Corporate Transaction and IP Due Diligence

Intellectual property plays a significant role in increasing the stake of the company. Previously, it was assumed that only tangible assets hold the major proportion of the company’s valuation but this was changed gradually. Now the intangible assets have a major stake in the company’s valuation. These importances of the intangible assets which are intellectual property have increased the need for its effective management in corporate transactions. In such corporate transactions, the IP issues generally tend to be overlooked. Most of the issues on which the attorneys focus are the financial statements, tax implications. It is important that the corporate transaction must also focus on the IP implications. A few of the issues which can be very important in the corporate transaction are-

Managing IP Portfolio

For corporate transactions, it is important that the IP assets which are owned and used must be scrutinized for further transaction. The list must even include those IP which is registered or even unregistered trademarks, trademark applications, patents, patent applications, and even copyright which are registered or unregistered. The list must also contain domain names, trade secrets, etc. Such listing helps the company to effectively scrutinize the IP valuation that will further help in the corporate transaction.

Why this listing is important is because of the fact that each such asset can be reviewed not only on the premise of getting the valuation but also verifying the ownership and status of IP. The details often show that the registration of IP is done in the seller’s name and there are no such suits being filed and the maintenance fees are satisfied to ensure that the registration is active. Such transactions in which details are not scrutinized tend to increase the risk in the future. Even for unregistered IP, the source of each asset must be scrutinized so as to provide full disclosure.

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Scope of IP and Agreements

The scope of IP must be disclosed so as to ensure that the usage of IP must comply with the scope of which the IP is registered. For example, the classification of the goods and services for the TM must confirm the anticipated use that is expected in the corporate transaction. Similarly, patents must also be reviewed for their scope and validity. Before moving further, any such infringement concern must be properly disclosed doing freedom-to-operate analyses. And since the IP is territorial in nature, such geographical concerns must also be relied upon. While seeking an agreement on the IP-related issues, all such agreement’s intricacies must be validly scrutinized. Context including license agreement, development agreement, settlement agreements, distribution and collaboration ventures, etc. Such agreements must be investigated so as to provide more effective and profitable transactions.

Enforcement strategy

IP enforcement is also an important part that majorly impacts the strength and value of IP. Such enforcement details must be needed to discover if any such disputes, whether active or prior, is there or not. Not only this but such enforcement information must also be effectively scrutinized to provide the knowledge of any such IP which has a competitive edge over its own IP or not. Such knowledge must also include any such licensing agreements r any such cease and desist letters. Even to the extent that any such foreign component must also be included in the transaction. Why it becomes very important to access such foreign transactions is because the enforceability of the IP assets is subject to the domestic laws of the country and hence enforceability will be different in different jurisdictions. In such transactions, conducting due diligence on foreign assets is heavily overlooked. There are a lot of instances that the IP assets are abandoned for the reason of not complying with the administrative duties such as filing of maintenance fees or failing to file required proof. Hence, all such assessments must be done with due diligence while going for the Corporate transaction.

Engagement of Counsel

Last, but not least, the engagement of qualified counsels is necessary for the conduct of any such corporate transaction requiring IP due diligence. For a transaction, it is impossible to cover all the aspects related to the same due to the complex market situation and subject matter. The team at GPF has qualified counsels who have advised for IP-related issues in various corporate transactions. Most of the participating members do not tend to hire any such professional at the beginning which generally leads to bad transactions resulting in significant liability to the investor. The counsels at GPF have significant knowledge in the domain which ensures that not a single aspect is missed and to conduct proper due diligence which will eventually result in a perfect corporate transaction with IP in it.

Author: Saransh Chaturvedi (an advocate) currently pursuing LLM from Rajiv Gandhi School of Intellectual Property Law (IIT Kharagpur).  In case of any queries please contact/write back Global Patent Filing us at support@globalpatentfiling.com.

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