If intellectual property of a target company is what drives the acquisition, the IP warranties in the transaction agreement should be comprehensive to protect the buyer’s interests.

The IP warranties in the transaction agreement should include:

1. The target company owns or holds valid licenses for all IP essential to its business operations.
2. The IP is free from encumbrances.
3. All registrable IP of the target company is validly registered.
4. There is no infringement of third-party IP by the target company, and no infringement of the target company’s IP by third parties.
5. All IP created by employees, consultants or third parties has been properly assigned to the target company.
6. The target company will continue to have full rights to use its IP post-acquisition.

In respect of IP licensed by third parties to the target company, legal due diligence should be conducted to review the terms of the license agreement, such as IP ownership, non-infringement, and the license’s validity period, to ensure the target company can continue using the third-party IP without disruption.

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This post was first posted on LinkedIn on 15 January 2025.