Due Diligence

Due Diligence or an Audit of an Intellectual Property portfolio

Our firm, Biesse, performs due diligence studies for any type of IP portfolio, ranging from the simplest cases to the most complex and challenging highly structured IP portfolios.

Often a well-performed due diligence forms a solid basis for the negotiation on a deal and is requested mostly in such cases as: during mergers and acquisitions, license negotiation, investment purposes especially into start-ups, preparing for listings on a stock exchange, developing of a new product, etc. By correlating patents with corporate financial records and key industry data, a well-performed due diligence report can become one of the key tools in mergers and acquisitions negotiations.

In a due diligence study we usually address the following issues:

  • Ownership
  • Infringement issues
  • Freedom to operate
  • Validity
  • Scope of protection (IP and regulatory)
  • Anti-trust
  • Confidential information and know-how
  • Territorial coverage
  • Contractual issues
  • Licenses

Based on the clients’ needs, our attorneys can choose to perform a quick straightforward IP status review or a more complex in-depth IP portfolio audit.

What is IP due diligence

IP due diligence is essentially an audit to assess the quantity and the quality of intellectual property assets owned by, or licensed to, a company, business or individual. Normally a due diligence report includes an assessment of the state of protection for the IP portfolio.

Intellectual property can be an organisation’s most valuable asset especially in technology-driven markets. Finding the right IP portfolio to acquire might reveal a strategic decision, but can be difficult due to limited information available to a company and a necessary professional insight based on the deep knowledge of IP rights and expertise.

Why conduct an IP due diligence

Typically, the IP audit is fundamental in mergers and acquisitions when an eventual buyer checks the health of the IP portfolio to be acquired, however it is also a valuable tool if a company prepares for a transaction (like licensing deal or similar) in order to negotiate better conditions. A prospective vendor (or licensor) should ensure to have good IP management practices in place and a prospective purchaser (or licensee) will hope to see these in place during the due diligence.

A particular case is represented by an initial public offering of a company. In such a case, a company seen as an IP owner is supposed to perform due diligence upon itself and affirm the IP portfolio consistency in terms of the ownership and license rights and eventual gaps to be fixed.

In general, a Due Diligence report states the quality and quantity of IP assets. Based on the outcome, in case of a complex IP portfolio, a company can identify the IP assets that are not used anymore or are not strategically important and whose maintenance represents an unnecessary cost.

A company should conduct the due diligence prior to opening transaction discussions with a third party: this will afford the opportunity to correct any adverse issues that may be revealed later during the transaction process.