Meaning
Reviewing the intellectual property assets of a target company before an acquisition ensures that the buyer understands the legal risks and asset values. Through m and a ip due diligence, buyers assess the strength and ownership of the target’s patent portfolio and trade secrets. This process identifies any ownership gaps or potential infringement liabilities before the transaction closes.
It acts as a safety mechanism that prevents the buyer from acquiring contested or unenforceable technology assets during corporate transitions.
Chain of Title
Auditors check the chain of title for every patent and patent application to ensure they are registered in the target company’s name. They review employee assignment agreements and contractor agreements to confirm that all inventors have assigned their rights to the target. This step prevents the buyer from acquiring assets with defective titles.
Litigation Risk
The audit also evaluates any ongoing or threatened patent litigation that could affect the target’s business. This includes checking for third-party claims of patent infringement and assessing the validity of the target’s own patents. This analysis helps the buyer to negotiate appropriate indemnities in the acquisition agreement.
Deal Valuation
The results of this review can directly affect the purchase price or even lead the buyer to walk away from the deal. Finding ownership gaps or litigation risks can lead to a renegotiation of the transaction terms. This makes the review a standard part of the transaction process.
