The details in due diligence can make or break an IP value proposition. While IP due diligence often involves the same considerations of traditional business valuations, it also includes considerations specific to IP, such as verifying IP rights.
IP due diligence can be a long and tedious process. However, it is a necessary process for the most reliable and accurate IP valuations. Therefore, IP analysts must ensure they review all aspects of an asset that would affect the value proposition. The following are discrete analysis components of IP due diligence that analysts must factor into a valuation.
- Performing initial interviews
- Analyzing historical financials
- Understanding the IP
- Verifying IP ownership
- Commissioning independent counsel review
- Reviewing enforcement history and ability
- Performing market analysis
- Evaluating the regulatory environment
As indicated, the due diligence process involves heavy-duty analysis in a variety of areas. Within each of those areas are a host of other factors an analyst must consider. For instance, in verifying IP ownership, the analyst must consider a number of factors such as title, options & warrants, reversionary rights, and royalty obligations. In order to analyze these factors, an IP analyst may have to review a number of documentations such as patent filings, assignment agreements, inventor notebooks, employee agreements, and others.
Those analysts who consider all components that affect IP value provide solid valuations that can stand up in court, help generate capital, and assist in the buying or selling of IP.