I have often written that the lifeblood of any small (and especially high-technology) enterprise is the intellectual property (IP) that it controls or potentially controls. In other words, the short-term salability, the long-term profitability, and the eventual ability to undertake an initial public offering of the small company all depend upon its ability to develop, acquire, protect and apply innovative ideas and concepts.
Given the foregoing, it is not surprising that in most corporate transactions that small- and mid-sized enterprises (SMEs) will experience (e.g., mergers, acquisitions, private offerings of equity and debt securities and bridge loans), some form of IP due diligence will be required by the funding source. Thus, I present below a general checklist of the information that the attorneys for the funding source may request during the due diligence process. Having this information organized and available is not only good business practice for managing an enterprise’s IP assets, but essential for closing such corporate transactions as quickly, efficiently and cheaply as possible (with minimal disruption to normal business activities).
IP Due Diligence Checklist:
I. Personnel
Identify each key technical personnel and provide a copy of their employment/consulting agreements
II. Patents
- Identify all (U.S. and foreign) issued patents
- Identify all (U.S. and foreign) pending patent applications
- Provide copies of the files for all U.S. and foreign pending patent applications
- Provide a chart relating all patents and patent applications to the company’s services, products, service features and/or product features
III. Copyrights
- Identify all U.S. and foreign registered copyrights
- Identify all U.S. and foreign copyright applications
- Provide a chart relating all registered, pending and material unregistered copyrights to the company’s services, products, service features and/or product features
IV. Trademarks/Domains
- Identify all U.S. and foreign registered trademarks
- Identify all U.S. and foreign trademark applications
- Provide a chart relating all registered trademarks and trademark applications to the company’s services, products, service features and/or product features
- List all domains owned
V. Trade Secrets
- Identify all key trade secrets
- Please provide a copy of all confidentiality agreements
VI. Licenses
Provide copies of all technology and IP-related licenses and agreements entered into including a summary of royalties paid, received and/or due
VII. Disputes
- Describe all pending and resolved IP-related law suits, including the identity of all parties and subject of each suit
- Describe any unasserted claims, such as a belief that a third party infringes the company’s IP
- Describe any claims not currently in court, such as any “cease and desist letters” sent and/or received
- Describe any exposure to IP infringement lawsuits
- Identify key patents owned by competitors, including the results of any non-infringement, product clearance, freedom-to-operate and invalidity investigations or opinions obtained in connection with any of the company’s products or services
