Intellectual property represents a valuable asset for most modern companies. Firms that may acquire or merge with another firm must carefully consider how to protect the value of their IP holdings.
These considerations provide a starting point for a comprehensive IP protection strategy during a merger or acquisition.
Complete IP documentation
When selling a business, documenting the company’s complete IP assets helps ensure fair valuation. The acquisition proposal should include supporting materials for domain names, pending IP litigation, proprietary information, trade secrets, service marks, trademarks, patent applications and issued patents, and current and past IP contracts, agreements, and third-party licenses. Each firm must carefully explore the other’s documents during due diligence for a true picture of IP value.
Employee and contractor rights
A merger or acquisition agreement should address ownership of IP developed by an employee or contractor working for the company. Each company involved in the transaction may have different provisions about this matter, so the contract must create a cohesive strategy that brings divergent policies into alignment.
Open IP disputes and liens
Consider resolving open IP challenges and claims before moving forward with an acquisition or merger. During due diligence, get complete facts about open IP disputes occurring in the target company that may affect its value or future IP ownership.
Companies must also ensure that target firms own lien-free IP. This asset has less value when used as collateral for secured debt, an increasingly common practice.
Start the conversation about IP early in the merger or acquisition process. Doing so can prevent surprises that could compromise the transaction’s success.