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Getting ready for an IPO

If your company doesn't have the luxury of full-time in-house patent counsel and you are contemplating an IPO, you'll still need to conduct thorough IP due diligence. However, the work will typically be distributed among your company's various outside IP counsel, often times on a piece-meal basis.

Sometimes the company employees distributing the work have a good understanding of patent law and know what to ask for from their outside counsel; other times they do not. While this approach is often adopted out of necessity, there is a risk that important IP issues will go undetected. For example, outside IP counsel may not have been involved in the negotiation and review of various license agreements, collaboration agreements, employment agreements, confidentiality agreements, purchase orders and other agreements to which the company is a party that may have a significant impact on the company's IP position, including the company's freedom to operate. Similarly, there may be gaps or other deficiencies in the company's patent portfolio that need to be considered in positioning the company for an IPO. A second set of eyes is often beneficial in identifying such deficiencies.

For these reasons, a company seeking to go public would be wise to take a step back and perform an objective "big picture" assessment of everything that affects the company's IP position before engaging underwriters.

That includes an assessment of not only the quality and strength of the patent filings themselves, but also the various license, confidentiality and other agreements that could have a potential effect on the company's IP. In addition, the company should take an objective look at any freedom-to-operate reviews that were previously performed and update those reviews for each of the products and services it plans to commercialize. If potential freedom-to-operate issues are identified, they can be dealt with in a timely manner either by obtaining non-infringement or invalidity opinions from outside counsel, obtaining appropriate licenses (if available), or even redesigning the infringing product or service to avoid the patents. All of these things take time, however, and need to be addressed before the IPO process gets underway. Failure by management and the board to identify and address early on the material IP issues facing the company can have a disastrous effect on the company's ability to go public.

Most companies only have one shot at going public. For many technology issuers, properly preparing for the IPO from an IP perspective can mean the difference between success and failure.

Submitted by Richard Gervase, a registered patent lawyer with Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC.

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