When acquiring another business, the goal may be to access new facilities or expand the pool of talent staffing a company. Other times, the goal may be to acquire valuable intellectual property.
Patents, copyrighted materials and even trademarks can give a company a competitive advantage. Trade secrets can also help make a company profitable. During the due diligence stage of a planned startup acquisition, business leaders may need to look into intellectual property (IP) assignments within employment contracts to ensure that the company they acquire holds the rights to the IP they deem most valuable.
IP oversights are common during acquisitions
Small businesses and startups often use template contracts instead of working with an attorney to draft custom agreements that address the specific needs of the organization. As such, the contract eventually signed may not adequately address every legal concern that a custom contract might, such as the ownership of IP produced during a worker’s tenure with the company.
An employment contract with a creative professional, for example, may fail to adequately address the legal ownership of any original creations during their time at the company. That could then lead to controversy regarding who actually retains that IP after the sale of the company and that worker’s prospective exit from the organization.
Determining what rules are in place for an organization’s intellectual property can play a key role in the due diligence stage of a planned startup acquisition. The guidance of an attorney familiar with complex business transactions is critical when preparing for a major business transaction, such as an acquisition or a merger.