When companies buy or invest in other companies, they conduct due diligence, looking into the company’s records to make sure there are no legacy issues or financial misrepresentation and to ensure that intellectual property portfolios are of sufficient quality and properly protected. If a patent won’t stand up in court, it’s worthless. For companies with high-value brands, buyers need to ensure that trademarks are valid and their ownership is correct. Companies seeking investment will also conduct legal audits to make sure they have the most complete IP portfolio possible.
Gearhart Law has been on both sides of the equation. From the small entity side, we’re happy to say that our patents, and in particular our biotech patents, have withstood scrutiny by law firms acting on behalf of investors during the due diligence process. From the investors’ side, we’ve discovered flaws in the IP portfolios of some of the firms they’re evaluating. When flaws are discovered, investors can then decide how to proceed, either by demanding the flaws be fixed, if possible, or by re-negotiating the terms of the investment.