Intellectual Property Issues in the Sale of Business :

When preparing to sell, many business owners think that their business doesn’t have or own any intellectual property unless they have gone through the process of registering a copyright or trademark or procuring a patent. However, items such as domain names, trade secrets, and the special know-how of a business constitute intellectual property which have value and for which the business and/or business owners have rights. Additionally, items such as third-party licenses (Microsoft Office, for example), IT maintenance and support contracts, and web-hosting and development contracts also constitute valuable intellectual property. Proper consideration and handling of these items matter greatly in the sale of a business, as failure to consider or handle them properly can cause problems for the seller at the front and back end of a sale transaction.

Understanding how intellectual property rights are involved with mergers and acquisitions is essential, given how merger and acquisition (M&A) activity in the intellectual property field has come to dominate, both in volume and in value, merger transactions generally. This situation was true in the 1990s, and it is still true now. The driving force behind a majority of mergers completed during the past decade has been the acquirer’s desire to obtain the target’s intellectual property assets.

Much of M&A activity takes place when a company wants to obtain the economic benefits of consolidation in a particular industry and it goes out and starts buying its competitors. In the health care industry, for instance, hospitals continue to merge to acquire the economic clout necessary to force insurers to increase their coverage payments to the hospitals.