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When one company acquires another, especially if the acquired company’s major assets include IP, the question often arises of whether the acquirer has purchased a company…or a lawsuit. IP due diligence should begin early, and care should be taken that IP reps and warranties are adequate to protect against third party claims.
This article addresses the IP risks that arise in mergers and acquisitions. The article notes that a joint owner of a patent can grant a license to a third party without the approval of the other joint owner (under US patent law). For contract negotiators entering into an IP license or transfer, the use of covenants or post-closing conditions may solve this problem, or the use of restrictions on the granting of sub-licenses.
- In M&A, IP due diligence should be an early priority.