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Equity Entrepreneur ©
Formed to cater for the needs of Private Investors |
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Intellectual property rights
Intelligible Advice on Intangible Assets - what intellectual property rights (” IPR”) are you acquiring?
Most businesses will own or have rights to intellectual property, whether as a relatively insignificant operational feature of the business (for example a client database) or a major asset crucial to future trading (for example, the patent for the manufacture of core products). Clearly the value of a business to a prospective purchaser will be dependent upon the ability to exploit those IPR and therefore it is fundamental that a purchaser acquires all the rights that it needs (and expects!)
Trademarks, copyright, patents, designs and other IPR can be the key assets of a business and, although intangible, they can be managed in much the same way as ordinary property in that they can be co-owned, sold, licensed or mortgaged.
When targeting a business for investment there will be a number of important questions to be answered in respect of who owns the intellectual property or, if it is licensed from somebody else, what the terms of that license may be. The effective transfer of IPR (which often requires an express written assignment) is problematic and co-ownership can be more complicated still. Indeed, no due diligence exercise of a target business will be complete without a thorough audit and understanding of the IPR position.
Whether the IPR is “inherited” under a share purchase or whether the rights are acquired as “assets” one would expect certain warranties and indemnities to be featured in the purchase documentation to ensure that any claims made to ownership and exploitation of the rights are supported by protections for the purchaser in the event that something different turns out to be true, for example where a third party lays claim to the IPR and sues for infringement. A purchaser will also need to check that the terms of any licence do not trigger revocation on a transfer of the business.
There are a myriad of issues involved in the investigation of IPR on a business acquisition and it is crucial that advice is taken at an early stage.
View a discussion of Patent Protection courtesy of BBC’s Working Lunch. (Filesize: 1.4MB, download time: approx 20 seconds on broadband)
Article kindly submitted by Tristram Moore of solicitors Clifton Ingram.
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