Step 6. Verifying That Intellectual Assets Can Be Exploited. The value of intellectual property assets lies in the future entity’s ability to exploit the assets in the marketplace. There for the future entity must be assured that they have proper ownership of the asset, that it is valid and enforceable, is not the subject of litigation and has not been transferred in a way the precludes the future entity from using it. Elements of the verification process include ownership, validity, litigation and license history. These elements are described in very general terms below
Ownership Verification. The future entity’s management team should conduct assignment searches of patent and trademark office records for each patent and trademark to be transferred. In the case of patents, the future entity’s management team should look for a complete chain of title beginning with each and every inventor. For trademarks, buyer should determine if the mark is already used or is the subject of an intent-to-use application, and verify recording of the appropriate assignments. Buyers should review all copyright assignments as well.
Intellectual Asset Validity Assessment. The validity of a trade secret depends on the inability of others to gain access the trade secret information. The trade secret acquirer should evaluate the product line to determine the trade secret information cannot be reverse engineered, and review procedures for maintaining the information is a trade secret. The acquirer may also wish to verify the key employees will not be competing with the acquirer, at least within reasonable time and geographic constraints.
Patent validity can be evaluated by conducting a prior art search and comparing the results of the search for the subject matter claim, especially for key patents. Patent rules place a strict responsibility on those obtaining the patent to disclose material relevant to the issue of a patent. In acquirer should obtain a complete record of maintenance fees paid to various patent offices around the world to assure that the patent did not lapse. The trademark buyer should verify that the requisite use affidavits and renewals filed with trademark offices around the world are also current.
Litigation History. In acquirer should become aware of the past and pending litigation for all intellectual assets included in the transfer. The acquirer should obtain information about threatened litigation. Acquirer should inquire if any trade secret is been the subject of litigation and, if so, the disposition of the litigation. Acquirer should also investigate whether any patents in the transaction have been found invalid or if information produced during the discovery in a patent litigation casts doubt on the validity of a patent asset. Acquirer should also ask the USPTO about administrative proceedings including re-examinations, reissue applications, or interference proceedings. Trademark asset acquirers should inquire about the litigation, administrative proceedings, oppositions to trademark applications, and cancellation proceedings for registered marks. Litigation involving copyrighted subject matter, especially software, may greatly affect the scope of protection by limiting the creative expression found in the work. Acquirers should review court decisions to determine if such limitations of been found and their effect on the value of the copyrighted work.
Licensing Activities. Acquirers should investigate whether the contributor has conveyed exclusive licenses to intellectual assets to the acquirer’s competitors. When the acquirer’s business plan depends on the use of such an asset, an exclusive license negates its value to the acquirer. This is particularly true when the license does not generate an income stream, for example a paid-up license.