If you are buying, licensing, or investing in any form of
Intellectual Property (“IP”), then some level of due diligence is critical to
be sure that you understand what you are paying for. This is the first in
a series of articles on various aspects of this important topic.
If you are contemplating any kind of IP transaction, there
are some things you can check yourself using online databases. Doing some
research of your own early on can avoid a lot of wasted energy and expense.
Amongst the fundamental issues to consider are status, ownership, validity,
scope, and freedom to operate:
Status: Have applications been filed to register the IP in
question? Are they in good standing? Are any applications still pending or have
they already proceeded to registration? How soon will the rights expire?
Ownership: Who is the legal owner of the patent,
trade-mark or other IP in question? Have any licenses been granted? Do any
third parties have rights in the IP?
Validity/registerability: If the IP has not yet been
registered, then what are the chances that a registration will eventually be
obtainable? If the rights are already registered, then is that registration
valid or could it be successfully challenged by third parties?
Scope: How broad are the IP rights? Is it still
possible to register rights in all of the countries of interest? Do any
filings cover the subject matter of most importance?
Freedom to operate: Will you be able to use the IP you
purchase without then infringing on the valid IP rights of a third party? A
patent grants only a negative right, the right to stop somebody using the
claimed invention. The owner of a patent may not be able to practice their
invention without infringing on a third party’s coexisting rights.
IP is a complex area of law and this article only touches
the surface of some of the issues that may arise. While any preliminary
research you are able to do yourself can be helpful, you should always seek
qualified professional assistance before making any decisions. If you are
selling IP, it is advisable to undertake some level of due diligence yourself
so you are prepared to answer any questions from potential purchasers and can
take steps to remedy any problems.
By: Euan Taylor
Euan Taylor is a lawyer, patent agent and trade-mark agent
and is based in MBM’s Vancouver office. He has wide experience of IP due
diligence for a range of commercial transactions and can be reached at etaylor@mbm.com or at 604-239-0271.