M&A (Mergers and Acquisition) is a merger and acquisition activity aimed at gaining control of a business through partial or total ownership of that business.
Typically, this merger and acquisition will value a lot of the target companys assets (the Company has been selected as an acquired or merged company), including intellectual property rights.
According to surveys, because of its intangible and long-term value, intellectual property is one of the difficult issues to reach consensus on in M&A deals, especially valuation and ownership transfer. Therefore, the legal assessment of intellectual property rights in the M&A deal is extremely necessary and important.
Legal Due Diligence of Intellectual Property
Legal due diligence in M&A is the process by which the buyer collects, learns, researches, reviews and evaluates information about the target company to indicate legal issues that are likely to affect the transaction. buy the company and give the right advice.
One of the important issues that must be focused on in legal due diligence is the assessment of the intellectual property rights of enterprises. This activity is primarily intended to identify the existing intellectual property assets of a business and determine whether there are any risks to these intellectual property rights. In addition, a legal due diligence on intellectual property rights will also determine if a businesss intellectual property is proprietary or shared with other entities. Only when these issues are clearly identified will the buyer have enough grounds to determine the value of the business (intellectual property rights are just one of many bases for assessment). However, the legal assessment of intellectual property rights in practice is not as simple as the aforementioned theories.
Notes when conducting legal due diligence on intellectual property rights
Through a number of typical M&A deals, it can be seen that common legal problems related to intellectual property rights often come from the fact that the company has not yet registered trademarks, industrial designs, and patents; subsidiary uses the parent companys trademark or the term of protection of intellectual property rights is coming to an end. So, what should the buyer do to avoid the legal risks mentioned above?
Firstly, the target company may be using intellectual property such as trademarks, patents, industrial designs. The buyer needs to check whether the target company has the right to own or use the asset, how to get the right to own or use the intellectual property (created by himself or licensed by a third party). use).
Second, the buyer must assess the possibility of the target company infringing upon the intellectual property rights of other individuals and organizations during its operation. Due diligence is also to uncover potential or unrealized financial obligations of the target company in relation to intellectual property, such as bonuses to inventors of inventions.
Third, whether the target company is allowing third parties to use its intellectual property should also be thoroughly investigated and evaluated.
Documents to be considered during the legal due diligence process usually include: the certificate of registration of intellectual property rights; contracts on transfer of ownership rights and rights to use trademarks, industrial designs and inventions; internal regulations on creativity and protection of intellectual property rights. In addition, additional attention should be paid to technology transfer contracts and contracts related to important and valuable computer software of the company.
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