Industrial Property Due Diligence
Industrial Property Due Diligence
The expression 'due diligence' in the context of industrial property identifies the totality of checks carried out on a portfolio of industrial property titles, for example a portfolio comprising patents, trade marks, and designs.
Clients typically commission a due diligence when one or more titles or a company (or a business unit) are to be acquired or divested, or in the context of negotiating licences on protected technologies or trade marks, or for applications for public financing or from banks or investors.
A due diligence serves to take a snapshot of the portfolio at a particular moment and to highlight any issues that may affect its value, maintenance, transfer, or use.
Why Carry Out a Due Diligence on Industrial Property Titles
In the context of negotiations and/or contractual relationships, it is important not only to carry out a due diligence, but to carry it out at the right time and, in the case of substantial portfolios, to carry it out with a certain regularity. Negotiating agreements without having first carried out a due diligence on the titles transferred or licensed or offered as collateral can be very dangerous, as there is a risk of paying royalties, assignment prices, or contributions that are not economically justified. There is also a risk of making investments and contributions based on exclusive rights that do not exist or do not correspond to reality. In the context of licence or right-of-use agreements, it is also important to verify that the titles are being maintained in force by the owner.
An intellectual property due diligence conducted during the negotiation process over an IP portfolio may reveal the existence of inconsistencies of any kind. The negotiation process can then be corrected promptly if the parties reach an agreement.
Once negotiations are concluded, however, any portfolio issues may lead to a revision or cancellation of already signed agreements.
What Are the Typical Inconsistencies That May Emerge From a Due Diligence?
The inconsistencies that typically emerge from a due diligence are:
- invalidity of titles in certain jurisdictions (e.g. cancelled or expired marks or patents);
- material limitations on the scope of titles in certain jurisdictions (e.g. limited goods or amended claims);
- incorrect or outdated ownership and/or co-ownership records;
- existence of oppositions or pending proceedings or adverse recordals.
BIESSE recommends carrying out a preventive due diligence so as to start negotiations on the best footing, without running the risks of failure, revision, and renegotiation.
