IP Due Diligence

Dear Sirs!

We would like to invite you to consider a business proposal of Intellectual Property department of “GRATA” law firm on intellectual property due diligence (IP due diligence) for your company. 

Not many large companies in Kazakhstan’s industrial, financial, construction or other commercial sectors are familiar with the term, “due diligence” (legal audit).

When is IP Due Diligence perfomed?

There are two cases when IP Due Diligence is usually performed:

1. Within the limits of general Due Diligence which is performed in the case of incorporation of legal entities or the purchase of a new company where an in-house lawyer or a law firm makes a review of the following issues:

• The structure and legal status of the company subject to due diligence and its subsidiaries;
• Availability or absence of appropriate licensees;
• Material contracts;
• Details of existing or threatened litigation;
• Insurance coverage;
• Intellectual property/Information technology;

2. Within the limits of intellectual property due diligence for which the purpose is to reveal the intellectual property objects of the organization. In this case, after the IP objects are discovered, each object is assessed to ascertain whether or not it may be referred to as the intellectual property object and to determine whether there is an opportunity to carry out its subsequent registration with the competent authority.
 
What is IP Due Diligence required for?

If your company does not have its own “patent portfolio” or other registered intellectual property objects, including trade marks, copyright, licensees for the use of intellectual property, you are advised to conduct IP Due Diligence.

What benefits do you receive after IP Due Diligence is performed?

As a rule, the value of the company includes not only tangible but also intangible assets (intellectual property). Despite their intangible nature, the intangible assets may be a major part of the charter capital.  Furthermore, the revealed intellectual property may be used as a mortgage or may act as a subject of transactions.

Advantages of IP Due Diligence performed by specialists

It is necessary to point out that during the performance of IP Due Diligence, in cases where a specialist reveals at least one intellectual property object which is subject to registration, and notes that this object is not registered yet, the first thing that the specialist must do is to draw attention of the company to this fact. 

For example, if the name of your company or the name of goods produced by your company are not registered with the Patent Office of the Republic of Kazakhstan as trademarks, there is a risk of it becoming a subject of “confusingly similar use by a third party”, which is sometimes called “unfair competition”.  This may even result in the loss of the right to perform your business under the trade name which has already become well-known among the clients of your firm. 

Another important role that the performance of IP Due Diligence plays is the examination of the status of the information technology of the organisation.  As a general rule, the due diligence team checks availability of licenses for the use of software, the accuracy of the performance of the contracts for transfer of proprietary rights for the program in cases where the program was created by an employee of the organisation, and software and hardware measures for providing information security.

It is necessary to point out that the main problem of an organisation in the sphere of information technology is in the purchase of software or other intellectual property products from improper suppliers. In other words, having concluded a contract for the purchase of an item of intellectual property, the organisation might not have checked the authority of the supplier for sale of the product which results in a risk of claims from the real owner of the proprietary rights.   Therefore before entering into a contract for the purchase or use of an intellectual property object it will be useful to obtain consultation from our specialists who will help you to prevent possible claims from the appropriate title-holder.

Summarising the aforesaid it is necessary to point out that IP Due Diligence may be performed in the following cases – in case if your intellectual property is not registered, the registration is pending or the IP rights are not protected at all. In the last case the IP Due Diligence will help to reveal intellectual property and determine its registrability.

Furthermore, depending upon the results of the IP Due Diligence, if this reveals a breach of any IP rights, GRATA can assist you to work out a strategy of pretrial and judicial defense, as well as provide subsequent legal support.

We hope that the present information will be helpful for you. In case if you have any questions or require additional information, please do not hesitate to contact us.