IP tools used for answering due diligence questions have varied over the years and will continue to evolve. With each iteration they become much more effective and efficient at saving time and inspiring thinking for better decision-making. Using analytical tools to create a visual display of information saves valuable time during the due diligence processes. Such pictures help quantify the unknowns in areas needing further investigation quickly. They also uncover from time to time “smoking guns” and/or lead to an alternative deal. All this said, these analytical tools are still no substitute for the human brain; an analyst must continue to think.
Good guidelines to remember when putting together intellectual property due diligence studies is that searches do not tell the whole story. Also remember that IP rights are not uniform from country to country. Before starting it’s important to develop a search strategy that builds on the strengths and weaknesses uncovered in previous due diligence work.
Through corporate name changes, mergers, acquisitions and other transactions, it is often the case that records relating to title of IP in public offices are not up-to-date. It’s important to consider searches using the names of predecessors. It’s also important to do enough due diligence to make sure that the rights not recorded in intellectual property offices are included in the study if they will have significant business impact.
For patents, types of searches to be conducted are: an index search; an inventor search; an index search in the names of the competitors; searches in the names of inventors who are competitors key technical personnel; searches of recorded voluntary licenses; searches of compulsory licenses, where appropriate; a state-of-the-art search; a novelty search; and infringement search; a validity search; a search for pending applications, were published; a search for pending applications that have not yet been published; a PCT index search for pending international applications that have not yet international phase; a PCT inventor search for pending international applications that of not yet entered the national phase; a search to identify grants of a security interest against patents and published applications.
The limitation of patent searches include: understanding the PCT filing regime and the limitations as to accessibility of international applications which have not yet reached the national phase; appreciate that pending patent applications may, in some circumstances, not be available for searching.
As a follow-up for patent searches consider the following activities: correlate the information obtained in patent searches with that obtained through meetings with relevant people in the target who are familiar with its key technology; consider other key inventions and proprietary information of the target that might be patented; consider major problems posed by patent or application of the competitor; determine whether the target has complied with its duty of candor to the United States patent office.
For designs the type of searches should include: an index search; an inventor search; index search and the names of competitors; searches in the names of inventors who are competitors key technical people; the search of recorded licenses; a state-of-the-art search; a novelty search; an infringement search; a validity search; a search to identify grants of security interest against applications, patents and registrations. As a limitation to these types of searches it must be remembered that pending applications are not available for searching.
As a follow-up to design searches consider the following: correlate information obtained in design searches with that obtained through meetings with relevant people in the target who are familiar with its key products and product and packaging configurations; consider other key designs that might be patented or registered; consider relevant information as to the key designs, their creators, and the relationship of creators, whether by way of employment or consulting contract.
For trademark searches consider the following: an index search in the name of the target and all relevant predecessor and related companies; a registrability search; a search of trademark rights of other major competitors; an opposition search; a search for expungement and/or cancellation proceedings; a list of all relevant registrations and applications; a search for documentation relating to security interest recorded against trademark registrations and applications; consider additional searches of sources which may reveal common-law rights, including trade directories, telephone directories, business name registries, corporate name registries and the Internet; consider anonymous inquiries to determine whether problematic third-party marks are in use.
Searches related to get-up/trade-dress should consider: conducting trademark searches for get-up/trade-dress; understanding the different countries treat get-up/trade-dress differently; consider identifying unregistered get-up/trade-dress rights were they exist.
Searches related to domain names should consider: a search for all registered domain names of target and all top level domain registries; a search for all registered domain names incorporating or similar to key trademarks and trade names of the target; identify those registrants of relevant domain names which are actual or potential competitors; identify those registrants of relevant domain names who may be cyber squatters; identify those registrants of relevant domain names in unrelated businesses; identify those registrants of relevant domain names with websites directed to criticizing the trademarks, website, goods, services or business of the target; compare the results of trademark and domain name searches with the activities of target to identify any inconsistencies; determine what additional marks and domain names would be of value to the target; consider the manner in which the trademarks and domain names are used; prepare list of all relevant marks and domain names.
For copyrights to types of searches include: an index search; a title search; and author search; a work search. Limitations of these types of searches are that a copyright for the majority of works including computer software and related documentation is not of record in the copyright office and that applications for registration are also not available for searching.
Other rights that should be considered and searched for vary by region and country. These include moral rights, neighboring rights, database rights, semiconductor chip rights, plant breeder’s rights, personality rights, secured intellectual properties, and products / advertising and packaging. The method of searching, its limitations, and how to utilize in a business decision for these types of searches is very case dependent. A good source to use in these cases is the “outline of issues for intellectual property and technology due diligence in business transactions” prepared by Blake, Cassels & Graydon LLP.
In conducting IP due diligence, other items related to intellectual property that must be included are: a contract review of intellectual property agreements, secrecy agreements, license agreements, assignments, franchise agreements, distribution and supply agreements, value-added reseller agreements, computer hardware and software support, maintenance agreements, packaging and manufacturing agreements, joint venture and strategic alliance agreements, research and development agreements, government agreements, sponsorship and co-promotion agreements, advertising agreements, employee and contractor agreements, settlement agreements, and information technology agreements. For each of these agreements it’s important to review them for elements the related forms of intellectual property. One needs to consider the restrictive covenants they contain and those that provide exclusivity and territorial limitations. One must also be sensitive to the liability surrounding issues related to the use of third parties technology and rights when integrating into the recipient’s technology. Another area of sensitivity is whether they contain clauses that will result in changes as a result of a change in ownership.