In this six-part series, Anders Isaksson explores some of the critical factors and motivators for why companies, small or large, should obtain intellectual property. The aim is to help you understand when and how you can create value from IP, especially when considering a company’s long and short-term goals.
In the previous article in this series, we explored why it could be essential to keep information, products and know-how originating from different business activities within the company as a trade secret. In this article, we consider how intellectual property helps quantify knowledge before a merger or entering into collaborations.
At any stage in the corporate cycle, it is likely that merger or collaboration opportunities will arise. In both instances, intellectual property nicely puts into place what is known before engaging in such activities and can help to provide concrete outcomes from the merger or collaboration.
In terms of collaborations with the purpose of mainly developing new products or services – intellectual property rights clearly define what intellectual assets, normally know how, both parties have prior to entering into a collaboration. If anything – this is the easiest part. From here though, you need to work with the other party to clearly understand how the intellectual property from both sides can work together and how the generated intellectual property will be protected.
First of all, roles need to be defined and this means creating a document listing each collaborator’s role and trying to anticipate what they will create. This document should preferably be included into a contract. The main purpose is to present a clear structure and definition of who is doing what from each side and what any possible desired outcome is of the collaboration.
Up next is ownerships, you need to ensure that before entering a collaboration it is decided how each creation will be protected, who will own the intellectual property and what each creator will receive in return. For instance, different business purposes of the result can be divided between the collaborators, making both sides happier with any result of the collaboration. Also, they may be more incentivised to complete the collaboration.
Lastly, it is important to try to detail as much as possible at the beginning of this process. If as much as possible can be detailed, discussed and agreed upon beforehand it means there will be less room for surprises later down the line. For example, timetables, how delays will be handled, plan for filing intellectual property and if extra budget is needed will it be split equally.
The best advice for smaller companies or start-ups when it comes to mergers is to have intellectual property. In my experience, larger companies will not even talk to you if you do not have any intellectual property rights. The intellectual property right does not be a registered right, but it needs to be formalised. Formalised here means documented in writing or otherwise documented and stored as well as dated.
You also need to ensure you have all the necessary documentation and an overview of these intellectual property rights so the acquirer can start a detailed review and confirm everything is in order.
This should always include who owns the intellectual property. While in theory, this should be the company, in some cases it is not uncommon for individuals who were involved in the creation of such IP to be listed and they may no longer be with the company.
The buyer is always going to do thorough due diligence of any acquiring company with a particular focus on intellectual property so there is no chance of hiding anything or hoping it will not be picked up.
Ensuring everything is in order from the start or disclosed with explanations to the acquirer will make for a much smoother merger.
If you have any questions on how IP can help your business or what combination of intellectual property rights would be most suitable – please reach out: anders.isaksson@awa.com.
Stay tuned for the fourth article in this series – Spin-Offs (learn how creating dedicated intellectual property during spin-offs makes it easier for companies commercially and also during valuations).