Tuesday, February 12, 2013

Intellectual Property Due Diligence- The Basics (Part 1)

Tuesday, February 12, 2013

If you are buying, licensing, or investing in any form of Intellectual Property (“IP”), then some level of due diligence is critical to be sure that you understand what you are paying for.  This is the first in a series of articles on various aspects of this important topic.

If you are contemplating any kind of IP transaction, there are some things you can check yourself using online databases. Doing some research of your own early on can avoid a lot of wasted energy and expense. Amongst the fundamental issues to consider are status, ownership, validity, scope, and freedom to operate:

Status: Have applications been filed to register the IP in question? Are they in good standing? Are any applications still pending or have they already proceeded to registration? How soon will the rights expire?

Ownership:  Who is the legal owner of the patent, trade-mark or other IP in question? Have any licenses been granted? Do any third parties have rights in the IP?

Validity/registerability: If the IP has not yet been registered, then what are the chances that a registration will eventually be obtainable? If the rights are already registered, then is that registration valid or could it be successfully challenged by third parties? 

Scope: How broad are the IP rights?  Is it still possible to register rights in all of the countries of interest?  Do any filings cover the subject matter of most importance?

Freedom to operate:  Will you be able to use the IP you purchase without then infringing on the valid IP rights of a third party? A patent grants only a negative right, the right to stop somebody using the claimed invention. The owner of a patent may not be able to practice their invention without infringing on a third party’s coexisting rights.

IP is a complex area of law and this article only touches the surface of some of the issues that may arise.  While any preliminary research you are able to do yourself can be helpful, you should always seek qualified professional assistance before making any decisions. If you are selling IP, it is advisable to undertake some level of due diligence yourself so you are prepared to answer any questions from potential purchasers and can take steps to remedy any problems.

Euan Taylor is a lawyer, patent agent and trade-mark agent and is based in MBM’s Vancouver office. He has wide experience of IP due diligence for a range of commercial transactions and can be reached at etaylor@mbm.com or at 604-239-0271.