Intellectual Property Transfer Agreement: A Guide For Mergers And Acquisitions

There are numerous challenges for acquirers and sellers when creating an intellectual property (IP) transfer agreement as part of a merger or acquisition (M&A). We share some simple tips to help you structure the process effectively.

The challenges associated with the permanent transfer of IP from one party to another, also known as an assignment, can be affected by many different factors, such as company size, publicity, and availability of information. Given the range of factors to consider, it can be tricky to know where to start and how to organize the process. Here are a few simple tips to help you get started when developing an intellectual property transfer agreement.

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1. Planning for Due Diligence

During the early stages of the M&A process, your internal IP team will want to undertake an IP portfolio audit to assess the assets being transferred. The timeframes associated with many M&A transactions can make it challenging to develop a plan, and gathering relevant and accurate information in situations where the seller is a small or private company can be especially time-consuming. Creating a solid due diligence plan in advance ensures that the acquirer understands what they are buying, the seller has the correct rights and protections, and that any significant gaps are identified, which will inevitably speed up the overall process.

2. Gathering Information about Intellectual Property Assets

When gathering information about IP assets, no stone should be left unturned. It is imperative for your legal team to identify the relevant IP assets, the rights associated with those assets, when they will expire or renew, and where the assets are registered and legally recognized. Any associated costs, fees, and gaps in coverage should also be identified.

In this stage, the governing factors of developing an intellectual property agreement are in the details. For example, if a seller has the right to manufacture an IP asset but does not hold the right to sell it under the assumed brand name, this can affect the value of the asset, thereby diminishing the value of its acquisition. For this reason, a robust investigation structure is necessary to source, collect, and evaluate the relevant information. This will also help with the next stage.

3. Updating Intellectual Property Ownership

Executing an intellectual property transfer agreement will require updates to be carried out to ensure that ownership has been correctly transferred from the seller to the buyer. Many of the necessary changes may be identified while gathering the information. However, it's also important to develop a plan for executing these changes. While some tasks may seem obvious, a thorough plan should include foresight and consideration of potential issues so that ownership is transferred in a timely manner.

When updating IP ownership (a process known as IP recordals), you will need to send a notification letter or email to the registry with the new IP owner's address, along with proof of IP ownership (e.g., the IP transfer agreement) and often additional authentication documents, such as a notary seal or legalization by a local consulate. Certain considerations also may need to be foreseen, for example, translated documents may be required in certain countries and jurisdictions. Different countries and jurisdictions may also have different requirements and fees, which should be factored into your change of ownership plan.

4. Overall IP Value Assessment

One of the key advantages of developing comprehensive plans in the previous steps is that you are in a position to provide an accurate value assessment for the intellectual property agreement. Initially, it can be difficult to determine the value of an IP asset, especially when little information is available to the buyer. An effective plan for assessing and transferring an asset can provide insight into potential costs, obstructions, and risks, which can be deciding factors in the overall value of a merger or acquisition.

The success of a merger or acquisition can rely greatly on the transfer of intellectual property. A comprehensive assessment of the IP assets, along with a plan to transfer them from seller to buyer, will not only ensure a speedy transfer but also provide valuable insight into the true value of the IP assets. During these stages, consulting with an IP recordals specialist can help you develop and execute a plan that supports the specific needs of your organization.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.