Intellectual property (IP) is a term typically used to describe creative or innovative concepts by individuals which are legally protected. This would often include inventions protected by patents or brand logos safeguarded by trademarks. From M&A to joint venture agreements, it is clear that IP exerts remarkable influence when it comes to negotiation strategies or deal valuations. IP therefore plays a major role by determining a company’s value or facilitating profitable deals.
Why IP Matters in Corporate Deals:
IP is considered important in corporate dealings because it is regarded as one of the most valuable assets of a company. For example, a company’s patent may potentially protect their innovative products from other companies who might steal their concept for their use, or the use of a trademark can help customers identify their brand. When a company enters negotiations to buy another company (this process is called merger or acquisition), it scrutinises the IP to define the company’s value and whether it is worth acquiring.
For instance, one example we can consider is the importance of IP by glancing at Google’s purchase of Motorola Mobility in 2012 for $12.5 billion. It is evidently clear that Google considered Motorola Mobility as a valuable competitor in their shared industry as Google did not just want Motorola’s phones but also wanted their patent. The reason Google wanted the patents was not because Google insisted on dominating the market. Those patents essentially helped Google defend itself in lawsuits and remain competitive in the smartphone industry. Another example is Disney’s purchase of Marvel Entertainment in 2009. Marvel’s intellectual property consisted of characters such as Iron Man and Spider-Man. Disney acknowledged the potential of these iconic figures and gave Disney the opportunity to create successful blockbuster movies and merchandise surrounding these fan favourites.
This further demonstrates how a beneficial purchase of IP can be converted into generating long-term profits when dealt with properly.
Use of IP in Partnerships
Another way in which IP is directly involved in corporate transactions is through sharing confidential information in a partnership. This can include companies working together through a collaboration or a joint venture, instead of simply merging. In a collaboration or where IP is being shared through a partnership, both companies must decide on who will own the IP they form together and how they will benefit from sharing this IP. For instance, in 2020 Pfizer and BioNTech partnered together to develop COVID-19 vaccines, but this partnership also included agreements about patent rights and profits. This allowed both pharmaceutical companies to succeed through this agreement whilst protecting the value of their innovation amid the pandemic.
Checking for Risks:
Though certain IP agreements can be positive for both parties, it does not mean all IP dealings are risk-free. For instance, during corporate deals it is expected that the buyer’s lawyer does their due diligence to ensure that the IP is owned by the seller and the trademark or patent hasn’t expired yet. A notable example of these risks can be viewed in the purchase of Oculus VR by Facebook in 2014. After this purchase, Facebook faced legal troubles after claims came forward that Oculus had stolen technology from other companies. Though Facebook won the lawsuits, it highlights the importance of making sure to do due diligence to check for any potential IP issues before completing any deal in order to avoid legal disputes.
Conclusion
IP is an invaluable tool that may be used by businesses to add major value to their operations. Therefore, understanding the concept of IP and its impact is crucial for both students and professionals if they are interested in a corporate career.
Key Terms:
Patent: A legal right that protects inventions
Trademark: A symbol, name or design that identifies a brand
Copyright: A law protecting original works of writing, and other artistic creations
Due Diligence: A detailed review to make sure everything in a deal is as it seems
References and Further Reading:
“Top Intellectual Property Issues to Think About in M&A Deals” ( Gibson Dunn)
“What is Intellectual Property”(WIPO)
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