Due diligence is process of ascertaining the scope, nature, strength, liabilities, and validity of a company's intellectual property rights. It is most typically done by someone who is interested in acquiring a company or by an investor was going to invest in a company. It is also good practice to do due diligence for intellectual property on your own company as an audit of your own intellectual property portfolio on a periodic basis.
The following is a summary of due diligence issues for intellectual property, however, is by no means complete, but is given as a sample of items to consider in performing due diligence for intellectual property. The purposes of performing due diligence on intellectual property include a better ascertaining a company's value of their intellectual property or to safeguard the investor's investment in the company. As far as performing due diligence on your own company the purposes would be for evaluating the intellectual property portfolio’s on going optimization and refinement in accordance with your company's business goals.
In conclusion, the goal is to understand who owns what intellectual property rights and what third-party license rights are granted or are received, or in other words what constitutes the intellectual property portfolio of the company.
Due diligence of intellectual property generally is in accordance with reviewing the intellectual property portfolio, where more detail is given on the website left side home page button under “General Intellectual Property” and clicking on the “Portfolios” button.
1. General intellectual property rights;
Review existing in employee confidentiality agreements and/or employee proprietary information agreements to understand the documentation of intellectual property that the employee brings into the company, how the intellectual property that the employee creates while employee is treated within the company, and further how the employee created intellectual property is treated after the employee departs from the company.
Also, in accordance with the employee confidentiality agreements above, ascertaining what exists for the same type of agreement for vendors of the company, and / or independent contractors.
Review all existing license agreements that the company has related to intellectual property, both for licensing out technology from the company and for licensing in technology from third parties.
Reviewing policies and procedures relating to how new inventions are documented in accordance with proper inventor notebook procedures, also how new inventions are treated for clearance to reduce infringement risk.
Reviewing policies and procedures relating to the maintenance of trade secrets, which is normally the status of an inventive idea prior to the patent application being filed, the proper administrative controls and marking of trade secret documents, scope and nature of confidentiality agreements for both employees and outsiders related to the administrative control of trade secrets covering both proprietary information that is created within the company and proprietary information that flows into the company from third parties.
Note that trade secrets can apply to any information in a company that has secrecy that value and thus would not only apply to technical information but also competitive information, financial information, and the like.
2. Intellectual property due diligence as specifically related to Patents;
Review the listing of all issued patents and pending patent applications understanding the status of proper assignments and recording of assignments, proper prosecution of the patent applications, patent maintenance fee status, and the proper public notice is given on all produced products and processes, and what procedures are in place related to watching for infringers in the marketplace.
Review any pending litigation issues related to patent infringement either wherein the company is allegedly having a patent infringed or is allegedly infringing a third-party patent, in addition to other legal issues related to issued patents, such as re-examination, submarine patents, continuations, and the like. Also, watching for on issued patents previously unknown prior art that could affect patent validity and understanding the effect of the prosecution history upon the issued patents.
3. Intellectual property due diligence as specifically related to Copyrights;
Review the listing of all registered copyrights and pending copyrights, status of proper assignments and recording of assignments, proper public notice of a copyrighted materials, and also what procedures in place related to watching for infringers in the marketplace.
4. Intellectual property due diligence as specifically related Trademarks;
Review the listing of all registered trademarks and pending trademarks, status of proper assignments and recording of assignments, renewals, section 8, 15, and 9 use affidavits, proper public notice and public use of trademarks as published by the company including branding and ownership statements, and also what procedures in place related to watching for infringers in the marketplace. Also, any pending litigation issues related to cancellation, opposition, or infringement proceedings.