Intellectual Property is one of the ways a company can stand out from its competition. Having legal protection for an idea, a symbol or a marketing phrase can add value to a transaction. Would you buy McDonald’s without the Golden Arches? Would you buy Nike if you could not use the swoosh? What about buying Subway without the right to use the phrase “Eat Fresh”?
There are two potential issues here – do you actually own the IP and if so, what do you own?
Beacon had a client who hired independent contractors to create voiceovers that were resold to customers. The client had no formal agreement with the contractors leaving open the possibility of a claim by the creator of the voiceover that they owned the finished product since it was their voice. In the years leading up to sale, the company created an agreement with the voice talent giving the company clear ownership of the intellectual property. The existence of these contracts provided comfort to the buyer that the company clearly owned what it was selling.
In some cases a company may share IP with another party, perhaps a college that collaborated on the creation of a technology, a subcontractor who created a software program for the company or an individual with whom the company shares royalties. These arrangements are quite common, and mutually beneficial, but they will raise concern in a deal.
These agreements should be reviewed with an eye towards selling – are there restrictions, rights of first refusal, or onerous fees or burdens placed on the sale. Are there future commitments in the current agreement the buyer needs to be made aware of as part of the bid process?
The intellectual property a company owns is an important part of its value. Owners should be careful to protect it so it can be smoothly transferred to a new owner.