Due Diligence Investigations
When Are IP Due Diligence Investigations Necessary?
IP due diligence investigations are similar to IP audits and are usually conducted in conjunction with an investment or transaction, such as a licensing deal, merger, or acquisition. Depending on the situation at hand, the IP due diligence investigation could also include an assessment of the copyrights, patents, trademarks, trade secrets, and any other intellectual property of the target company and an independent investigation of each property’s potential liabilities, potential weaknesses and strengths, logistical information (filing dates, expiration dates, maintenance fees, assignment records, etc.), prosecution history and related prior art, ownership information, and inventorship. An IP due diligence investigation could have several issues unique to each branch of intellectual property.
Patent Due Diligence
In an IP due diligence investigation involving patents, the investigation could include a review of the patents, patent applications, invention disclosures, and their associated file histories. The IP due diligence investigation could reveal issues with inventorship, claim amendments, prior art references, and possible prosecution history estoppel. The IP due diligence investigation could also include reviewing ownership agreements, ensuring that the chain of title is continuous and correct, assessing whether any third parties have a security interest in the subject patents or patent applications, and verifying that all issue and maintenance fees have been paid. Depending on the scope of the IP due diligence investigation, a review of the records in both in the U.S. Patent and Trademark Office (USPTO) and in any Uniform Commercial Code (UCC) filings may be warranted. In some cases, a review of any patent pending or patented products covered by an issued patent may also be warranted to check for proper markings and compliance with company standards.
Copyright Due Diligence
In an IP due diligence investigation involving copyrights, the investigation could include a review of copyrighted works of commercial value. The IP investigation could reveal issues with authorship and ownership of such works. For example, the IP due diligence investigation could include verifying that employees and consultants executed express assignments of the copyrights to the apparent copyright owner. The diligence investigation could also include reviewing ownership agreements, ensuring that the chain of title is continuous and correct, assessing whether any third parties have a security interest in the subject works, and verifying that all registrations were completed properly. When the subject works include software, the IP due diligence investigation could include reviewing any licenses in which the subject works were named (or should have been named). In some cases, the IP due diligence investigation may warrant reviewing the works for proper copyright notices.
Trademark Due Diligence
In an IP due diligence investigation involving trademarks, the investigation could include a review of registered marks (both domestic and foreign) and common law marks. The IP due diligence investigation could include verifying ownership and licensing agreements, ensuring that the chain of title is continuous and correct, assessing whether any third parties have a security interest in the marks, and verifying that all registrations were completed properly. If the marks are involved in a licensing agreement, the IP due diligence investigation could include verifying that the goods and services associated with such marks meet specified quality standards. The IP due diligence investigation may also warrant reviewing the products, promotional materials, websites, and other materials for proper trademark markings and assessing whether any potential infringements may be identified. In cases involving products imported from a foreign country, the IP due diligence investigation could include an inquiry into whether any of the registered trademarks were recorded with U.S. Customs.
Due Diligence for Trade Secrets
In an IP due diligence investigation involving trade secrets, the investigation could include a review of the procedures and protection systems in place to maintain the trade secret. For example, the investigation could include a review of employment agreements, employee handbooks, standard operation procedures, licensing agreements, IP licensing programs, technology-sharing agreements, product development agreements, confidentially agreements with third parties, and security measures related to the trade secret.
About the Technology Law Firm:
At Klemchuk LLP, a technology law firm, we offer comprehensive legal services including litigation and enforcement of all forms of Intellectual Property (IP), as well as registration and licensing of patents, trademarks, trade dress and copyrights. We also provide a wide range of technology, internet, eCommerce and business services, including business planning, formation and financing, mergers and acquisitions, business litigation, data privacy and domain name dispute resolution.
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