At Kenealy Vaidya, we have experience handling a variety of due diligence investigations arising from various corporate transactions, and understand how to support your acquisitions, securities offerings, lending and other transactional work. We recognize that a company’s intellectual property (hereinafter sometimes referred to as “IP”) is one of its most critical assets in establishing value and that confirming prospective revenue flows from the use of IP assets is essential to a transaction. Yet most middle market companies have a small general counsel’s office, and few have experts in IP. We work with in house counsel and outside transactional lawyers to help confirm IP strategies and support transactions for middle market and smaller companies, and their lenders and underwriters. We understand how to establish the scope of work and the need to deliver services efficiently to clients of this size.
1. Mergers & Aquisitions:
We regularly work with both acquirers and targets well in advance of their transactions. We are experienced at preparing an “IP Audit,” which includes a detailed review of all of the company’s intellectual property, including its patents, trademarks, copyrights, trade secrets, and other related rights. The IP Audit report can: (i) confirm all rights of ownership in the IP, (ii) review licenses and other agreements which affect the company’s IP, (iii) review liens and encumbrances; (iv) identify any challenges to the intellectual property, such as lawsuits or administrative procedures seeking to invalidate or limit the scope of the intellectual property; and (v) identify any intellectual property rights in third parties or other issues that could limit the company’s ability to sell its products or services.
Our IP Audit provides the acquiror or the target, as the case may be, with a complete understanding of important IP assets and helps establish or confirm the client’s IP strategy. In the case of an acquiror, we use the IP Audit to reduce risk in the transaction by providing a full picture of both the strengths and weaknesses of the target’s intellectual property. It resolves important questions such as:
- Does the target’s intellectual property fit with the IP strategy of the acquiror?
- Are critical licenses to the target being used in a manner consistent with license terms?
- Are any royalty amounts being properly computed and paid?
- Does the target have an adequate system for developing and registering its IP?
- Has the target mixed open source software with its own IP and if so, what is the effect of the same?
- Have the software developers (including employees and consultants) executed adequate assignments of IP rights to the company?
When we represent the target, we provide an IP Audit report and the identification of issues in the report provides the company with the opportunity to resolve problems before making itself available for due diligence. Such early preparation allows the target to present prospective buyers with a coherent plan for management of its IP instead of, what may be, a plan in need of repair with problems identified by the prospective buyers.
2. Securities Offerings and Other Investments:
We use our IP Audit reports to work with companies in advance of both private and public offerings in the same way as we work with targets in and M&A transaction. The IP Audit will assess the issuer’s intellectual property assets in order to both prepare for due diligence and to meet the disclosure requirements of the federal securities laws. We help a company identify problem areas in its intellectual property and we establish remedies before the due diligence process for the offering is initiated. In a similar way, we have also worked with underwriters during the IPO process by providing an IP Audit and otherwise supporting them as they conduct their due diligence of an issuer’s intellectual property. We have also worked with banks, venture capital groups and other investors who are seeking an assessment of a company’s intellectual property before they initiate an investment. For most of these types of clients, investments are driven by the investor’s perceptions of the strength of the intellectual property.
In cases where our client’s investment has afforded them with management authority, we can provide on-going advice so that the value of the intellectual property is maximized and the use of IP assets is measured against the issuer’s IP strategies after the investment is made.
