In Due Course

Businessperson performing due diligence of intellectual property when buying or selling a business

A major part of buying a business with value tied to its intellectual property portfolio is due diligence on how it owns and protects its intellectual property. Companies with brand recognition or products that rely on trademarks and patents will need to show that they have procedures in place to safeguard the value of those assets. Further, trade secrets can be valuable assets that raise concerns about privacy and data security due to how they are stored and transmitted.

If you are considering a sale of your business or the purchase of an existing business, the list below will help you take inventory of the intellectual property that may be important to the transaction:

  • Issued patents and pending patent applications;
  • Trademarks and servicemarks, whether registered or if only protected by common law rights;
  • Copyrights and printed works;
  • Trade secrets, which usually requires contract review;
  • Corporate names, including formal names and “doing business as” names;
  • Domain names, including those that are used and those that are registered but not active;
  • Tag lines, by-lines, slogans, and brand hashtags for marketing purposes;
  • Websites, online publications (for example, “white papers”), and social media accounts;
  • Software that is used in the business or developed by the business; and
  • Databases, which can require detailed review depending on the type of information retained.

An understanding of the proposed transaction and the impact of the intellectual property that is being transferred is critical to satisfying the parties’ expectations regarding value, price, ownership, and assignability. Once the due diligence is complete, any issues that come to light can be remedied between the buyer and seller and further steps taken as necessary to protect the intellectual property.

Taking an inventory of the intellectual property that your company owns or that is being acquired can help make sure you are capturing all of the intellectual property and determining how it is managed, stored, and transmitted and whether care is being taken to protect those assets from a data and security perspective.

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