DUE DILIGENCE
FRANKLIN PIERCE LAW CENTER
17th ANNUAL ADVANCED LICENSING INSTITUTE
Concord, New Hampshire
Wednesday, January 7, 2009
By Ronald I. Eisenstein
Nixon Peabody LLP
WHAT IS A DUE DILIGENCE ANALYSIS?
—Assessment of Risks
• Examination of IP
• Ownership Rights
• Mistakes
• What does IP cover?
• Are there obstacles?
—Typically part of a Larger Process
• Analysis of Science
• Analysis of Commercial Success
• Analysis of People
—What is required?
• Think about other types of due diligence
• How big is the deal?
—Who are the players?
• Counsel for both sides
• Scientists
• Inventors
• Management
—Now, Step Back …
• Before you get involved in a Due Diligence do an Internal Audit!
o Check for problems
o Correct problems
o Coordinate IP story with other parts of the company’s story
o Know what to say and what not to say
—WHY?
• Minor IP issues can get blown out of proportion
• Minor mistake can be corrected, e.g., reissue – correction of inventorship, priority claims, claiming issue, payment of maintenance fee
• Opinions can be prepared, expanded, updated
— What Type of Documents Should You Review?
• Schedule of patents, including corresponding foreign applications, continuations, divisionals, (IPs, reissues and reexamination of ownership right?
o Do you have assignments?
o Are maintenance fees paid?
o Are annuities paid?
• Schedule of patent applications, corresponding foreign applications, continuations, divisionals, and CIPs
o Is ownership right?
o Do you have assignments?
o Are annuities paid?
• Licenses and cross-licenses
• Technology research and development agreements such as sponsored research agreements
• Material Transfer Agreements
o Are there restrictions?
• Employee agreements re assignment
• Vendor agreements re confidentiality
• Requests for licenses
• Notices of infringement
• Third Party claims
o Claims of infringement
o Unfair competition
o Brach of confidentiality or non-disclosure agreement
• Prosecution files
• Opinion letters
o Non-infringement opinions
o Invalidity opinions
o Freedom to operate opinions
• Settlement or Consent Agreements affecting the use of IP owned or licensed by the Company
• Product Descriptions
—What Are Some Things You Look At?
• Product Description
o Do you have IP covering it?
o How broad are the claims?
o Do you have freedom to operate?
o What are your competitors doing?
—Third Party Counsel
• Looks at similar things
• Needs to know what the purpose of due diligence is
• It’s a risk assessment situation
• Common sense is really important
—Important:
No deal is without risk – Counsel must understand the risk and place it in perspective.