M&a · Software Patents

How to handle patents in an acquisition situation?

Richard Pridham Investor, President & CEO at Retina Labs

September 18th, 2015

I am working on a deal to acquire a medical imaging software company. For different reasons, we're structuring the deal such that we will be setting up a new company and acquiring the assets of the target company (name, IP, clients, fixed assets, employees...). The founder and sole shareholder of the target company has software patents in his name. Those patents pertain to the company's products and IP and for which we believe that there are many infringers, although we're not acquiring it to become a patent troll :)

So my question pertains to the transfer of the patent from the inventor into the new company. Can this be done? Or, must the patent stay in the inventor's name and the new company get's a licence of use of some sort. How does this work?

Can anybody help clarify?

P.S. It's a Canadian company and the patents are granted both in the US and in Canada.

Alex Chan Co-Founder at DataNovo, Inc.

September 18th, 2015

Richard-

This is what I used to counsel the target companies acquired by Google and Apple.  Prepare the assignment, have the founder and shareholder (assignor) of your target company sign the assignment, and record the assignment with the USPTO.  This effectively provides notice to the public that the patents have been assigned and are no longer owned by the assignor.  In so doing, this provides a notice function that would prevent downstream purchasers from buying these patents not knowing that the rights to these patents have been transferred to the acquired company.  You can do this at both the USPTO and CIPO.

Patrick Reilly Patent/IP Attorney

September 18th, 2015

It's all negotiable, but I would advise an acquirer-client to demand transfer of exclusive ownership of all relevant IP rights. Joint ownership can severely impair any potential competitive advantage of IP Rights, limit the ability to present as an effective Strategic Partner, and reduce the attractiveness of a venture (and its valuation) as a potential M&A candidate. Think Full Spectrum IP Protection and strive remove any limitation to the scope of your firm's IP Rights. ---- Pat

Tom Collopy Fiduciary at Securus Inc.

September 18th, 2015

Richard, My experience relates to US patents. You should be able to acquire the patents and have ownership of the patents transferred to your company. I recently sold a company and we transferred ownership of the patents to the acquiring company. I would suggest you get advice from an attorney on the transfer process and related documentation. Tom

Richard Pridham Investor, President & CEO at Retina Labs

September 18th, 2015

Thanks. We will seek the appropriate legal advice. I just wanted to know what's possible as we're in the LOI stage of the offer and I wanted to carve out the stipulation for the patents, subject of course, to legal review in the due dil stage.