Intellectual Property Law

Chapter 24 Putting It Into Words Solution

A client has informed your law firm that it intends to sell all of its assets to another
company within the next six to nine months. Explain to the client why performing an IP
audit at this time would be prudent.

It is our understanding that the company will be selling all of its assets within
the next six to nine months. As you may know, the purchase and sale
agreement will require your company to identify all of its intellectual
property (IP) assets. Moreover, the company will be required to represent
that those IP assets are current, valid, enforceable, and subject to no claims
(or, if they are subject to any claims, the company must disclose such claims).
To prepare for the transaction, we strongly recommend that the company
begin the process of auditing its IP assets. The audit will disclose if any
remedial action needs to be taken with regard to those assets, such as
maintaining utility patents, maintaining trademarks, correcting records of
the U.S. Patent and Trademark Office to reflect ownership of patents and
trademarks, and so forth.

Moreover, the IP audit may help the company properly evaluate any offer
made to it by the acquiring company. If the company’s IP assets are strong
(not subject to litigation, claims, etc.), it will help the company negotiate the
best price for its assets.

Finally, when a contract for the transaction is executed, the already-prepared
list of IP assets will only need minor updating rather than full creation,
saving time and money during what might be a pressure-filled time when the
parties try to close the transaction.