Thorough evaluation of a company’s assets is a crucial part of any investor’s acquisition strategy but knowing what to look for from an IP perspective throws up a myriad of challenges. Tom Ewing from AWA Strategy provides a quick guide to IP due diligence for investors and advisors.
For venture capitalists
Where an investment warrants a thorough IP due diligence, either hire or assemble a proper team for the assignment. The ideal team comprises a series of experts who can assess the intellectual property from every relevant angle – legal, technological and commercial. If you select the technical expert, insist that they work closely with, or at least liaise with, the IP diligence team. In addition:
- Provide guidance to the intellectual asset diligence team in terms of the extent to which you would like patents evaluated and which types of patents you would like evaluated – bear in mind that patent evaluation is likely the most expensive step in the diligence process.
- Let your team know the extent to which you would like unregistered and soft intellectual assets assessed.
- Inform your team about the investment target’s business and your plans for the target’s management team post-investment and/or post acquisition at a level sufficient to guide its assessment of the investment but without revealing any confidential information.
- Discuss the format of the IP diligence team’s report and the extent that the report should be quantitative as well as qualitative.
For investment targets
Do not worry if you have not previously gone through an IP due diligence; an experienced IP strategist can guide you through the process. Here are a few suggestions:
- Get ahead of the due diligence by having an IP strategist conduct a pre-diligence of your intellectual assets well before the investor’s diligence team arrives and in ample time to make corrections.
- Fix everything that your own pre-diligence suggests should be fixed. A completely independent third-party diligence team may still find other problems.
- Develop a cogent set of explanations for the decisions that the company has made regarding its IP assets.
- Develop believable responses to any financial and business risks the company might face with regard to third-party intellectual assets.
- If your intellectual asset portfolio has largely been crafted by a patent specialist, whether inside or outside your company, consider bringing in a skilled IP strategist to examine the company through a prism that is not focused exclusively on patents.