Due Diligence of Intellectual Property

Due Diligence of Intellectual Property

Few companies engaged in manufacturing, financial, construction, trade and other activities know anything about legal audits of intellectual property.

When is legal due diligence of intellectual property performed?

There are two cases when a legal audit of intellectual property is performed:

1. Within the overall legal due diligence, which is performed in the case of a merger of legal entities or an acquisition of a new company. Here, in addition to the issues relating to intellectual property, the following issues are analysed:

• structure and legal status of an audited legal entity and each of its subsidiaries;
• presence or absence of licences;
• material contracts;
• availability of disputes;
• insurance issues;
• intellectual property/information technology.

2. As part of an audit of intellectual property, which is usually aimed at the identification of IP objects of an organisation. In this case, after such an identification, the possibility to refer this or that object to the objects of intellectual property and determining its subsequent registration with the authorised body shall be determined.

What is the due diligence of intellectual property for?

If your company does not have a so-called ‘patent portfolio’ or other registered IP rights, including trademarks, copyrights, and licences to use intellectual property, then you need to conduct a due diligence of intellectual property.

What can the results of the due diligence of intellectual property give you?

The value of a company includes both tangible and intangible (intellectual property) assets which can become a part of the charter capital of the company. Furthermore, the identified intellectual property can be used as collateral or be the subject of transactions.

Advantages of the due diligence of intellectual property by specialists

It should be noted that in the case of a revelation during the due diligence of at least one intellectual property object, which is subject to registration, and this object by the time of the due diligence has not been registered, a specialist on intellectual property first should draw the company’s attention to the importance of registering such an object.

For example, if the name of your company or output products are not registered with the Patent Office of Kazakhstan as a trademark, then you will bear the risk of becoming a victim of unfair competition, which may even lead to the loss of the right to engage in business under the name of your company that is already well-known to your clients.

An important role in the due diligence of intellectual property is checking the information technology of a company. They often check for licences to use the software, correct registration of contracts on the transfer of property rights to the software owner, if established by the company’s employee, and in cases with the banks - the existence of organisational and program-technical measures to ensure information security.

Please note that the main problem for companies in the area of information technology is the acquisition of software or other IP products from improper suppliers. This means that by signing an agreement to purchase the software, the company does not check the right of the supplier to sell such a product, which leads to the risk of becoming a subject of claims from the real owner. Before entering into a contract for the purchase or use of intellectual property, it is therefore advisable to contact us, and our experienced specialists will help you to avoid possible claims from the proper copyright holders.

In summary, we would like to draw your attention to the fact that a due diligence audit of intellectual property can be performed in any case, regardless of whether you have registered your IP rights, whether they are in the process of registration, or even if you do  not have any protection. In the latter case, the due diligence will help in identifying IP objects and in determining whether they are registered.

In addition, according to the results of due diligence, in case of a violation of IP rights, GRATA can offer procedures for pre-trial and/or judicial remedies, as well as subsequent legal support for these remedies.

Our services:

• a comprehensive due diligence of your company in respect of IP objects;
• recommendations for the protection of identified IP objects.

Recent Experience:

• conducting due diligence with respect to intellectual property and information technology to foreign banks, Kazakh banks, construction companies, a telecommunications holding company, an international engineering company, an international investment company, a foreign telecommunications company, a foreign company, which is the world leader in food and household chemical goods, and a foreign construction company.

Publications:

• IP Due Diligence