How Due Diligence Analysis Drives a Negotiation

By on December 1, 2015

John M. Fleming, Banner & Witcoff Ltd.

Due diligence allows parties to a negotiation the opportunity to drive the assigned value of assets up or down. Confidential, or often shielded from certain entities, a due diligence analysis can have an enormous impact on the negotiation process.

Patents present unique due diligence issues. A seller should approach the sale from the perspective of the buyer. What will a buyer want this for? Which industry will be most impacted by this asset? This is where an infringement due diligence analysis can be a real benefit for a seller. Sometimes a seller may prepare generalized claim charts, showing a potential buyer how the patent claims stack up as a way of illustrating the patent’s value.

A buyer should be concerned with enforcement and the potential to go after another entity. Thus validity is an important factor. A validity diligence analysis can inform a buyer about prior art that is not of record and may affect eventual enforcement.

Similarly, a buyer should assess the potential for infringement action against a third party, whether through charts provided by a seller or independently.

A buyer can seek to drive down the cost of an acquisition by discussing the weaknesses with the seller, without divulging their potential correction or removal in a pending application.

In most cases, a broad view of the positives and negatives in a portfolio offering, derived through due diligence, should steer negotiations on both sides of the deal.

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Today's General Counsel

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  1. Pingback: John M. Fleming discusses how due diligence can affect the negotiation over patent assets in Today’s General Counsel | Banner Witcoff

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