An Introduction to Intellectual Property and Technology Due Diligence

AuthorLacy Kolo
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,
2. See KPMG US Executives on M&A 2016 Survey Findings,
An Introduction to
Intellectual Property and
Technology Due Diligence
By Lacy Kolo*
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
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.

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