How much time and money you need to spend on investigating an IP portfolio is going to depend on many factors. Amongst these, the amount of time available and the value of the IP are among the most obvious considerations.
Due diligence can be anything from a cursory look-and-see, to an extensive process that includes preparing legal opinions and interviewing inventors and authors. For convenience, due diligence can be broken down into stages, all of which are infinitely flexible in scope and depth to reflect the nature of the IP in question and any budgetary and time constraints. Some brief suggestions of what may be included in some of these stages are set out below:
Stage 1Carry out a cursory review of the online resources to see who is shown as the real owner of the IP, whether there are pending deadlines, and whether any applications are pending, issued, or expired. Search for any litigation or other disputes involving the IP. This is really the bare minimum that should be done before pursuing serious negotiations. The results of Stage 1 can be used to prioritize any further work. For some transactions the due diligence process never gets beyond this preliminary stage.
Stage 2Address any issues identified to date. Review all relevant documentation to ensure that the IP owner has good and clear title to the IP and is free to sell or license it. Review the terms of any licenses for limitations on scope, representations and warranties, reservations of rights, and permissions that may have to be obtained to proceed with the transaction. Have foreign agents confirm the status and ownership of rights in their own jurisdiction. Consider the need for any preliminary assessments or legal opinions on scope, validity and freedom to operate.
Stage 3Address any issues identified to date. Prepare any necessary legal opinions. Review laboratory notes and interview all inventors to ensure that the chain of title takes account of all parties who may have rights in the IP.
Address any outstanding issues. Take any remedial steps, such as challenging any conflicting third party rights, obtaining supplementary assignments, correcting any errors on the record, and obtaining any necessary consents for the transaction.
Due diligence is an organic process and the content and focus of the work will evolve depending on what surfaces as investigations proceed. Good communication between professional advisors, technical personnel and business management is critical to the efficiency and effectiveness of the due diligence process. IP is a very complex area of law and this article only touches the surface of some issues that may arise. You should always seek qualified professional assistance before making any decisions.
By Euan Taylor
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 firstname.lastname@example.org or at 604-239-0271