IP due diligence involves a legal review of a company’s IP assets, typically in connection with an acquiring company’s planned acquisition of another company.
Aspects of due diligence can vary from job to job but typically include a review of ownership records and determining whether they adequately cover the product(s) for which the company is being acquired. The IP assets are reviewed for their scope, strength, enforceability, and geographical coverage, among others.
Due diligence sometimes include freedom-to-operate considerations. For example, if the acquired company makes and sells a component of a system and only holds patents covering the component, the acquiring company may wish to seek a review of system patents that incorporate the component in a process called freedom-to-operate (FTO) study, which is sometimes referred to as a clearance study.
A clearance study can also arise when a company considers launching a new product and seeks to review whether there may be active patents that cover the product. To secure that answer, the company commissions a clearance study, which involves a search to compile a list of relevant patents and then reviewing the patents for potential infringement. If a patent is found to pose an impediment to the new product, the company can still proceed by altering the design, licensing the right to practice the patent in question, and/or invalidating the patent in question, such as by seeking an administrative review of the patent or file an invalidity lawsuit.
