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Client

Debt Finance Provider

Background

Metis Partners was commissioned by a debt finance provider (“the Client”) to conduct commercial IP due diligence of an established high-tech company with a vast patent and patent application portfolio, in excess of 250 filings, protecting a plurality of technologies worldwide. The Company generated healthy revenues through licence royalties and sales, however it was looking to expand its operations and technology offerings in the short term and therefore required growth capital.

Assignment

Metis Partners was asked to identify intangible assets vesting in the Company, in the form of both registered and unregistered IP, assess their strength in relation to the Company’s competitive advantage, and identify risks which could undermine the value of these IP assets in the short-to-medium term.  The assessment was intended to provide the necessary assurances the Client was seeking prior to providing financing to the Company, including steps that the Client could take to de-risk the transaction as well as steps the Company could take to improve value and/or mitigate identified risks.

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Our Approach

Metis Partners met with both the Company’s executive and management personnel to learn about the business, its technologies and products, R&D activities and current commercial operations.  Through this we were able to identify and map intangible assets, including patents, know-how and trade secrets, and highlight their contribution to historical and forecasted revenues of the business.

We assessed the information collected during our meeting alongside other significant Company documentation, including commercial agreement terms, legal opinions and financial and strategic documents. This approach allowed us to identify the IP assets most critical to the Company’s competitive advantage (and hence most relied upon), as well as any risks which could undermine IP asset value such as patent term limitations, leakage of trade secrets or incongruences between licensing terms and medium-to-long term Company strategy.

The Outcome

Our assessment of the Company’s critical IP assets revealed that critical patents (which claimed platform technologies) were likely to expire shortly after financing terms expired.  Additionally, assessment of complementary and dependant critical patents claiming unique aspects of the Company’s technology revealed that these patents were not relied upon and/or had lapsed or remained pending for a duration which would render granting unlikely or minimal in value.  Our due diligence did, however, identify a wealth of know-how and trade secrets which had not been fully recognised by the Company but which backstopped its core patents.  Furthermore, our assessment revealed that these “unregistered” IP assets would allow the company to continue operating with minimal threat of competition once its core patents expired.  We note that had the focus been solely on the patents in this case, the final report would have erroneously painted an unreasonably grim picture of the Company IP assets and misguided the Client in its financing decision.

Based on our findings, we were able to advise the Client on which of the Company’s patents it should register security against at the UK IPO, and provided other practical recommendations which would minimise risk for the Client.  The Client was subsequently able to work directly with its counsel in order to translate our recommendations into legally binding provisions.  Similarly, the Company was able to take our recommendations and implement necessary processes within its IP strategy which would secure downstream value ahead of any exit.

Ultimately, Metis Partners’ IP due diligence of this transaction provided the Client with sufficient assurance to proceed with financing and helped an already successful British hi-tech firm to secure a significant amount of funding to help its business to grow.

Photo credit: Dave Crosby