Glendale, CA asked in Mergers & Acquisitions and Patents (Intellectual Property) for California

Q: My company has a few IP patents that are important to me as its CEO. If we merge with another company, how will that

affect the ownership of these patents?

1 Lawyer Answer

Peter D. Mlynek

Answered
  • Patents Lawyer
  • Moorestown, NJ

A: Typically, if there is a merger, the patents will belong to the new company.

But it does not have to be that way. Issued patents are treated just like any other business asset. Your company can sell the patents along with all the other business assets such as inventory, production facilities, tooling, etc., or it can spin them off into another entity.

The question that needs to be answered is: how valuable are the patents to you, vs. how valuable are they to the buyer? If the buyer is not really interested in patents, but you view them to be valuable, then you should keep them. But if the buyer is interested in the patents, then be prepared to be paid significantly less money for your company if you want to keep them. Sometimes, patents are not of interest to the buyer at all, other times patents is the only thing that is of interest to the buyer. It is very deal specific.

A part of my career was devoted to advising clients on M&A with respect to IP. Namely, I did due diligence on the products and patent portfolio of target companies. There are two questions that the buyer is always interested in:

(1) How good are the target company's patents? -- i.e., will the patents keep others from making & selling the products covered by the patents?

(2) How strong is the target company's freedom to operate? -- i.e., after the buyer buys the company, will the buyer be able to make & sell the product & services?

Good luck in your sale!

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.