Business purchases - Intellectual property and due diligence
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Written on 19 June
The following article looks at the due diligence required by a
potential buyer in relation to intellectual property rights (IPRís).
For any purchaser of a business it is essential to ensure that
the buyer acquires all the intellectual property rights associated with
the business to enable them to continue with the conduct and objectives
of the business purchased (i.e. make a profit!).
The due diligence enquires should include independent searches
to determine the IP assets the business owns and the any licences the
business may have acquired or granted in the course of its dealings,
due diligence enquiries are also essential to identify any potential
IPR's are made up of either registered or unregistered rights,
they offer the benefit of a monopoly in the right acquired and they are
recognised in the majority of the countries globally, however it must
be borne in mind that the legislation that govern them may differ
What types of IPR's may a company own?
A company may own a variety of different IP rights or may even
have access to make use of certain rights by way of a licence, the most
common types of IPRís owned may include:
- Registered Trade Marks
- Registered Patents
- Registered and Unregistered Designs
How long does the protection last?
It is important to also note the length of protection afforded
to a particular right, for example in the United Kingdom:
- A registered trade mark is given an initial period of 10
years protection, this length of protection may be renewed indefinitely
- Trade Marks Act 1994.
- Copyright, a right that arises automatically and requires
no formal registration, has a protection period that varies depending
on the type of copyright, for example a literary work is given
protection for the life of the author/owner plus an additional 70 years
Designs and Patents Act 1977.
- A patent may be afforded protection for 20 years - Patents
- A registered design has a maximum protection period of 25
years - Registered Designs Act 1949.
- Unregistered designs may have protection between
10 to 15 years from the date they are first marketed -
Copyright Designs and Patents Act 1977.
Fact finding: registered and
As well as the term of protection it is also necessary to find
out the territories within which protection has been acquired.
Registered rights such as trade marks and patents are generally quite
easy to obtain information on, research on the unregistered designs may
however not be as straightforward. Certain industries such as
the fashion and entertainment industries rely heavily on unregistered
designs and analysis of a companyís internal records and documents is
particularly important in establishing subsistence and ownership in the
Rights subject to licences
Most companies will have obtained licences in relation to the
use of software and IT arrangements, for a IPR licence the following
considerations are important:
- Sole, exclusive or non exclusive licence?
An exclusive licence as the name suggests permits use by the licensee
only, with the exclusion of use by the licensor or of the licensing to
third parties a non-exclusive licence does the opposite. A sole licence
will permit use by the licensor as well as the licensee, however as
with an exclusive licence the licensor cannot licence to third parties.
- The territory, term, termination and royalties
associated with a licence are further considerations that a potential
buyer must research before a purchase is made.
All of the above enquires are essential for a potential buyer
in order to gain a good understanding of the IPRís associated and owned
by a businessbefore making a decision to purchase.
Written by Rehana Ali
About the Author
Solicitors offer services and advice for litigation,
commercial contracts, Intellectual Property and IT legal agreements. We
are experts in commercial law with a heavy emphasis on Intellectual
Property, Internet and e-commerce law. Lawdit is a member of the
International Trademark Association, the Solicitors' Association of
Higher Court Advocates and we are the appointed Solicitors to the
largest webdesign association in the world, the United Kingdom Website
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Article Published/Sorted/Amended on Scopulus 2014-07-11 09:08:44 in Legal Articles