IP Business Moments

Accelerate by Working with Investors and Buyers

On this moment
Maximize opportunities with investors and potential buyers while safeguarding your IP assets.

Key takeaways

  • Be clear on what IP you use. Know if you own it or just have the right to use it.

  • Be prepared to prove you own your IP. You should have agreements establishing that these rights belong to you.

  • Make sure you protect your company as it grows. Try to negotiate ownership of key IP rights so you can build on what you have created.

  • Make sure key agreements, especially licenses can transfer if you get acquired. You may need to negotiate to secure these rights.

  • Learn to tell your IP story.

What investors want to know before investing in your IP?

There are several things that an investor needs to know and make sure of prior to investing, usually done in the Due Diligence phase.

This includes analyzing your IP current situation to assess its value,

liabilities, etc., so make sure you can answer at least the following:

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What IP assets are you using?

Do you own them? Can you prove it?

Are there any restrictions on their use?

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What contracts do you have related to IP?

Will a buyer be able to use the IP assets? Many

agreements limit transferability or require permission.

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Are you using someone else’s IP without

permission?

Acquisition by a larger company can compound risk.

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Do you have IP rights in key markets?

Generally speaking, IP rights are only valid in the

markets where you’ve secured protection.

Proving you own your IP

What you think is your IP may actually belong to someone else. Have you taken specific steps to get IP assigned to your business?
Here are some scenarios and recommendations to address each:
  • IP contributed or developed by a founder needs to be formally assigned to the company. Put contributions in writing now if you haven’t already.
  • Generally speaking, the IP generated under an employment agreement belongs to the company, however, this must be made clear in the corresponding agreement. Make sure that it includes an IP rights clause, and that every employee or collaborator signs it. If you have priorly hired people without taking this into consideration, make sure to regularize for current employees and get past employees who created critical IP to assign it to the company in writing.
  • If you hired someone, either a freelance, contractor, supplier, agency, etc., to create or work on an IP asset of your business, consider that you should priorly agree on the terms of the resulting deliverable and set those in the agreement. Usually, the IP rights belong to the company that commissioned the creation or development, however, this depends on what was agreed upon and the type of IP right, as well as the specific industry practices.
  • If you hired someone without setting these terms and the IP is critical to your business, you should look up to try to secure those rights in favor of the company.

How to transfer IP to a new company owner?

Many agreements do not transfer to a new business owner automatically. You may need to take certain steps to transfer it.
For this, you should look at your key agreements with customers, suppliers, and partners to see what’s required. Usually, you may need to:
  • Tell the other party in the agreement about the transfer within a certain time frame, and/or ask permission to transfer the agreement in all cases or to certain parties like a competitor.
  • If the agreement does not transfer automatically, you may need to negotiate with the other party, considering:
    • Asking the buyer of your business for permission to reveal information about the potential sale
    • The needs of your business and its new owner when finalizing terms.
In case you have IP license agreements, especially when you're the licensee, you need to pay special attention to the scope of your rights in case the agreement gets transferred. Take care of checking the limitations of the license (certain product lines, technologies, geographies, etc.), as well as making sure that the scope of the licenses match how the business plans to grow, or the buyer plans to use the IP.
If the way you or your buyer plan to use it doesn’t match your rights in the agreement, you may need to negotiate with the licensor.

Tell your IP story to potential buyers or investors

Be ready to explain how IP impacts your business strategy to potential buyers or investors.
There are two main dimensions to craft and tell your IP story:
The first is under the competitive advantage storyline, where you need to prove how your IP helps your business to outstand over the competition, either you use it as a barrier of entry, to enter new markets and line of business, to maintain your position, etc. Try answering some of these questions:
  • How does the IP you own protect your market position?
  • How was your company’s IP developed?
  • Do your competitors have similar IP?
  • What does your IP prevent your competitors from doing?
  • Is anyone else using your IP?
  • Do you use third party IP and will you continue to have the rights to it?
  • Are there any restrictions on the IP you use?
  • Does your IP have value to others outside your business?
Another component of this story is to identify possible risks related to your IP and how you are working on or planning on mitigating them. You can follow these examples:
  • How are you safeguarding your IP?
  • Do you have the following?
    • Employment agreements
    • Confidentiality agreements with suppliers, partners, customers
    • Cybersecurity measures
  • How do you know that you are not using third party IP?
  • Are you complying with the terms of your existing agreements?