository access. Audit logging is enabled for all repository operations.
• Access Management. The Company uses Vireo Partners LLC for identity and access management across its enterprise systems, with single sign-on ("SSO") and MFA enforced for all employees and contractors. Access reviews are conducted quarterly by the IT security team.
• Encryption. All data at rest is encrypted using AES-256, and all data in transit is encrypted using TLS 1.2 or higher. The Company's proprietary algorithms and risk models are stored in encrypted repositories with additional access restrictions.
• Endpoint Security. All Company-issued devices are managed through an MDM (Mobile Device Management) solution, with full-disk encryption, remote wipe capability, and endpoint detection and response ("EDR") software.
Internal Policies. The Company has adopted the following internal policies relevant to trade secret protection:
• Information Classification Policy (version 2.3, dated June 2023), which establishes four tiers of information classification (Public, Internal, Confidential, and Highly Confidential) and specifies handling requirements for each tier.
• Data Handling and Retention Policy (version 1.8, dated March 2023), which governs the collection, storage, processing, and disposal of Company data and proprietary information.
• Acceptable Use Policy (version 3.0, dated January 2023), which establishes guidelines for the use of Company systems, devices, and information resources.
• Clean-Desk Policy (incorporated into the Information Classification Policy), which requires employees to secure sensitive documents and materials when not in active use.
DTSA Notice Compliance. Section 7 of the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1833(b), provides a limited immunity for individuals who disclose trade secrets in confidence to an attorney or government official for the purpose of reporting or investigating a suspected violation of law, or in a complaint or other court document filed under seal. The DTSA requires employers to provide notice of this immunity in any contract or agreement with an employee that governs the use of a trade secret or other confidential information. 18 U.S.C. § 1833(b)(3)(A).
We reviewed the Company's standard CIIAA (current version, dated September 2020) and confirmed that it includes the required DTSA immunity notice. However, our review of a sample of earlier versions of the CIIAA (used from 2017 to mid-2019) indicated that these earlier versions did not include the DTSA notice. Ms. Ramanathan confirmed that the Company has not obtained updated CIIAAs with the DTSA notice from employees who were onboarded prior to September 2020 and who have not subsequently signed updated agreements. We identified approximately forty-five (45) current employees whose CIIAAs do not contain the DTSA notice. While the absence of the notice does not invalidate the underlying confidentiality and assignment provisions, it may limit the Company's ability to recover exemplary damages and attorneys' fees in a trade secret misappropriation action under the DTSA brought against any of these employees. 18 U.S.C. § 1833(b)(3)(C).
We similarly reviewed the Company's standard Consulting Agreement and Independent Contractor Agreement and confirmed that the current versions include the DTSA notice. Certain earlier contractor agreements lack the notice, consistent with the pattern described above.
Compartmentalization. Ms. Vasquez and Mr. Kim confirmed during their interviews that the Company's engineering teams are organized into functional groups (payments engineering, lending engineering, platform infrastructure, data engineering, and security engineering) and that access to source code repositories and proprietary technical documentation is compartmentalized along these functional lines. For example, members of the payments engineering team generally do not have access to the source code and technical documentation for the lending engine, and vice versa. Access to the most sensitive algorithmic logic (particularly the payment routing optimization and lending risk scoring algorithms) is further restricted to a small group of senior engineers and technical leads.
C. Known or Suspected Misappropriation
We reviewed the Company's records and discussed with Ms. Ramanathan whether there have been any known or suspected incidents of trade secret misappropriation.