When a company is seeking an infusion of capital, a loan, is involved in merger and acquisition (M&A) discussions, or considering an initial public offering (IPO), invariably an investigation of the intellectual property assets (IP assets) of the company ensues. The entity that represents the source of funds, a suitor or the underwriter wants to be sure that all IP assets, and particularly patent and trademark assets, are assigned to the company, that all such assignments have been properly recorded and that the recorded assignments establish a clear and uninterrupted chain of title to the company.
It has been observed that companies frequently do not pay attention to the housekeeping associated with their IP assets, and for one reason or another, assignments of IP assets have not been obtained or have not been recorded in the USPTO. By way of example, companies frequently are not diligent in obtaining assignments of patent applications from all named inventors on patent applications, do not record assignments of patent applications with the USPTO, or have not obtained and recorded IP assets at the time of an acquisition or merger. Additionally, in transactions which involve foreign IP assets, it is common for companies to neglect to correct or intentionally defer the correction of the ownership records for the foreign assets.
The failure to address the housekeeping associated with the company's IP assets is almost universally a mistake. While it is quite straightforward to deal with such issues contemporaneously when inventors work for a company or when parties exist and recognize the benefit of dealing with such matters, the passage of time frequently changes the landscape. It may become difficult or impossible to locate inventors no longer employed by the company, inventors may die and inventors may become uncooperative if the separation from the company was not amicable. Additionally, it may become difficult to find persons who will execute assignments on behalf of companies that no longer exist. Consequently, developing a clear chain of title to the IP assets, which is almost universally required by the funding source, the suitor or an underwriter, can become problematic. While it is usually possible to address such issues after the fact, it is almost always more difficult and costly.
For the above reasons, it is recommended that companies contemporaneously deal with assignment obligations as they arise. If this has not been the normal and customary practice, it is recommended that a review of the company’s intellectual property assets be conducted to identify and address any matters that have not previously been dealt with. Such a review pays dividends when a company is seeking financing, initiates M&A discussions or is approaching an IPO.