[author:Michael Lasky]

The value of your company to a prospective buyer will be affected by whether the new owners have the right to operate and expand the business they are buying.  Intellectual property rights of others, which you may be completely unaware of, often spring up when a new owner, with greater visibility, and perhaps deeper pockets, buys a company.

Therefore buyers conduct due diligence before purchase to minimize their risk, but if they find something wrong, it can be too late or very expensive to fix, and furthermore, it must be disclosed to any subsequent potential purchaser.

If a patent is granted (albeit in error) on your current methodology or product, or blocks your future business expansion, it may destroy the salability of your business, unless you intervene to prevent the patent from being granted in the first place.

A new law, which goes into effect on September 16, 2012, will help protect your business valuation from this patent threat, but it will only work for those businesses which are proactive in using this new tool.

Patents can be improperly granted because the Patent Office is unaware of prior technology –possibly your technology, which you have implemented for years.

If a patent is granted which, on its face, will block your business or its expansion, you have an expensive task of getting it invalidated.  Until it is invalidated, no buyer will touch your company because of the risk that they may be buying a lawsuit. Patents last 20 years, so “waiting it out”is not an option.

The new law gives you the right to inform the Patent Office of evidence which would block issuance of patents.  The procedure is far simpler and cheaper than a lawsuit, but because the window to activate the procedure is very narrow and the only way you will discover a problematic patent application in time, is to start an ongoing Patent Competitive Intelligence program.   

The Patent office program works like this: You watch for the publication of patent applications before issuance (competitive intelligence), either in the categories of your interest, or by a competitor’s name. If you have documents which would tend to prove that the patent should not be granted (or its scope should be narrowed), you can submit the documents and they will be included in the evaluation of the patent application grant.

If however, you miss the window, (which closes at the first examination of the published application), or 6 months from publication, whichever is later), the Patent Office will totally refuse to consider your submission. Then you must disqualify the patent by various other, and much more expensive, procedures.

Even if you never have to intervene in any patent application process by this procedure,   a patent competitive intelligence program can be extremely valuable as you will get an early glimpse of your competitor’s R&D plans well before they are made public.  Either way you win, but only if you are proactive to prevent problems which may later threaten the value of your business.

Burr & Forman team members are happy to help you set up a Patent Competitive Intelligence program within your company and answer any questions you might have about business succession. Contact us today for more information.