Why should you acquire IP?
Why acquire IP from another company?
|After reading this article, you will know how to acquire IP from a company.
It’s just like carrying small stones.
It doesn’t matter what the company looks like.
It matters what their IP portfolio looks like.
Acquire IP = Stuff that you could look at
Acquire IP like Brands.
Acquire IP like Trade marks and Service marks
Acquire IP like Patents
Patents could be worth a lot, and they could be worth nothing. A patented product which has become popular in the marketplace is worth a lot. Manufacturers would want to license the patent. But a patented product that is so diametrically different from anything in the market and is perceived as too weird for use, is of no use to manufacturers who do not want to educate the market. Because educating the market takes a long time, a patent licensee might not benefit from the patent. It’d be more logical to wait for the patent to expire and then start exploiting the patent.
Acquire IP like Industrial designs
Acquire IP like Copyrights.
These may consist of drawings, writings, films, songs, jingles, and the like. They are a part of the persona of the company, and have value due to their long life. Once the TPPA required amendments kick in, copyrights will be for the life of the author plus seventy years. If you acquire that, you have a long, long time to exploit the copyright. Think of Michael Jackson and the Beatles’ catalogue. Think of the Walt Disney cartoons. Think of Philip K Dick and how he died poor, but his books became blockbuster movies. You could pick up copyrighted works and turn them into something else tomorrow.
Acquire IP like Trade Secrets
The Checklist to Acquire IP.
- The Letter of Intent (a.k.a. LOI). Send a letter of intent to the company to state your intention to acquire their IP. Say that you want to enter into discussions and/or negotiations. Wait for response.
- The Non-Disclosure Agreement (a.k.a. NDA). You’ll get this before they start talking to you. This is to ensure that you do not divulge whatever they disclose to you to any third parties. For all they know, you might be fishing for information. Or you might be a competitor. They might send you a Non-Disclosure and Non-Competition Agreement (a.k.a. NDNCA). Get your lawyer to look at it.
- The List of IP Assets. If they are interested, they might send you a list of what they have. They might want you to take it lock, stock and barrel. That’s like saying, “Could you take this whole heap over here?” (But then again, maybe not since that’s bad negotiating tactic.)
- Verify the validity of their list. This means getting your lawyer to check to see whether they have ownership of the IP. In some cases, they might have to show you that they own the IP, e.g. the brand or the trade mark.
- Get a valuation. You’ll want to get the IP valued. For trade marks and service marks, use the Interbrand method. For patents, look at how much the patent is generating, not how much it cost to patent the thing. Patents cost a lot to register, but many patents are duds.
- Check patent claims. Since a strength of a patent lies in its claims, you might want a patent agent or patent attorney to evaluate whether the patent’s claims could stand up in court. Some patents get published even though they should not.
- Consider whether the IP is a fit for your business. Is the IP aligned with your company’s direction? If no, don’t worry. I remember the Friendster deal that a Malaysian company snapped up some time back. They sold the Friendster patents to Facebook and recouped their costs. In the process they dismantled the Friendster social networking website and turned it into a game coupons vending site. Young people everywhere migrated to Facebook.
- Evalute how much it is going to cost to maintain the IP. Patents need an annual fee to continue to be valid. If a patent lapses and someone starts manufacturing the patented item, the patent holder cannot sue that person, even though the patent is later reinstated. You might as well give the patent away for free if you cannot maintain it. Better yet, don’t buy.
- Check whether the IP has been licensed out. In case you thought that you were going to acquire them and then license them out (pays for itself), check first. The company may have already licensed it. Some guy in Dubai or India may have gotten the manufacturing rights. Some company in Indonesia may be allowed to manufacture a cheaper version of their product, with the same brand. Imagine having to deal with grey imports. You make the high quality originals, and some guy imports the same brand from a third-world country.
- Ask for previous valuation reports from their side. They need to justify their asking price. Of course, their valuations are always sunny.
- Get details of any claims, potential litigation, on-going litigation, and past litigation. For all you know, the IP you are eyeing is the subject matter of a highly contentious claim. It could be invalidated in a court case somewhere, after which it would be worth nothing.
- Interview their IP manager, if possible. Find out what their strategy was for their IP and why their IP did not save their company. They may blame it on : Lack of funding, lack of marketing, slow market adoption, litigation. Listen and nod. Sort the bullshit from the truth.
- Talk to people in industry about the potential value of the IP that you’re getting. You can’t name names, and you can’t mention who you are dealing with. You can’t mention what you are acquiring, because the deal might fall through. But you can ask what direction the industry is headed, and whether similar IP has been a boon or a bane. You can’t say anything yet you must say something, otherwise how else can you get information? Go general with outsiders and drill deep with your team. You might need to tie up your team members with NDA’s as well, just in case somebody leaks.
- Evaluate how the IP might be further developed. Before you acquire IP, think how it can be further developed. Is your R&D department positive that it is full of potential? Does the market show an appreciation for the product the IP covers?
That’s it for now. We could update this checklist sometime in the future.