For many companies, intellectual property is the most valuable asset on the balance sheet — and often the most overlooked in legal transactions. When IP is not properly identified, valued, transferred, and protected, the consequences can be catastrophic.
Types of Intellectual Property
Patents
Protect inventions — utility patents (20 years from filing), design patents (15 years from issuance). Grant the right to exclude others from making, using, selling, or importing the claimed invention.
Trademarks
Protect brand identifiers — names, logos, slogans. Rights arise from use or federal registration. Can last indefinitely if maintained.
Copyrights
Protect original works of authorship — software, literary works, music, art. Protection arises automatically; registration provides additional benefits. Lasts life of author plus 70 years (or 95 years for works made for hire).
Trade Secrets
Protect information that derives economic value from being secret. Not registered — protected as long as secret. Can last indefinitely but lost immediately if public.
IP Due Diligence in M&A
Ownership
The most critical question: does the target actually own its IP? Common issues: employee-created IP (without written assignment, the company may not own it), contractor-created IP (contractors retain ownership without work-for-hire agreements), joint ownership, and prior employer claims.
Chain of Title
For registered IP, verify all assignments and transfers have been properly recorded with the USPTO or Copyright Office. Gaps create clouds on ownership.
Registration Status
Are registrations current? Are there pending applications? Have any been challenged? Are foreign registrations in place?
Licensing Arrangements
Review all IP licenses: exclusive vs. non-exclusive, scope, duration, assignability, change-of-control provisions, and royalty obligations.
Infringement and Litigation
Identify pending or threatened IP litigation, cease-and-desist letters, and known infringement by or against the company.
Trade Secret Protection
Assess whether the company has implemented reasonable measures to maintain secrecy: confidentiality agreements, access controls, marking, and exit procedures.
IP Transfer in Asset Purchases
IP must be specifically identified and transferred through written assignment agreements. For registered IP, assignments must be recorded with the relevant government office. Trademarks cannot be assigned "in gross" — without associated goodwill. For software, ensure all source code, documentation, and development materials are transferred. Domain names are transferred through the registrar. Review licenses for assignment consent requirements.
IP Protection in Commercial Contracts
Employment and Contractor Agreements
Every agreement should include IP assignment provisions ensuring all IP created is owned by the company. Include work-for-hire language, waiver of moral rights, assistance obligations, and disclosure obligations.
Software Development Agreements
Specify who owns the developed software, source code, and related IP. If the developer retains ownership and grants a license, specify scope.
License Agreements
Specify scope, field of use, territory, duration, sublicensing, and royalty terms. Include quality control for trademark licenses.
Confidentiality Agreements
The primary tool for protecting trade secrets during business discussions. Define confidential information broadly, specify permitted uses, and include robust remedies.
Frequently Asked Questions
Do we own the IP created by our employees? Not necessarily. Without a written IP assignment agreement, employees may retain ownership.
Can we assign IP without recording? Legally effective between parties, but recording provides notice to third parties and protects against subsequent purchasers.
What happens to IP licenses in an acquisition? Depends on the license terms. Many require consent for assignment or contain change-of-control provisions.
How do we protect our trade secrets? Implement reasonable security measures: confidentiality agreements, access controls, marking, exit procedures, and physical/electronic security.
Protect Your Intellectual Property
The business law attorneys at Poulson Law can help you identify, protect, and transfer your IP assets. Contact us at 607-547-1195.
