The Art of Selling IP

Overview

Much of the intellectual property profession focuses on establishing rights for companies and individuals developing a business or seeking a degree of market exclusivity. The practical control those rights provide depends on their legal scope and the activities of third parties.

IP rights may also be sold or licensed. As with physical products, an owner may negotiate with a buyer for a time-limited licence, an outright transfer, payment, or other consideration such as a cross-licence.

At first glance, that may seem straightforward. In practice, an IP transaction requires careful investigation.

The intellectual property rights need to have commercial relevance, namely they need to have within their scope of legal rights something of commercial value. For example, in the case of patent rights, patent claim scope needs to include at least one essential element that matters commercially to the buyer. As a further example, in the case of trade mark rights, the trade mark needs to impart a benefit to the buyer, for example providing an indication of verification of quality or origin when used in the course of business.

The owner may not know what the intellectual property is worth. Assessing value requires market research, analysis of the likely benefit to a buyer, and consideration of whether the relevant technology may soon become obsolete or be superseded.

A granted or registered right is only one part of transaction diligence. A review may also need to consider validity, scope, ownership, chain of title, relevant technical and non-patent literature, and whether the rights cover the commercial activity that matters to the buyer.

For trade marks, due diligence may also need to consider whether a right is vulnerable to cancellation, including issues arising from non-use.

The depth and cost of due diligence should be proportionate to the proposed transaction and the value of the rights. The objective is to investigate the material issues without making the process disproportionate to the opportunity.

Portfolio size alone does not establish transaction value. A smaller number of rights that map clearly to important products, features, markets, or licensing positions may be more useful than a large portfolio with weak commercial relevance.

V24 can support the IP and commercial work around a proposed sale or licence, including questions of ownership, scope, relevance, diligence, and how the rights connect to the transaction.