Taking Inventory

The status of those registrations and fees, as well as how closely the company’s list matches what you find, will show a great deal about the overall care the organization has devoted to its intellectual property. A company that’s scrupulously careful about its intellectual property registrations inspires trust; one that’s less careful might inspire more research.

When to Research Further

At this point, how much research should you conduct? How much time and money do you want to invest in a company that you have not yet acquired? The answers lie in how much the acquiring company trusts the target company’s information, and how important a particular piece of intellectual property is to the deal. “You get a sense of how far you need to go, and that’s tempered by how important this intellectual property is to the company and by how much money you have to spend on due diligence,” says Phil Goldman, a patent attorney and partner at Minneapolis firm Fredrikson & Byron, P.A.

For instance, a company’s profits might depend on just one piece of intellectual property, so it would make sense to thoroughly research that property. Or they might have 100 pieces of intellectual property, but only three that are of any interest to the acquiring company. In that case, the acquiring company might perform only basic ownership research on all the properties—particularly if those properties appear to be well documented and maintained—but deeper research on the ones they hope to use. “Focus on the patents that are key to the company’s operations,” Schutz says. “You don’t want to do deep due diligence on a thousand patents. Your deal would never get done.”

An acquiring company might also hope to use intellectual property in ways that the original company never did—to distribute a product in Japan, for example, if the existing company only sold it in the United States. A buyer in that circumstance would need to research both the current underpinnings of the intellectual property, as well as the possibility of using it in new circumstances.

Of course, ownership isn’t just a question of who has registered a copyright, trademark, or patent. It’s also a matter of the origins of the material and how a company developed or acquired it. It’s important to know if it was developed in-house or by an independent contractor, Parks notes.