Role of IP In Merger and Acquisitions

July 21, 2022
- Intellectual Property (IP)
- Mergers and Acquisitions

IP In Merger and Acquisitions

Intellectual Property (IP) refers to non-physical assets invented by a person through his intelligence, and which are usually held by a company. IP includes patents, copyrights, trademarks, trade secrets etc. The IP carries an innovation, the value of the company and its products/solutions hence it is considered as a crucial parameter in deciding strategies for a company.

Nowadays, to stay ahead in the rat race and to either build better products and provide improved services to the user or to protect themselves from disruptions/bankruptcy and maximize revenue, companies are increasing their focus on the acquisition of technological capabilities or divestiture of company assets, or business unit. These acquisitions can be categorized into two important categories: Mergers and Acquisitions.

Merger
Acquisitions

To capture a bigger market segment or to cut the competition when two companies join to generate a new company, is known as a merger.

Acquisition refers to purchasing the stake of another company to maintain a leading position in the market.

Merger and acquisition (M&A) are beneficial in various industries majorly including industries of information technology, telecommunications, pharmaceuticals, healthcare, etc. After the successful deal may it be a merger or acquisition, all the assets of the company including physical as well as non-physical, are transferred to the acquiring company or the final merged company, hence IP plays an important role in M&A.

Merger and acquisition (M&A) provide various benefits and may include:

Increase in portfolio of the company

It is not an easy task to invent something new, so an IP acquired through M&A helps to increase the company portfolio.

Provide a competitive edge

through M&A, companies can acquire unique inventions and capabilities or any secret information and maintain a dominant position in the market.

Diversification

The company can expand its business segment by knowing the technologies available in the market.

However, while considering M&A deals, the IP should be very well evaluated through proper IP Due Diligence steps. Some of the parameters considered while acquiring IP assets are:

Identify the focused IP to be acquired based on the company requirement or interest.

Verification of proprietorship of the assignee to know which patents the company currently owns.
Checking the legal status of patents to know which patents are active.
Infringement Risk.
Validity Check.
Territory Check, to know if the patents cover key territories that are of interest.

Check the patents if they come under FRAND licensing restrictions.

If an IP is transferred through a proper process and taking into consideration all the relevant parameters, every part of the IP would generate a good jewel, skipping this step may prove to be problematic in the future which leads to huge revenue loss.

One of the biggest failures in M/A deal is between Google and Motorola, where even though Google bought Motorola Mobility for its patents, it hasn’t generated a good amount of revenue for Google as Google has not won any injunction cases against giant competitors in the handset manufacturing domain and proved that Google over-remunerate for patents acquired from Motorola.

Another failure was between Holley Communication and Philips Semiconductor, where Holley acquired Philips Semiconductors’ CDMA Technology including patents, but Holley failed to identify patent cross-licensing agreements between Philips and Qualcomm as a preparatory step before the deal and was not able to implement patented CDMA technology and required to pay license payments to Qualcomm to use the technology it had acquired.

So, we at TT Consultants provide the service of IP evaluation, where our team of experts assists our clients in well-organized due diligence process by identifying relevant targets and the relevant patents and thus helping them in deciding the further strategies for the business unit.

About TTC

We’ve constantly identified the value of new technology carried out by our pretty skilled executive crew with backgrounds as our professionals. Like the IP professionals we empower, our starvation for development is never-ending. We IMPROVISE, ADAPT, and IMPLEMENT in a strategic manner.

TT Consultants offers a range of efficient, high-quality solutions for your intellectual property management ranging from