An Introduction to Intellectual Property and Technology Due Diligence

• Author: Lacy Kolo
• Pages: 1-16

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I. Introduction

Intellectual property and technology are now recognized as key

drivers of transactions for companies desiring to enter new busi-

ness lines, expand their customer base, or extend their geographic

reach. For instance, a 2016 report by Deloitte revealed that acqui-

sition of technology is tied for rst place in a list of the most criti-

cal drivers in mergers and acquisitions.1 Others in the transaction

industry concur, highlighting the desire to enhance intellectual

property or acquire new technologies.2 It is widely recognized that

intellectual property (IP) and technology can assist strategic com-

pany growth, but often acquisition of IP and technology is desired

over organic growth within the company because of its rapid

*I am grateful to all of those with whom I had the pleasure of working in pulling

this project together. In particular, I would like to give special thanks to Emily Josef

for her careful and thorough review of this book. I would also acknowledge, with grati-

tude, the support and love of my husband, Brian, without whom this book would not

have been possible.

1. Deloitte M&A Trends Year-end report 2016, https://www2.deloitte.com/content/

dam/Deloitte/us/Documents/mergers-acqisitions/us-ma-mergers-and-acquisitions-

trends-2016-year-end-report.pdf.

2. See KPMG US Executives on M&A 2016 Survey Findings, https://info.kpmg.

us/content/dam/info/ma-survey2016/pdf/2016-ma-outlook.pdf.

Chapter

An Introduction to

Intellectual Property and

Technology Due Diligence

By Lacy Kolo*

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2CHAPTER 1

growth potential. For this, among other reasons, mergers and

acquisitions (M&A) activity continues to grow substantially, with

recent global deal values being quoted as upward of $4.7 trillion,

despite recent global political anxiety, sluggish growth across

emerging markets, and uncertainty surrounding interest rates.3

For these reasons, due diligence regarding IP and technology in a

transaction is expected to increase as well.

At its core, due diligence on intellectual property is

intended, as a whole, to answer one question: How much is it

worth? To answer that question, we have to address three tiers

of questions.

Tier 1 Questions: What is the intellectual property, and to whom

does it belong?

• What is the intellectual property?

• Who owns the intellectual property?

• Does anyone else have certain rights to the intellectual

property?

Tier 2 Questions: Is it good intellectual property?

• Is the intellectual property good/valid?

• Is the intellectual property enforceable against others?

Tier 3 Questions: Is it valuable intellectual property?

• Does the intellectual property cover the products or ser-

vices that are of interest in the transaction?

• Is the intellectual property being inappropriately used

(i.e., misappropriated or infringed) by a third party?

• Do the company products, services, or actions inappropri-

ately use another’s intellectual property?

• Does the intellectual property generate any revenue

through licensing, joint ventures, or any other type of con-

tractual relationship?

3. Id.