IP: Don’t let intellectual property be the deal breaker

Prepare your IP assets early in a deal to avoid last-minute headaches

In today's economic climate, mergers and acquisitions are rarer than they once were, and a deal can falter if the target company has not properly dealt with its intellectual property assets. But for companies with the right offering and the right IP, the opportunities still exist. Just ask the founders of 2-year-old Instagram, which was recently acquired by Facebook for $1 billion (pending Federal Trade Commission approval).

Instagram enables users to easily manipulate their digital photographs to create a retro-looking image. That requires software, in which intellectual property subsists. Of course, the enormous sum Facebook offered wasn't just for the software. For Facebook, the attraction was likely to be more in the engagement levels of Instagram's growing social network. Facebook identified that Instagram's model, based on users sharing photos, could potentially compete with Facebook if it remained independent, but could also enhance Facebook's offering if bolted on. That made it an irresistible proposition.

Have all employees and freelancers signed contracts that transfer relevant rights to the company? What about any intellectual property created by customers (such as Instagram's army of photographers)? It may not be appropriate for the company to own that IP, but it will need a license to use it.

The customer database is itself an asset and it is essential, therefore, to obtain appropriate consents. In Europe and other jurisdictions that recognize database rights as sui generis intellectual property, you also may need to look at how to obtain protection for that. 

Contributing Author

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Robert Lands

Robert Lands is head of intellectual property and media at Central London law firm, Finers Stephens Innocent LLP. He specializes in intellectual property and related...

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