Patent Portfolio Acquisition Scenarios to Bear in Mind

To avoid a failed acquisition of a patent portfolio, there are certain steps that need to be taken long before the portfolio is market-ready and other steps that must be taken during the deal-making process.  Further, the sale of discrete IP assets involve much more focused negotiation and documents dealing with the conditions and transfers of the specified assets as compared to asset purchases, where IP rights are transferred along with non-IP rights.  Make sure to keep in mind how the following scenarios could affect your future patent portfolio acquisitions.

(1) Some standards-setting organizations require that inventors sign an agreement to attend meetings, wherein the agreement states that any patent they file after the meeting that is read on the standard will be available to license by third parties on a fair, reasonable, and non-discriminatory basis. This could significantly affect the future value of such patents.

(2) Some agreements require sellers to give a third party the right to refuse any IP acquisitions, which would dissuade a buyer from investing in conducting any due diligence checks.

(3) The ability to sue for past damages must be explicitly transferred in all prior assignments in order for the rights to past damages to be transferred after the patents are sold.

(4) If a government entity funds the research and development that is associated with the patents, the government may have rights to share the proceeds of the transaction or have a say in terms of the commercialization of the patents.  The seller should deal with such issues and/or work out an escrow agreement with the government before any acquisition deals.

(5) There is no requirement under U.S. law to record prior patent assignments.  However buyers will usually want to see that the current title holder in the U.S. Patent and Trademark Office is the seller before closing a transaction.

(6) Any discovery of prior art that was not disclosed to the U.S. Patent and Trademark Office discovered during a potential buyer’s diligence effort may result in not only a failed acquisition, but also possibly an invalidity finding in a court proceeding.  Therefore, sellers should make sure they have done a thorough due diligence search themselves.

(7) If the inventors never assigned title of the patent to the company they worked for at the time the patent was filed, then none of the subsequent transfers took place legally.  If an assignment agreement was signed when the inventors were hired or the inventors agree to sign a new assignment agreement, it could cure the inadequate transfer of rights.