Hello. My name is Stefan Golkowsky. I'm with the German patent law firm Pfenning, Meinig & Partner, PMP based in Berlin, Munich, and Dresden. I'm a German and a European patent attorney, and my main fields of business are patent prosecution and patent litigation.
Today we'll talk a bit about different aspects of IP acquisition. In the following, we'll talk about choosing a method of acquisition, and let's start with a brief overview. So we have different types of acquisitions. First of all, the asset deal, where we only take over the pure assets, only the IP rights and no further liabilities from any corporation. The subject matter of the due diligence is clearly defined and so this is maybe the easiest way to have a due diligence. Of course if the assets are sold, it is mostly necessary to also register the change of ownership for the single IP rights. This involves costs but is somehow necessary. The second option is a so-called share deal where you take over, for example, a complete corporation with all its liabilities. The advantage is that you don't need to wind any remaining corporation—you sell all you have—the complete corporation, and often it's not even necessary to apply for a change of ownership for the IP rights in the official registers. The last option is a merger, in which two corporations somehow merge so are melted together and the pros and cons are quite similar to a share deal.
Okay, let's move on with the due diligence aspect. As soon as we have agreed on a certain type of acquisition, for example an asset deal, you then have to consider the scope of the due diligence, so check what the IP rights are really worth and there are several options to conduct such a due diligence. First of all, this can be an extensive due diligence by the buyer, and prior to the deal, we normally get lists from the seller relating to the IP rights and then check these data sets with the official registers. If questions arise, we pose these to the seller and so we all get a good impression what the IP rights are really about. There is also another strategy to cope with this question and this is just to have the seller give you specific guarantees prior to the deal. If some of the statements made in the contract are not correct, you can then afterwards approach the seller and renegotiate if necessary. However, we normally recommend to always have an extensive due diligence by the buyer maybe combined with some guarantees by the seller.
The next question is the exact subject matter of the due diligence so what has to be checked, which questions have to be raised and relating to patents and trademarks just in a nutshell—these are a few of the following questions. First of all, are the IP rights existing? Are the IP rights valid and not only formally but also in terms of content. So formally could be are the annuities paid, are they really enforced, and in terms of content just to briefly check if the scope is 0 or if there's something special about the scope. The next question which could be raised, especially in charity deals, is there freedom to operate for a certain marketed or hypothetical product? So normally, if you have IP, you of course want to have your own product covered just to give you the opportunity to sue third parties who copy your product but also the freedom to operate aspect is very important so the question: Does the marketing of your product infringe third parties patents or trademarks? So this is a very sophisticated question and you should at least briefly address this question and in this context, it's always advisable to get guarantees by the seller prior to the deal but often this is not possible so you should check the situation on your own just to avoid any surprises afterwards. Relating to trademarks, you can also check if these infringe older trademarks of third parties. This normally involves the questions if there's a similarity of signs, if there's a similarity of goods and services, and there are very good databases available today, which give the buyer the opportunity to briefly check these aspects prior to the deal.
Now we'll talk about the subject matter of the FTO relating to patents. It's important to clearly define the subject matter of the FTO so you won't get lost in a bundle of documents. First of all, you have to analyze a certain marketed or hypothetical product. The idea behind this is that you want to make sure as a buyer to have the opportunity to freely distribute your product after the deal and so you really have to know what product you're looking at before starting the FTO. Normally it's crucial to elaborate certain key features which somehow define this product and which are essential. So nonessential features are not that important because you can have a redesign related to these but you have to define certain key features which are really essential.
In the next steps, you conduct a patent search or any other documentation, if the whole product or at least the combination of features are mentioned in documents that are more than 20 years old. Normally we'd use databases, often pay for databases such as total patent by LexisNexis, but it's also possible just to search by using Google, and you might even consider a picture search. So you feed a certain picture into Google of a certain product and it throws out similar products, and this is also often a hint for any prior art. So if by any search you get something that's older than 20 years, you might already have freedom to operate, and the good thing is that you can sell this product as you want but the bad thing might be that you are not the only one who may do this because it might not be possible to have patent protection for this product. If you don't find a freedom to operate document, then you have to conduct a refined search and you can use several search strings. For example, you can consider assignees, so you'd use the names of your main competitors, you can consider a patent classification searches and there are several patent classifications used in Germany. There's one by the German Patent Office. There's one by the European Patent Office or there's also now the so-called CPC, the Common Patent Classification, which is used by the USPTO and the EPO, although this is not always really up-to-date, but you have several options. You also can consider content-related keyword searches and mostly we use a combination of all these search strings and you can always check several search strings and the outcome associated therewith if you then melt it down to say 100 documents that are to be considered, then this might be the right scope. If you have too many documents to be considered–several thousand documents—then it will get tough to have an opinion on each of these. If you just have a few, you might run the risk that you have missed patents that might be important. So at the end of this refined search, you will come up with a few documents, a few older patents by third parties which have to be investigated. And normally you ask your patent attorney to write brief opinions on these documents and this is if the buyer does a decent freedom to operate investigation. This is also often the measure to renegotiate about the money because if you can show that there is no real freedom to operate and you might have to ask for a license of a third party, then this is a good point for the buyer and it's important that he knows this prior to the deal.
Finally, in the annex, we have summarized a few web links which are very useful. For example, you can do searches at the German Patent and Trademark Office, you can use the European Patent Office with its espacenet or we mostly use a paid-for database—it's Lexis-Nexis TotalPatent, which has very sophisticated search strings available. If you have to check the trademark infringement situation, you can also start with the German Patent and Trademark Office. As an alternative, you can use the OHIM, the Office for Harmonization in the Internal Market database, so this is the European Union's Trademark and Design Office, or you can also use a pay-for database, and we mostly use Thomson Compumark SAEGIS. It's really easy to use and you can search the whole world with just one click.
Okay. So this was a very brief overview of choosing a method of acquisition.