DUE DILIGENCE AND INTELLECTUAL PROPERTY

COMMERCIALISING INTELLECTUAL PROPERTY SERIES #5

John P. Mc Manus

Published by NuBooks, an imprint of Oak Tree Press, 19 Rutland Street, Cork, Ireland

www.oaktreepress.com

ISBN: 978-1-84621-140-9 (PDF)

ISBN: 978-1-84621-141-6 (ePub)

ISBN: 978-1-84621-142-3 (Kindle)

© 2012 Dr. John P. Mc Manus.

All rights reserved. This eBook may not be reprinted or distributed in electronic, print, web or other format without express written permission.

The information contained in this publication is intended for guideline purposes only and does not represent legal advice. Readers should always seek independent legal and/or other professional advice specific to their own requirements before taking any action based on the information provided herein.

Extracted from INTELLECTUAL PROPERTY: FROM CREATION TO COMMERCIALISATION – A Practical Guide for Innovators & Researchers, by Dr. John P. Mc Manus, published by Oak Tree Press.

1: INTRODUCTION

Once you have captured and managed IP emerging from your research activities, the key questions are:

• If I have developed an interesting piece of IP, how do I know how strong it is?
• Will someone be able to use it? and
• If I try to commercialise it, just how valuable will it be?

These questions are prompted by the need to understand the benefit of IP and, because it is an asset most people have never bought or used before, it appears complex and so we are not quite sure just how to assess it. To answer these questions, we need to understand how to evaluate IP.

Key aspects that need to be examined are those that establish the integrity, strength and value of the IP. The process undertaken to perform this evaluation is referred to as ‘due diligence’ and is aimed at establishing the status of the IP and assessing the strengths, weaknesses and risks associated with it.

Due diligence typically is carried out by a company or investor before any commitment to a licence or investment is finalised. It also should be carried out by the organisation that developed the IP, to ensure that all the correct agreements, documentation and evaluations concerning the IP are complete, so that it can stand over the value of its intellectual asset in advance of any transaction.

Whether the technology being evaluated is a high-tech or low-tech solution to a problem, whether it has originated in a university, a research centre, a new start-up technology company, or a long-established and successful company, it is important to verify that, right from the outset of developing the technology, rigorous systems have been in place for recording, tracking and managing the IP that underpins the value of the asset.

Much of a company’s success in defending its position in a highly-competitive market depends on the strength of its IP in overcoming opposition from those who seek to undermine it. Competitors always try to find ways to invalidate or work around patents and other forms of IP. So the IP must be capable of acquitting itself of any challenges launched by competitors, which may be based on legal faults or loopholes related to certain key aspects of the IP.

Therefore, it is necessary to examine the process for creating the IP and its subsequent management in the environment in which it was first created and further developed, to ensure there is no scope for errors or procedural lapses.

It is here – where the foundation of the IP has been established – that the due diligence questions are focused whenever a dispute arises over IP, or when investors and businesses begin evaluating an investment in a technology; and, like all foundations, they need to be secure and to provide confidence.