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
Peter D. Mlynek
  • 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!

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