Due Diligence and Valuations Obligations

One aspect of IP Management that is often talked about is the extra revenue to be gained by leveraging off technologies that are not being used through license agreements, royalties and joint ventures. However, with these advantages there comes a duty to ensure that the rewards are not just seen as being serendipitous but are real and commensurate with the value of the IP concerned. The transaction will involve due care on both parties.

The due care will generally have two components. Firstly, there is the requirement for the Patent, Copyright or Trademark to be verified. This verification is often the primary subject of a Due Diligence search.

No IPR purchase should be made, or license agreement entered into, without due diligence having been conducted beforehand.

Due diligence ascertains among other things ownership of the property in question, that all of the true and first inventors are acknowledged and will include such things as any third party interests, outstanding or due payments and relevant expiry dates of the IPR.

Due Diligence has been defined as: An evaluation, performed by investors or their agents, into the details of a potential investment or purchase, where the evaluation involves a verification of all the material facts relevant to the investment or purchase.

To learn more about Due Diligence please go the Searching Topic of the Articles in the Virtual IP Library.

In any licensing agreement or IP assignment or business sale, merger or acquisition regardless of its size both parties should present a Non Disclosure Agreement (a simple agreement can be found at the link on the right hand side) and an independently commissioned IP Due Diligence Report.

The second part of the equation involves an investigation into the value of an IP. How to measure the value of an IP is discussed. Needless to say, there are many formulae involved in this exercise and all have at least some relevance. The bottom line is, that if any IP portfolio is to be successfully managed, opportunities realized and alliances made the value, ownership and content of what is being bought, sold or licensed needs to be clearly understood.

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