When a business is merging with another or being acquired, there is a lot to think about. Employees, contracts, real estate, finances, and operational details all demand attention. However, one area that gets overlooked is intellectual property (IP).
Patents, trademarks, copyrights, trade secrets, and proprietary software can be some of the most valuable assets a company owns. So, what happens to IP rights during a merger or acquisition?
You don’t want to find out after the fact that a patent, a signature brand, or proprietary technology wasn’t properly transferred. That can leave you open to disputes, lost revenue, or lawsuits. Here is what to know.
IP Rights Are Transferrable Assets
Those IP rights don’t vanish during a merger or acquisition. Many times, ownership transfers to the acquiring company as part of the deal. Keep in mind that those rights transfers depend on the agreements signed between the companies.
Some agreements will list the IP being transferred, including patents, trademarks, and copyrights. Others may only cover certain categories or grant licenses instead of ownership. Without careful review, this can create major headaches down the line.
Patents and Trademarks
Patents and trademarks are the easiest IP assets to transfer. This is because they’re registered and documented. When a company is acquired, the acquiring party assumes ownership of:
- Existing patents, including rights to enforce them
- Pending patent applications
- Registered and pending trademarks
Remember that nothing should be assumed. Contracts need to spell out:
- Which patents and trademarks are included
- Who is responsible for renewals
- Who enforces them if there is infringement
Ambiguity can lead to disputes. In the worst cases, valuable rights are lost.
Copyrights
Copyrighted material, including software, creative content, manuals, marketing materials, and other original works, is also considered IP. These assets can transfer during a merger.
The transfer is simple if the company owns the work. However, things can get complicated when independent contractors or freelancers create some of it.
In those cases, the acquiring company may need separate assignments or agreements to secure ownership. Without them, ownership can remain unclear, even if the company paid for the work.
Trade Secrets
Trade secrets are a different animal. Their value comes from secrecy. Maintaining confidentiality is important. Acquirers should require:
- Employees to sign agreements protecting trade secrets
- Non-disclosure agreements for key contractors
- Clear documentation of what is considered a trade secret
If trade secrets are mishandled during transfer, the company could lose valuable competitive advantages. In some cases, that could be permanent.
Legal Assistance Can Avoid These Pitfalls
Mergers and acquisitions can make IP law even more complicated. That is where an experienced IP attorney becomes invaluable. They can help make sure the transition goes smoothly by:
- Going through contracts to confirm every piece of IP is accounted for
- Making sure ownership rights are properly assigned during the transfer
- Spotting potential licensing issues or conflicts with third parties
- Protecting trade secrets and other confidential information
Even small mistakes in handling IP can turn into big disputes or lost revenue down the line. When you work with an experienced IP attorney, they can help prevent headaches before they ever start.
Don’t Forget to Protect Your IP During Mergers and Acquisitions
What happens to IP rights during a merger or acquisition? Patents, trademarks, copyrights, and trade secrets require attention to make sure they transfer correctly and continue to provide value.
If your company is entering a merger or acquisition, you want to reach out to Phillips & Bathke, P.C. We can make sure nothing is left to chance. We protect not just your intellectual property, but the future of your business. Schedule a consultation today to learn how we can help your company.
