Six items that should be on every patent portfolio acquisition checklist, based on a $1.2 billion transaction we closed last year.
First, chain of title. The single largest risk in a portfolio acquisition is a gap in the chain of title. Every assignment in the chain should be reviewed, and every gap should be cured before signing.
Second, encumbrances. Security interests, licenses, and government use rights are common. Each one reduces the value of the portfolio and should be priced into the deal.
Third, ongoing prosecution. Pending applications are not the same as issued patents. The acquirer should assume responsibility for the prosecution of pending applications and budget accordingly.
Fourth, foreign counterparts. A U.S. patent does not give global coverage. The acquisition agreement should list every jurisdiction with a counterpart and confirm the status of each.
Fifth, employee inventorship. In jurisdictions with employee inventorship rights, the acquirer should obtain confirmatory assignments from each named inventor.
Sixth, litigation. Pending litigation is not necessarily a problem, but it should be disclosed and the cost of defense should be allocated in the agreement.
The practical implication: a patent portfolio acquisition is a diligence exercise, not a contract exercise. The deal is won or lost in the diligence room.
Written by Mei-Lin Zhang, Partner.
This article is for general information only and is not legal advice.