Key Takeaway: Key business considerations relevant for choosing between patents and trade secrets include: (1) Need for transfer of IP rights; (2) Life cycle of the product or service; (3) Cost of IP protection; and (4) Other business considerations.
When would a company undergo intellectual property due diligence?
Konstantin Linnik: Any corporate transaction involving IP assets necessitates diligence: merger, acquisition, IPO, investment (such as a venture capital financing), in-license, partnering, co-development, or distribution agreements. The buyer who is evaluating the Target could be a licensee, business partner, investor, banker, or underwriter. IP due diligence analyzes patent issues, trade secrets, trademarks, copyrights, freedom to operate, IP litigation, licensing, reps, warranties, disclosures, and even employment agreements. The process will examine the Target’s IP, such as how well the existing and potential IP protects the Target, what projected revenues will be based on the exclusivity period and geographic scope, and the current and projected expenses, including prosecution, maintenance, royalties, and enforcement. Because the diligence is expensive and is typically charged off as the overall transactional cost, the diligence is conducted as close to pre-closing as possible.
In Zircore, LLC v. Straumann Manufacturing, Inc. (E.D. Tex. 2017), as in many patent litigations since Mayo, Myriad, and Alice, the defendant moved to dismiss the infringement allegations contending that the patents in suit are ineligible subject matter under 35 USC § 101. Here, despite Straumann’s assertion that Zircore’s U.S. Patent No. 7,967,606 was invalid under § 101 as directed to an abstract idea, the court found that the claims were patent eligible under § 101 as directed to a method of manufacturing a physical object.
Maximizing the protection and value of intellectual property assets is often the cornerstone of a business's success and even survival. In this blog, Nutter's Intellectual Property attorneys provide news updates and practical tips in patent portfolio development, IP litigation, trademarks, copyrights, trade secrets and licensing.
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