The first step of the due diligence process is to prepare a comprehensive list of all patents and application owned by the seller. Usually, the seller provides this list, and the buyer must crosscheck the list with a search on global patent database. Patent databases such as PatSeer provide easy and comprehensive company search capabilities that can include all patents that currently held or previously belonged to the seller and its subsidiaries.  

With the list in place, the following evaluations are key to the due-diligence process: 

• Validity of Patents and future costs: Buyers must confirm whether the patents under investigation are valid for how long, potential maintenance costs till they expire and whether their protection can be extended (in case of pharma), and at what cost. 

• Likelihood of grant for pending applications: For pending applications, buyers can go through the patent registers and available prosecution history data to assess the likelihood of grant. 

• Ownership and Reassignment analysis: Buyers must investigate the ownership of the patents held by the seller to ensure that the seller is the absolute owner of the patents and there are no claims or disputes against this. The chain-of-title must also be inspected along with associated filings at the patent office to establish that the transfer of ownership to the seller did not leave any gaps.  

• Infringement Risks: Patent being public documents about the inventions held by the seller can also open door to potential future infringement cases in case the invention draws upon another’s patented technology. It is important for companies to perform patent due diligence (especially FTO studies) to identify infringement risks and design appropriate counterstrategies prior to the deal.  

• Scope of Protection: For the key patents in the portfolio, the buyer should analyze the scope of patent claims to assess the depth and breadth of protection This process should help in identifying any limitations or challenges to the scope of protection claimed by the patent.  

• Alignment with Products and Business goals: As businesses continue to adapt to changing market conditions, it is not uncommon to find patent portfolios that no longer align with the existing or future growth plans of the seller. Therefore, patent claims mapping to products and business goals should be done to evaluate the strategic alignments of key patents and further identify gaps where additional protection may be needed.  

• Evaluation of existing Licensing Agreements: A licensing agreement is a legal document that permits another party to use the technology held by the patent. The main use of these agreements is to generate revenue as royalties. Certain license agreements can pose a restriction on the aspirations of the buyer and so their details must be analyzed in context of the value being assigned to the assets.   

The overall process helps determine if the company has fulfilled its legal and financial obligations related to its patents and serves as a precautionary measure to identify any potential risks associated with the technology that is going to be acquired.