Taking Inventory

If an outside contractor did the inventing—a situation that’s particularly common in software development—things can get sticky. “Maybe someone started developing software before the company was created, or they hired independent contractors to do some programming,” Wiese-Parks says. “If you used people who weren’t full-time employees, and you didn’t have a written ownership agreement, you could have a problem.”

If possible, track patents back to the original inventor, and make sure that ownership-assignment records clearly name the target company as the patent owner.    

Explore Validity

In reviewing the list of intellectual property the target company says it owns, your attorney should independently verify the validity and ownership of the patents, trademarks, and copyrights. Patents convey the right to exclude others from making, using, offering for sale, or selling the invention in the United States or importing the invention for a limited period (generally 20 years), provided that the periodic maintenance fees are paid. After the expiration of the patent grant, the invention moves into public domain. Therefore, for patents, verify that periodic maintenance fees have been paid, that the patent has not expired, and that the chain of title can be traced to show the seller as owner.

Unlike patents, trademarks can be renewed indefinitely if still in use and proper documents have been filed. Verify that the trademarks have not expired and that the seller is the owner of record. Be aware that an applicant cannot assign an application that was filed on an intent-to-use basis before filing an amendment to allege use or a statement of use, except to a successor to the applicant’s business or portion of the business to which the mark pertains.

Scope: The Final Frontier

You know what the company owns, and you have opinions about the validity of its claims. Your final queries should involve the scope of the firm’s ownership rights.

“Do they have exclusive rights to a whole category of things, or just to a particular design of an item within that category?” Hemphill asks. A category claim could be more valuable than a specific design claim, because it may hold competitors at bay.