Patent Due Diligence

The Process of Patent Due Diligence Review

A due diligence study goes through four stages: preparation, assembly, and analysis of data, as well as reporting, similar to other kinds of research. However, depending on the goal and desired thoroughness of the assessment, the concerns and things covered might vary from providing answers to a few key queries to hundreds of inquiries. Furthermore, the due diligence examination is a dynamic process; if something new or unclear is found in stages two or three, you may occasionally need to return to a previous action.

A checklist for due diligence can be used to monitor your progress, either for the full process or just a specific stage, as due diligence involves a lot of information in and of itself.

Stage 1. Preparation:

Prior to anything being "done," a few things need to be determined. These include:

• The purpose of this due diligence review
• Cost and scope

Which business plan do you have? Which business is your goal? Is it a technological or product? What are the topics that matter? Are there any ancillary products involving other technologies that should be taken into account? How much will the due diligence review cost you?

• Objectives

What details from this due diligence assessment are you hoping to learn? Keeping your focus on the goal allows you to operate more productively. Here is where you can start putting together a due diligence checklist. This may be a lengthy checklist, listing every detail, or it can be brief, containing only the most important questions.

• Team members

Despite its importance, This item is routinely ignored. Not just patent attorneys, but entire teams of professionals are usually necessary for a successful due diligence procedure. Professionals in top management, technology, law, patents, and other fields all contribute important knowledge and perspectives.

Stage 2. Data collection:

The following would be the primary concerns to gather and look into at this stage:

• The protection status of the target matters

You must now decide on the scope of protection after focusing on the subject areas in the first step. Which goods or innovations have patents or pending applications? After completing this process, you will know the approximate number of patents-at-issue that need to be examined.

• Ownership

It is important to determine who owns the patents in question because some may be jointly owned, and this could result in issues if managed incorrectly.

• Litigation history

To find unanswered litigation issues and stop lawsuits in the future, any litigation history of the patents in question needs to be researched and reviewed.

• Other documents

Documents pertaining to patents (if any) that need to be gathered for further research include publications and personnel assignment agreements, licencing agreements, confidentiality agreements, in addition to any inside communications.

Stage 3. Analysis:

The due diligence process's most laborious and time-consuming phase will be this one. At this point, you'll have to:

• Analyse the patents

This could be the hardest aspect of the process. Reviewing each patent at issue requires you to determine its current status (active, inactive, licenced, or not), as well as its scope of claims, validity, enforceability, and novelty. To ensure that you look at the same things in each patent, you may wish to create a distinct checklist for due diligence for this matter.

• Conduct an FTO search

An FTO search would be necessary if you were getting ready to buy or license a portfolio of patents for new company plans to ensure that the patents at issue allow such development.

• Pinpoint problems or holes in your findings.

It's possible that you found a target that should have been patented but wasn't filed. Perhaps a different patent family has been found that requires more analysis. Maybe there are unpaid maintenance payments for a certain patent.

• Draft action items

You will know where to go from here and have a far better idea of the whole situation by now. Requesting unpaid maintenance costs from the patent owner or supplying further details are examples of possible action items. Or maybe by now your team found that your business plan needs to be modified or the prospect deal needs to be re-examined.

Stage 4. Report:

The writing of the report would be the final step in the due diligence process. When drafting, we advise you to utilise your original process checklist as a guide to a due diligence report, even if the format may change for each review. Typical elements of a due diligence report include:

• Background and objectives
• Analysis, findings, statistics, charts, interpretations
• A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis

It is advisable to take the target readers into account when writing a due diligence report. Because the CFO and CTO, for example, may have different areas of interest, it's critical to focus on what the reader is interested in learning.

Please be aware that this process only acts as a basic guide for the due diligence process. We strongly advise you to enlist the assistance of patent experts who have knowledge of M&A and patent transactions.