Businesses and corporate lawyers are familiar with the need to conduct due diligence in corporate transactions. Oftentimes however, the status of a company’s intellectual property may not be properly investigated.
A comprehensive due diligence search must include a thorough search of the company’s intellectual property, including its licensed assets, such as computer software. A company’s intellectual property is essential to valuing a company, and identifying strengths, weaknesses, and exposure to potential liabilities. Indeed, the intellectual property should be evaluated before negotiations begin.
Here are some tips for making your due diligence more effective by ensuring that it includes all intellectual property assets.
The due diligence search should include review of all documents related to the following topics:
• General Intellectual Property due diligence
Identify the origins of all of the company’s IP and assure compliance with obligations related to licensed assets.
Review all threatened or pending litigation. Include review of any cease and desist letters concerning the company’s IP. Be sure to review any settlement agreements related to IP.
• Software
Software is a topic that most people overlook, but it is critical to the intellectual property due diligence search. Be sure to review all software licenses used by the seller, regardless whether the seller is the licensee or licensor, and assess the company’s software asset management program.
• Patents
A schedule of all issued, pending, and abandoned U.S. and foreign patents and patent applications should be assembled. Be sure to include all applications and patents filed by the seller, currently or formerly owned by the seller, or licensed to the seller.
Evaluate the strength of the patents.
• Copyrights
Review a schedule of all copyrightable works.
Review all copyright registrations and applications.
Review all licenses of copyrightable works used by the seller.
• Trademarks
Review a schedule of all trademarks and service marks and trademark names registered or used by the seller.
Review all trademark searches performed or obtained in connection with the marks.
Review all licenses related to the marks.
Evaluate the strength of the trademark rights.
• Trade Secrets
A description of the company’s confidential and proprietary information.
A description of methods and processes in place to protect the company’s trade secrets.
Review all agreements between seller and its employees related to confidentiality, non-disclosure, and assignments of inventions and copyrights.