Intellectual Property Protection and Management of Intangible Assets in Business Transactions

The importance of due diligence in both pre and post transaction

In most business transactions today, intellectual property and intangible assets comprise increasingly significant elements (value) of a deal. Therefore, due diligence must be much more than a cursory or confirmatory review of the presence, absence, and/or legal position of the targeted assets, i.e., intangibles, intellectual property, brand, goodwill, reputation, business processes, proprietary know how, etc. What’s more, due diligence must provide more than merely a snap-shot-in-time estimate of the assets’ value.

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In most business transactions today, intellectual property and intangible assets comprise increasingly significant elements (value) of a deal. Therefore, due diligence must be much more than a cursory or confirmatory review of the presence, absence, and/or legal position of the targeted assets, i.e., intangibles, intellectual property, brand, goodwill, reputation, business processes, proprietary know how, etc. What’s more, due diligence must provide more than merely a snap-shot-in-time estimate of the assets’ value.

The strategic value of about-to-be purchased/acquired intellectual property and intangible assets cannot be properly assessed by using conventional snap-shots-in-time techniques because, in today’s hyper-competitive, globally predatorial, and winner-take-all transaction environment, the value, usefulness, and materiality of a patent and/or intangible asset can fluctuate, diminish, and/or be undermined rapidly if adverse circumstances exist in which the assets’ have been compromised, misappropriated, infringed pre-post transaction.

That’s why it’s especially important for those charged with structuring-framing (negotiating) transactions in which intellectual property and intangible assets are in play to fully appreciate the reality that conventional forms of protection, i.e., patents particularly, are not synonymous with either party to the transaction being able to sustain their rightful control, use, ownership, or value of the purchased/acquired assets.

The reasons for this are two-fold, i.e., the time frame when holders, buyers, and/or sellers of intellectual property – intangible assets can expect to realize/extract value (from those assets) is continually being compressed due to, among other things:

o abbreviated product functional life-value cycles relative to consumer habits, and

o globally predatorial business intelligence and data mining operations than can, when successful, rapidly ‘get out front’ of competitors’ transactions, product rollouts, R&D, etc., to adversely affect (undermine, erode) an assets strategic value.

Again, those charged with structuring-framing (negotiating) transactions when intellectual property, know how, and intangible assets comprise a significant part of the deal would be well advised to approach the due diligence process to determine if there is evidence of:

1. consistent stewardship, oversight, and management of the targeted assets above-beyond conventional intellectual property protections?

2. consistency in the representation of those assets, i.e., meeting requisites of Sarbanes-Oxley and FASB, etc., in which risks, value, materiality, and financial performance are accounted for, reported, and measured?

3. business continuity-contingency planning that includes intellectual property and intangible assets?

4. strategic planning already in place intended to achieve fuller utilization (commercialization, monetization) of those assets?

Conducting (intellectual property, intangible asset) due diligence in this manner to determine the status, stability, and fragility of the assets in play, will provide decision makers with valuable insights relative to ‘deal – no deal’ decisions as well as assessing whether the assets’ value, control, use, and ownership can be sustained post-transaction absent time consuming and costly legal challenges.

Mr. Moberly has conducted numerous national presentations, seminars, and training for business organizations and professional associations on a range of issues related to helping companies sustain control, use, ownership, and value of their intellectual property, intangible assets, proprietary information and competitive advantages.

A professor at Southern Illinois University (1982-2002) Mike brings strong domestic and international experiences, operational insights, research regimen, and concise/objective writing skills to benefit his clients. As a researcher, analyst, strategist, educator, and practitioner, Mike offers services to various business venues and transactions in which intellectual property and intangible assets are in play. Mike has a BA and MPA degree from Indiana University. He holds leadership positions in the American Society for Industrial Security International and the Intangible Asset Finance Society among others.

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