How to Protect Intellectual Property

intellectual propertyUnfortunately few people understand why due diligence is important. They don’t realise due diligence can be a clever way of increasing the value of a business.

If you properly prepare for due diligence you can literally make money from your efforts. A satisfactory due diligence finding may enable you to get a higher price from a purchaser or investor. Or, a good report may prevent your price being beaten down because all sorts of shortcomings or risks in your business have been identified.

The first step is to identify your intellectual property.

The next step is to verify that your IP is securely held by the entity under consideration.

Protecting your intellectual property rights does cost both time and effort. So, before you make the decision to  invest in IP protection it will help if you understand why we protect intellectual property and the various types of IP that exist.

Intellectual property can take many forms, but the main types of IP that a business may seek to secure and protect are:

  • Domain name
  • Business name
  • Patent
  • Trade mark
  • Existing content

There are various registries for a most of these assets.

A Common Mistake

It is not unusual for a founder to have acted swiftly to protect intellectual property such as a good domain name. Because of that haste, the identity of the registrant may not have been clearly thought through.

A common scenario is that a domain name was available and a credit card was in the pocket. The registration took place with little thought about the legal implications of ownership. The same holds true for any other assets that are of value to the company.

If that happened, it is important to get that registration into the hands of the right entity.

Importance of Confidence

If the domain name or other asset forms part of the company’s operations, then it is clearly an important asset of the company.

Any investor intending to put their money into the company will want to know the company owns the domain name or other asset. They will want to be sure that it is not owned by one of the founders or shareholders or anyone else.

If attention is not paid to this before due diligence then the discovery of the flaw could be fatal to the potential acquisition of investment.
Any deal is about human relationships. Trust and confidence is the glue that really holds the deal together. There are plenty of investment opportunities and if the other party is spooked, loses confidence or feels cheated or conned, then the deal is not likely to survive.

Can you imagine the scope for mistrust if a due diligence team detects that the domain name under which a company operates is not in the hands of the company, but remains owned by an individual.

It may be completely innocent and unintended, but there is cause for considerable suspicion that the buyers or investors are about to sink their money into an entity does not own one of its key assets. What a potential disaster. That is the exact sort of issue that the due diligence process is designed to detect.

Rather than have a deal destroyed though suspicions or mistrust, get ahead of the game.

Have someone within the company work though the due diligence issues ahead of any external procedure. If there is anything not correctly registered, then transfer the asset to the company and make sure the registry is notified of the transfer and the register is updated.

A useful document for recording these changes is a Deed of Assignment.

Photo by Jaxxon
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About Mark Toohey

Mark Toohey is an experienced commercial lawyer who has worked with both major law firms and as general counsel in the media, telecommunications, software and IT industries. He has been a lawyer, company director, marketing director, company secretary and entrepreneur. Mark's commercial experience extends way beyond the theoretical. He has helped launch a number of start-up businesses and his hands on experience was gained from negotiating and documenting deals for a wide variety of business initiatives.