Intellectual property due diligence
WITH MILLIONS RIDING on the merger and acquisition deal, IP (intellectual property)
due diligence should be handled early and with care. If it isn't, your company could
become a surprise defendant in a patent infringement suit or it could be rendered
vulnerable due to weak IP rights, says Peter Becker, an IP attorney with the firm of
Reinhart, Boerner, Van Deuren, Norris, & Rieselbach, S.C., in Milwaukee.
1. Identify products and services
Identify and list the acquisition target's important products and services, Becker
says. Don't neglect to identify secondary or support products and services. The second-
string may hold untapped value or hidden risks. "Even if something seems insignificant,
include it," Becker says.
2. List IP rights
Break down the company's IP rights into three categories: patents, trade secrets
and know-how, and trademarks and copyrights, Becker says. Describe each item in detail:
title, country of registration, filing, issuance, and expiration dates. "Patents are
the easiest to handle. Trade secrets are incredibly difficult to itemize because they
are not quantifiable," Becker says. For trade secrets and common law trademarks, give
general summaries of their functions.
3. Prioritize and assess IP rights
"Not all IP rights may be of significant value to a business," Becker says. Be sure
to consider future product changes or improvements. When assessing rights, review
employment agreements and written assignments from inventors and creators on patents
and copyrights. "The chain of title for copyrights can be a horror because few
companies fully comprehend the issues, including ownership and implied licenses,"
Take extra care with the software and systems, Becker says. Companies often work
closely with consultants on the development of software and information systems. Often
the ownership issues are not solidly defined or a license may not transfer to an
acquiring company, Becker says.
4. Consider the competitors' IP
Due diligence requires examining competitors' IP positions. This allows you to
determine which business lines should be avoided and which can be developed. Proceed
with extreme caution when acquiring a company that has ignored its competitors' IP
holdings, Becker says. "You could find, lo and behold, that your competitor has blocked
off your research and development path through their patent filings."