Financial Due Diligence is required in any kind of investment or business dealing with mergers...
21st century is the era of innovation; these innovations are playing an important role in the growth of Indian economy. All these innovations are intangible property or propriety assets which come out from human intellect, which has commercial value. These new ideas, innovations need to be protected and secured under some law. The law protecting these innovations is Intellectual property law. These innovations either belong to an individual or become a key asset of a company. If it belongs to a company, it is important for the company to know the quality and quantity of its IP. The process of the audit to assess the worth of assets owned, licensed by the company is called IP Due Diligence.
Intellectual property law protects one’s legal right in respect to the property created by the human mind- such as inventions, slogan, symbols, any artistic work, design, any software, or any technology, etc. There are three ways to protect your Intellectual property through the use of – Patent- Trademark and Copyright.
These laws not only protect the owner of IP rights from third party infringement but also provide many other exclusive rights to the owner. In the emerging nation like India, where an individual is way heading towards the stimulating emergence in technology and scientific activities. Government from all around the globe put efforts to harmonize the IP laws through many kinds of international treaties such as the world trade organization agreement 1994 (WTO) on top related Intellectual Property Rights (TRIPs). The convention established in the year 1967 by the name of world trade provided the list of subject matter which is protected under Intellectual property rights;
TRIPs agreement is the most effective and complete multilateral agreement until now, which came into effect on 1st January 1995. According to which following areas will be covered under intellectual property.
Any company or business mainly includes two types of major two assets. One is a physical asset – which includes building, machinery, financial assets, and infrastructure. The second main asset of the company is intangible assets- which include ideas, designs, brands, and innovations. In the earlier time, physical assets were responsible for the value of the company, but with time situation have been changed drastically. Revolution in the field of Information technology, for the company’s intangible assets, is becoming more valuable. In simple terms, we can say that now the value of the company is not its factories or large warehouses but now innovative ideas, the software has become the main source of company. SMEs are working over their intangible assets and finding out more ways to make the best use of its intangible asset.
Hence, therefore, it’s important for the company to legally secure its intangible assets. IP rights which may be acquired in particular for the given categories of intangible assets.
Due diligence is a process of investigation or audit which should be carried before any investment in a business or any merger and acquisition. The main aim of due diligence is the valuation of the company’s assets, liabilities, assess the risk within the business. This process plays an important role for the investor or purchaser to make an adequate and profitable financial decision.
IP due diligence is the investigation to know the worth of the company’s intellectual property. It is a process of the audit to assess the quality and quantity of intellectual property of a company or business. The audit also includes an assessment to know how intellectual property is secured and captured by any relevant company or business. IP is the essential key assets of any of the company or business. Conversely, if a company can’t use it’s IP due to third party infringement, this may significantly impact on its ability to operate effectively and therefore on its value. Intellectual due diligence is often conducted during the merger and acquisition or can be carried out by a company on its IP assets in preparation for a transaction for sale of a business, or for acquiring any major license.
The strength of an IP due diligence can determine the company’s worth. The other reasons to determine the value of a company’s IP are;
For a smooth IP due diligence following step are recommended to be taken;
Without any set term of goal, the investigation cannot be carried properly. With the set of goals, an attorney can perform its task properly. Following are a few questions that can be asked for a better understanding of business and can get a better understanding of business IP.
The investigation is the most important and time-consuming part of due –diligence. Here the search of facts and information are carried out of a company. It’s important to know during the investigation that what all are the products involved in the business transaction and other is whether the IP assets are covered under the IP protections rights.
Results analysis is the stage where all the information gathered by the attorney will be combined in a cohesive and understandable format. The result analysis will give further advice and guidance for the next step.
IP in now days are the most valuable asset of any company or business. IP Due diligence where it will provide information about the IP of a company, within that the worth of the company’s can be carried. Merger and acquisition or the investment are the main conditions when a company carry out then due diligence process so that the third party interested in a company can make most of the profitable decision by investing or purchasing the business. A proper time taking due diligence process and from the good attorney always gives out the best results, and hence the reason of carrying due diligence process can be fulfilled.