What to ask before acquiring an intellectual property portfolio

Thought Leadership on Intellectual Property Protection presented by Nath, Goldberg & Meyer.

It is widely acknowledged that there are three possible ways to protect your technology and products with a robust intellectual property (IP) portfolio:

  1. To build and develop the portfolio yourself
  2. To acquire the portfolio from another company (or as part of acquiring the other company)
  3. Some combination of the two.

While there are pros and cons to each of these approaches, the possibility of acquiring an already developed IP portfolio has become not only more accepted, but also more desirable in recent years.

To determine whether this approach is best for you, it is best to start with the basics. Ask yourself the question, “Why am I doing this?” Hopefully, you have a specific goal in mind, whether it be the introduction of a specific product to market, providing meaningful (or better) protection for an already existing product, trying to branch off into a new area for the company, or something else entirely. But, if you don’t know the reason you are going through the process, and you don’t have an end result in mind, it is unlikely you will end up with a huge success.

Performing and IP audit

When looking seriously at another company’s IP portfolio, the most important thing you should keep in mind is the need for a full IP audit. You will want to see a complete list of all IP that comes as part of the portfolio and an indication of what items protect which products. Additionally, you should develop a working understanding of the various layers of protection that are provided. Of course, it is most important for there to be a patent in place directly protecting the product at issue, but it is also important to see how any variations or modifications to the product are protected to maximize the barriers to entry for another, competing product. Also, you should see that some thought has been given to future product developments, and that IP protection has been obtained in all geographic markets of interest.

The competitive landscape analysis

You will also want to know, either from your own research and understanding of the market or from information made available to you by the seller, what the competitive landscape looks like. That is, you need to know the other entities out there already selling a competitive product, or who might do so in the near future. This will impact not only the future of the acquisition, but also the price you will pay, the amount of levels of IP protection you think are necessary, and how long it will take you to receive a return on your investment.

As a part of this competitive landscape analysis, you should find out if any third party has a blocking IP that could cause you to have a barrier to market entry. There are few things worse than concluding on what you consider to be a successful deal, only to find out there are a number of companies in competition with you, each with their own blocking IP rights, which will keep you from selling your products.

While there are many additional factors to consider when deciding whether or not you should acquire an IP portfolio from another company, these are the most important points to focus on. Any deal concluded without considering these questions as a part of the process is a riskier undertaking than normal, and could leave your company exposed to risks beyond what you thought possible. We have helped numerous companies successfully navigate this process, and stand ready to help guide you as well.

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