Before undertaking a strategic transaction such as a round of venture funding, a merger or an acquisition, it is essential to investigate the target company’s intellectual property assets, practices and risks. Depending on the business, IP assets can strongly affect valuation. How strong are the company’s patents and other IP assets? Will they help drive success? Do outside parties have any claims to them?

The company’s own IP position, however, is only one side of the coin. A thorough IP due diligence also evaluates the rights of third parties – most prominently competitors. A “clearance” analysis can reveal third-party patents that threaten the target company’s ability to do business. Also critical are contracts and licenses that can circumscribe freedom of action. A seemingly innocuous license, or technology access granted as part of a development agreement, can severely curtail the company’s ability to make future deals involving its technology.

Goodwin Procter’s IP Due Diligence Practice is devoted to helping transactional clients discover and manage IP-related risks. We represent not only investors and acquirers but also companies seeking financing, merger partners or strategic relationships which must prepare for IP diligence. The subjects we consider range from a company’s adherence to IP “best practices” to identifying threats and opportunities:

• Does the company’s IP strategy align with its business and litigation strategy? Do its patents cover the key market differentiators of its products or provide blocking positions?

• Are there procedures in place to identify potential IP and decide how best to protect it?

• Do former employers, universities or departed employees have any claims on the company’s technology?

• Have potential third-party claims (or license opportunities) been investigated?

• Does the company have policies in place relating to open-source software? Do company products contain open-source components that may trigger disclosure or other obligations?

• Does the company participate in standard-setting, and if so, have strategic issues been explored and obligations complied with?

• Are invention records and notebooks adequately maintained and archived?

• Do out-licenses or in-licenses of technology limit future opportunities, e.g., acquisition events or partnerings?

Attorneys in our IP Due Diligence Practice are highly experienced, with deep knowledge of technology, IP practices and dealmaking. Our approach is pragmatic, business-oriented and always tailored to a particular transaction or business context.  

Contacts: Stephen G. Charkoudian and Steven J. Frank