How to deal with intellectual property during the credit crunch

intellectual propertyIntellectual Property issues continue to be critical, says Skadden Arps in a recent report on the trends in 2009. For parties interested in acquiring technology companies, well-thought-out IP diligence is more important than ever. Companies respond to economic pressures by implementing cost-cutting measures that inadvertently may dilute the value of their IP assets.

Conversely, as technology companies trade close to their cash value, rather than on less predictable cash flow metrics, the value of IP on a stand-alone basis may become an increasingly important component of overall valuation.

From the standpoint of the acquirer, key IP issues will include:

  • valuation challenges and determining appropriate valuation methodologies for various IP assets;
  • managing open source and other “upstream” licensing risks, where target companies, because of budgetary constraints, opt to use no-fee open source code rather a proprietary code;
  • evaluating a target company’s IP portfolio in light of litigation trends, licensing requests and demands received by the target company and third-party infringement claims;
  • determining the adequacy of trade secret protection where a target company’s practice includes the disclosure of material source code to third parties;
  • considering the implications of a change of control on the value of IP assets and third-party rights that may be triggered by a change of control;
  • implications of government or institutional funding on intellectual property ownership as target companies increasingly turn to such funding sources to stay solvent;
  • implications of joint ownership of intellectual property as target companies collaborate with third parties to meet product development goals in a cost-effective manner;
  • evaluating, in view of budgetary constraints, the adequacy of a target company’s efforts to enforce its IP rights against third-party infringers and assessing the implications of inadequate enforcement efforts on the value of the target company’s IP assets;
  • managing the IP risks associated with high employee attrition as the value of equity compensation declines, in particular with respect to key inventors of IP who land positions with direct competitors; and
  • understanding particular IP issues raised by cross-border transactions and identifying related risks.
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January 15, 2009 | Filed Under Simone Brummelhuis news | 1 Comment 

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One Response to “How to deal with intellectual property during the credit crunch”

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    [...] thenextwomen: New blog entry: How to deal with intellectual property during the credit crunch http://thenextwomen.com/?p=3171 2009-01-15 10:22:55 · Reply · View jccoops: Just reused a chai tea bag. The credit [...]

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