《IP due diligenceMake it strategic》.docVIP

IP due diligence: Make it strategic Posted on December 15, 2007 at 3:15 PMFiled under: 2007 | Best Practices | Intellectual property | Nov.-Dec. 2007 | The Magazine Tagged: competitive intellectual property , corporate dealmakers , due diligence , intellectual property , patents , private equity , strategic , strategic IP , SWOT 窗体顶端 窗体底端 A medical devices manufacturer was seeking a large amount of expansion capital, and the investment looked attractive. The company had received Food and Drug Administration approval of its diagnostic system, which would allow it to enter a $1 billion-plus womens health-market segment. Major distribution agreements were in place. Attorneys for the potential investor completed due diligence on the companys intellectual property in the traditional manner and found it had valid, enforceable patents covering its core technology -- the diagnostic system. They also completed a product-clearance search and rendered a favorable freedom-to-operate opinion; the system did not appear to infringe the patents of others. But a green light to invest was not in order. A more comprehensive look at the companys IP position identified significant business risks. The business plan and financial statements indicated the company was pursuing a razor-and-blades business model whereby the diagnostic system would be sold at or near cost and the main source of profit would be high-margin consumables. Yet there was minimal IP protection of the consumables or of the way the consumables interacted with the diagnostic system. Competitors could easily enter the market with cheaper consumables and take advantage of the companys installed base of diagnostic systems. Whats more, the company had not filed any additional patent applications for several years. Interviews with the senior management team revealed that the founder-CEO -- the main inventor -- was increasingly occupied with running a growing business. The company had missed many opportunities to prot