DUE DILIGENCE

FRANKLIN PIERCE LAW CENTER

17th ANNUAL ADVANCED LICENSING INSTITUTE

Concord, New Hampshire

Wednesday, January 7, 2009

By Ronald I. Eisenstein

Nixon Peabody LLP

reisenstein@nixonpeabody.com

WHAT IS A DUE DILIGENCE ANALYSIS?

—Assessment of Risks

• Examination of IP

• Ownership Rights

• Mistakes

• What does IP cover?

• Are there obstacles?

—Typically part of a Larger Process

• Analysis of Science

• Analysis of Commercial Success

• Analysis of People

—What is required?

• Think about other types of due diligence

• How big is the deal?

—Who are the players?

• Counsel for both sides

• Scientists

• Inventors

• Management

—Now, Step Back …

• Before you get involved in a Due Diligence do an Internal Audit!

o Check for problems

o Correct problems

o Coordinate IP story with other parts of the company’s story

o Know what to say and what not to say

—WHY?

• Minor IP issues can get blown out of proportion

• Minor mistake can be corrected, e.g., reissue – correction of inventorship, priority claims, claiming issue, payment of maintenance fee

• Opinions can be prepared, expanded, updated

— What Type of Documents Should You Review?

• Schedule of patents, including corresponding foreign applications, continuations, divisionals, (IPs, reissues and reexamination of ownership right?

o Do you have assignments?

o Are maintenance fees paid?

o Are annuities paid?

• Schedule of patent applications, corresponding foreign applications, continuations, divisionals, and CIPs

o Is ownership right?

o Do you have assignments?

o Are annuities paid?

• Licenses and cross-licenses

• Technology research and development agreements such as sponsored research agreements

• Material Transfer Agreements

o Are there restrictions?

• Employee agreements re assignment

• Vendor agreements re confidentiality

• Requests for licenses

• Notices of infringement

• Third Party claims

o Claims of infringement

o Unfair competition

o Brach of confidentiality or non-disclosure agreement

• Prosecution files

• Opinion letters

o Non-infringement opinions

o Invalidity opinions

o Freedom to operate opinions

• Settlement or Consent Agreements affecting the use of IP owned or licensed by the Company

• Product Descriptions

—What Are Some Things You Look At?

• Product Description

o Do you have IP covering it?

o How broad are the claims?

o Do you have freedom to operate?

o What are your competitors doing?

—Third Party Counsel

• Looks at similar things

• Needs to know what the purpose of due diligence is

• It’s a risk assessment situation

• Common sense is really important

—Important:

No deal is without risk – Counsel must understand the risk and place it in perspective.