Due diligence is a fundamental tool for decision makers to evaluate whether or not they should move on with a given transaction. A due diligence report provides valuable information for different levels of reports.

An intellectual property due diligence report can be made for several types of transactions, such as a company merger and acquisition, assets sale, joint ventures and partnerships, licensing and cross-licensing, loans and secured transactions, valuations, among other possibilities.

The difficulty in a due diligence process is to pre-define with your client the scope, what should be reported and at which level of detail. The definition of the type of analysis to be conducted and the level of detail of the report in a due diligence process are the key factors in a successful work.

Some tips for a successful intellectual property due diligence (this is not an exhaustive list):

  1. Understand what is your client's business, the reason why the client wants to get involved in the transaction and ask specific information about relevance of role played by intellectual property rights in the transaction. It is also important to understand the structure of the deal with the corporate team.
  2. Understand if your client knows what is intellectual property, the type of assets/rights the client wants to keep after the deal is closed and obtain general information about the market and competitors.
  3. Prepare a specific checklist for the deal. You can use your general checklist, but it is important to review it in each case, to assure that nothing is missing and that there isn't anything that should be asked in a different way. Also, you should consider the suppression of some of your general requests, depending on the case.
  4. Ask if the client expects additional research/investigation from you, whether in your own country alone or in other ones. Explore with your client what information/work could be obtained in addition to those contained in the data room. Understand your client's cost/budget concerns.
  5. Participate in the kick-off meeting to define the scope, understand the objectives, main issues, structure of the transaction and how the work will be performed.
  6. Select the right team to conduct the work and instruct the team members very clearly as to how the work will be performed, the expectations and the timeframe.
  7. Make sure your questions are clear and addressed to the right person. Sometimes you have to confirm the information with the technical team as well.
  8. Understand how confidentiality will be treated, especially considering the intellectual property information.
  9. Prepare an objective due diligence report. Explore in advance with your client the appropriate type and format of the report.
  10. Be prepared for the next step. If the deal is ultimately closed, work together with the corporate law team to include intellectual property clauses on the agreements, and also define specific representations and warranties and collateral clauses. Analyze what type of agreements will be drafted and whether or not there is any regulatory procedure to be followed.

Despite the complexity and size of the transaction, you should be prepared and work with the right team. Due diligence processes are always challenging, therefore, it is extremely important to have an expert team working on them. Also, intellectual property due diligence should be conducted by an intellectual property team!

Tatiana Campello, Partner at Demarest Advogados - head of intellectual property area.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.