{"id":9796,"date":"2021-12-10T05:13:58","date_gmt":"2021-12-10T05:13:58","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=9796"},"modified":"2021-12-10T05:15:17","modified_gmt":"2021-12-10T05:15:17","slug":"how-can-you-conduct-an-ip-due-diligence","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/how-can-you-conduct-an-ip-due-diligence\/","title":{"rendered":"How Can You Conduct an IP Due Diligence? &#8211; An Overview"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Nowadays, in every industry, there is very tough competition; business enterprises, in order to expand their business, to raise capital &amp; to give monetary gains, have understood the significance of IP Assets. Hence, companies regularly conduct Intellectual Property Audits to know the complete value of these intangible assets &amp; make the most of their possible benefits. IP Due Diligence is the estimation of an IP portfolio of any business, \u201cchecking valid IPR subsists therein and scope of their protection, examining the risks involved concerning thereto and in turn, assessing their potential value\u201d. In simple words, IP Due Diligence is an exercise that gives a complete knowledge of the value &amp; risks of a company&#8217;s intangible assets. For any business transaction involving Intellectual Property, <a href=\"https:\/\/swaritadvisors.com\/due-diligence\" class=\"text-primary\"><strong>Due Diligence<\/strong><\/a> is designed to analyse and check the scope, strength, and future potential that could be derived from intangible assets like Trademarks, Patents, or Copyrights. In this blog, we discuss how to conduct IP Due Diligence.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a47047aea5d7\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a47047aea5d7\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/how-can-you-conduct-an-ip-due-diligence\/#When_can_IP_Due_Diligence_be_conducted\" title=\"When can IP\nDue Diligence be conducted?\">When can IP\nDue Diligence be conducted?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/how-can-you-conduct-an-ip-due-diligence\/#Why_is_it_Necessary_to_conduct_an_IP_Due_Diligence\" title=\"Why is it\nNecessary to conduct an IP Due Diligence?\">Why is it\nNecessary to conduct an IP Due Diligence?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/how-can-you-conduct-an-ip-due-diligence\/#Requirements_for_Conducting_an_IP_Due_Diligence\" title=\"Requirements\nfor Conducting an IP Due Diligence\">Requirements\nfor Conducting an IP Due Diligence<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/how-can-you-conduct-an-ip-due-diligence\/#What_are_the_steps_to_be_followed_to_conduct_an_IP_Due_Diligence\" title=\"What are the\nsteps to be followed to conduct an IP Due Diligence?\">What are the\nsteps to be followed to conduct an IP Due Diligence?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/how-can-you-conduct-an-ip-due-diligence\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"When_can_IP_Due_Diligence_be_conducted\"><\/span>When can IP\nDue Diligence be conducted?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Following\nare the conditions where IP Due Diligence is conducted:<\/em><\/strong><\/p>\n\n\n\n<ul><li>If there is an M&amp;A (<a href=\"https:\/\/swaritadvisors.com\/mergers-and-acquisitions\" class=\"text-primary\"><strong>Merger and Acquisition<\/strong><\/a>);<\/li><li>If a company or a business wants to raise money by mortgaging;<\/li><li>If an investor desires to invest in any start-up company or business.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_is_it_Necessary_to_conduct_an_IP_Due_Diligence\"><\/span>Why is it\nNecessary to conduct an IP Due Diligence?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol><li>IP Due Diligence aids a company\nor business in reorganising its operations with the aim of increasing the\nmarketability of its products or services;<\/li><li>Ignoring IP Due Diligence could\ndevalue the assets that have to be acquired;<\/li><li>It also helps to exploit the\nvalue of these intangible assets, which can boost the balance sheet of the\ncompany;<\/li><li>It helps to disclose risks and\npermits the acquirer to tackle the issues pre-close.<\/li><\/ol>\n\n\n\n<p>With\nthe high number of acquisitions, more <strong><em>SMEs (Small &amp; Medium-Sized Enterprises) <\/em><\/strong>looking\nto raise capital, pursuing a deal without conducting Intellectual Property Due\nDiligence is unlikely. As a seller, you are stress testing your Intellectual\nProperty. By doing this, you notice the risks associated with Intellectual\nProperty Assets, fix what is possible and if it cannot be fixed, create an appropriate\nnarrative explaining the price.<\/p>\n\n\n\n<p>Without\nconducting Intellectual Property (IP) Due Diligence, a business cannot\nunderstand the risk and so the prices. Therefore, Due Diligence is more of a\ndetail collecting exercise. You are telling yourself about risk &amp;, thus,\nprice because the price is a function of risk. Without the correct information,\nany business or company cannot develop the right strategies to lessen the risks\nor correct the selling price when the risks cannot be mitigated.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Requirements_for_Conducting_an_IP_Due_Diligence\"><\/span>Requirements\nfor Conducting an IP Due Diligence<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every\ncompany or business transaction is different from each other and will have\ndifferent kinds of requirements for conducting an IP Due Diligence. Following\nare some requirements that should be involved in an IP Due Diligence:<\/p>\n\n\n\n<ul><li><strong><em>Prove Existence &amp; Ownership of IP<\/em><\/strong>: Ownership is one of the first issues examined while conducting an IP Due-Diligence. A series of questions are asked regarding each Intellectual Property Asset to set up the rights of the target company. If the assets&#8217; ownership is disputed, the seller cannot transfer the rights &amp; title of the asset to others. If the seller doesn\u2019t own the intangible asset, the calculation will be done to check whether correct steps were taken to obtain the rights from the original owner.<\/li><li><strong><em>Identify IP Assets<\/em><\/strong>: In all businesses, domain names, brand names, Trademarks, Patents etc., are the intangible assets, and these are the intangible subject matter that requires to be recognised.<\/li><li><strong><em>Check for any 3<sup>rd<\/sup> Party Claims<\/em><\/strong>: Along with the ownership check, it is prudent to check any 3<sup>rd<\/sup> party interest\/claims concerning the seller&#8217;s IP asset. Sometimes rights can accrue in favour of a 3<sup>rd<\/sup> party mistakenly also. Hence, scrutiny of all franchise &amp; license agreements, MOUs (Memorandum of Understandings), Joint Venture Agreements should be done to recognise if any exclusive rights have been permitted regarding relevant Intellectual Property. The records of the Intellectual Property Office can be perused concerning pertinent IP Assets to recognise any discrepancy.<\/li><li><strong><em>Check for Relevant Territory &amp; Terms<\/em><\/strong>: It is vital to check the validity of each IP Asset (terms &amp; territory). Most Intellectual Property Rights are limited to a particular territory only. Hence, it\u2019s vital to ascertain the territories in which the Intellectual Property Rights are safeguarded. If the company runs in several nations and has not got the Intellectual Property Rights covered in all those territories, it might cause problems in the future.<\/li><li><strong><em>Estimate Possible IP Infringements<\/em><\/strong>: Moreover, while conduction IP Due Diligence it is vital to check whether a 3<sup>rd<\/sup> party is violating a company\u2019s IP Right or it is the company that might violate a 3<sup>rd<\/sup> party right. In both conditions, if the pertinent IP rights are subject to any encumbrance, a dispute is likely to arise with the outcome of disrupting the business operations. An <strong>FTO (Freedom to Operate<\/strong><sup><a href=\"https:\/\/www.wipo.int\/wipo_magazine\/en\/2005\/05\/article_0006.html\"><strong>[1]<\/strong><\/a><\/sup><strong>) <\/strong>search should be conducted to check whether the investor could use, sell, or make the Intellectual Property Assets without violating any 3<sup>rd<\/sup> party rights.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_steps_to_be_followed_to_conduct_an_IP_Due_Diligence\"><\/span>What are the\nsteps to be followed to conduct an IP Due Diligence?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Following\nare the steps to be followed to conduct an IP Due Diligence:<\/em><\/strong><\/p>\n\n\n\n<ol><li>Lay down a proper IP Due\nDiligence team &amp; examine thoroughly with IP experts your expectations from\nthe transaction;<\/li><li>Arrange and send an IP Due\nDiligence Checklist;<\/li><li>Identify the IP assets of the\nproposed company relevant for the transaction \u2013 at the outset, separate IP\nrights or protectable intangible assets pertinent for the transaction from\nthose which are not so; the Intellectual Property Due Diligence should\nenlighten the significance of associating such extra IP rights with the primary\nIP rights for the transaction;<\/li><li>Commission a detailed search of\nthe ownership of the Intellectual Property, collect information on other IP\nrights that may affect the use or sale of these rights in the future. Examine\nif there is any infringement or litigation involved;<\/li><li>Moreover, it is the\nresponsibility of the Due Diligence team to check facts &amp; verify\ninformation received from the target; if &amp; when any inconsistency is found,\ngoing back to the target with the further set of issues &amp; questions must\nnot be avoided at any cost;<\/li><li>Examine safeguarded IP rights,\nvalidity, claim check, status check, conflict check, and ownership check should\nbe conducted, in the manner mentioned above;<\/li><li>Provide a final report of Due\nDiligence on risks involved along with the strategies to mitigate the\nliabilities &amp; risk involved;<\/li><li>Execute documents &amp; record\nthe IP Agreements.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It doesn&#8217;t matter what the arrangement of the IP Portfolio or what the transaction type conducting Due Diligence enables to recognise and mitigate the risks managed so that expectations &amp; objectives can be met. A well-timed &amp; correctly executed IP Due Diligence investigation can benefit both the parties involved &amp; may lead to long-term connections and business collaborations.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our Article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/importance-of-ip-audits-for-corporates\/\">Importance of IP Audits for Corporates: An Overview\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nowadays, in every industry, there is very tough competition; business enterprises, in order to expand their business, to raise capital &amp; to give monetary gains, have understood the significance of IP Assets. Hence, companies regularly conduct Intellectual Property Audits to know the complete value of these intangible assets &amp; make the most of their possible [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":9798,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[903],"tags":[936],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/9796"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=9796"}],"version-history":[{"count":13,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/9796\/revisions"}],"predecessor-version":[{"id":9810,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/9796\/revisions\/9810"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/9798"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=9796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=9796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=9796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}