The Client

The investor engaged Metis Partners to perform an IP Audit to identify the IP assets which underpinned the Company’s competitive advantage, and to report on any IP risks which could undermine future value. In addition, we were asked to advise the Client on the status of the Company’s patent portfolio and conducted market analysis to contextualize the Company’s IP portfolio and increase the Client’s transparency over the IP. We subsequently provided an IP valuation to support the Company’s value proposition.  

The Assignment

Our PE client engaged us to provide commercial IP diligence to support its acquisition. It was important for the PE firm to understand the key value drivers of the Target and the IP risks that could be detrimental to future value. 

Our Approach

Our Metisology® approach was critical to us successfully breaking down this complex group and complex IP structure and to: 

  • discover & appraise the IP assets critical to competitive advantage and continuity of the Target; 
  • identify risks that could undermine the value of these IP assets post-transaction; 
  • assess the completeness of the patent portfolio that was to be transferred or licensed and report on any key patents being omitted or licensed on unfavorable terms, which would limit the Target’s ability to meet future R&D and commercial strategies; 
  • highlight any perceived post-transaction limitations or risks to the Target from existing cross-licenses, collaborations or ongoing disputes involving the Target or its parent company;
  • and review commercial terms around IP in the relevant legal documentation and liaise with the Client’s IP attorneys in ensuring that appropriate language was introduced to mitigate risks or weaknesses identified through the course of our analysis. 
The Outcome

Our IP due diligence revealed some major commercial risks that were critical to the deal:  

  • some patent filings that were critical to the Target’s business, had been entirely omitted from the transaction, and in some instances abandoned but left with a generous grace-period for resurrection.  This was a significant risk that undermined the Target’s (and our Client’s) ambition to grow the business in foreign markets. 
  • a number of the patents proposed for licensing (rather than transfer) were in fact critical to the Target’s business with little value to the parent company’s current operations.  This again left the Target and our Client at risk, especially given that it could result in patents intrinsic to the Target being licensed-out to competitors.   
  • risks relating to ownership including rights to foreground (future) IP that had not been included as part of the negotiations, as a result the Target may lose the rights to foreground IP that it generated on the back of licensed IP.  
  • when we appraised the business continuity of the Target, we uncovered a potential risk of critical undocumented know-how escaping the Target when it closed facilities abroad following the transaction.  What made this a significant concern was that our industry research indicated that a competitor to the Target would likely become the employer of those who were being made redundant.  
  • Probably the most significant risk was around the trade secrets that wholly and fully protected a platform technology which underpinned the Target’s entire business. We found that these trade secrets were not identified, to any extent, within legal documentation as a result there was no clarity as to what trade secrets were being transferred to the Target and what trade secrets could no longer be used by the parent company.  This would leave both sides of the transaction at full risk of trade secret misappropriation – especially since management on both sides was likely to change post-transaction. 

Our IP diligence highlighted the extent and quality of IP being transferred and identified all major IP risks associated with the transaction. We provided viable and practical solutions for our Client to be actioned pre & post transaction to mitigate the risks and delivered recommendations for an achievable timetable for implementation. Our PE client gained full transparency over the critical IP in this Target and was able to confidently address the license/transfer of the IP in its negotiations with the parent company.   

IP Assets Appraised – Patent Portfolio, Trade Secrets, Key Organizational Knowledge, Know-how