Understanding Due diligence of IPR in mergers and acquisitions
Due diligence around intellectual property rights (IPR) involves identification, examination and assessment of the IPR owned or used by an individual company. IPR to be assessed can include:
- patents and patent applications;
- registered designs;
- registered circuit layout rights;
- registered plant breeder rights;
- registered and common law trade marks;
- copyrights (including software code);
- trade secrets;
- trading names or registered business names;
- domain names;
- client lists and databases;
- marketing or branding materials such as slogans or hashtags; and
- websites, online publications and social media handles.
Key Aspects of Due diligence of IPR in mergers and acquisitions
Importance of Due diligence: Due diligence is a key step in assessing the quality of a company’s intangible assets and determining their value. Knowing the quality and value of assets assists in determining the overall value of a company that may be subject to a merger or acquisition. Due diligence is also useful when conducting negotiations as it provides a fuller understanding of any IPR that may or may not be included as part of any merger or acquisition. It allows for identification of issues that may need to be resolved before a merger or acquisition can take place, including any jurisdictional issues for companies or businesses based overseas or for Australian based companies with internationally protected IPR.
Considerations when conducting due diligence: Preparation of a list of known IPR that details the IPR to be included or excluded in a merger or acquisition is an excellent starting point. Identification of all IPR owned or used by a company wishing to be acquired provides an opportunity to identify any issues that may arise with IPR ahead of acquisition and the opportunity to rectify them. This might include unregistered or unprotected rights, rights the subject of an incorrect assignment, or expired rights.
Identification and rectification of IPR issues pre-merger or acquisition can result in a buyer paying more than should be the case if those positions with the IPR were not discovered. Investigation and assessment of all IPR from a buyer’s perspective provides an opportunity to identify issues such as potential infringement claims or which IPR may be relevant to an acquisition or merger ahead of any negotiations or subsequent agreement.
Intersection with Privacy and Data Security: Some IPR such as trade secrets or storage of IPR in digital mediums require additional protections in terms of privacy and data security. Trade secrets in particular maintain their value and status to a company through ongoing confidentiality, security and privacy measures taken by the owner or user. Privacy and Data security protections differ across jurisdictions and IPR used or registered internationally may be subject to different standards of Privacy or Data security protections in other countries.
Intellectual Property Considerations
Ownership of IPR: Due diligence should clearly identify which IPR is owned or used by a company. Depending on the type of IPR it may be owned or licenced for usage which may affect the value of the IPR when negotiating a merger or acquisition.
Protection and Use of IPR: The status of IPR should also be identified through a thorough due diligence process. IPR that has expired or been renewed despite no longer being used may be irrelevant to any agreement made. Potential claims of infringement either by or against a company will also be relevant, as will knowledge of steps taken to protect IPR or defend any infringement claims.
Assignment and transfer of IPR: Due diligence may identify which IPR could be assigned or transferred as part of a merger or acquisition or ahead of a merger or acquisition. Once this IPR is identified it gives a company time to arrange for the assignment or transfer of relevant IPR ahead of any merger or acquisition. It will also be important to ensure that the identified IPR has been effectively assigned from any author to the company the subject of the merger or acquisition – closing the loop to ownership.
Our Expertise in Due diligence of IPR in mergers and acquisitions: At CGLaw, we have extensive experience in advising on due diligence, and identifying, classifying, protecting and prosecuting claims of infringement of IPR for companies wishing to conduct due diligence for a variety of reasons. Our team of skilled lawyers understands the importance of a thorough register of IPR for a company and the peace of mind that comes with knowing that IPR is protected, adds to a company’s value, and can help clients navigate complex legal issues while protecting and identifying their intellectual property rights.
Whether you are a small business, an international company trading in Australia or a sole trader, we provide tailored legal solutions to ensure that your IPR is correctly identified, protected and maintains its value with your business objectives so you can have peace of mind during a merger or acquisition.
Get in Touch
If you require assistance with identification, assessment or protection of your IPR, our team is here to help. Contact us today to schedule a consultation and learn how we can assist you in safeguarding your intellectual property rights and ensuring your business retains its maximum value.