Key Players: How IP Lawyers Drive Successful M&A Integration

In the dynamic world of mergers and acquisitions (“M&A”), intellectual property (“IP”) lawyers have proven essential in navigating the web of IP rights and obligations throughout the transaction process. As companies increasingly look to acquire new strategic levers, the expertise of these specialized lawyers has become invaluable, helping to ensure the validity of intangible assets and mitigating potential risks involved.

One cannot overstate the importance of IP due diligence in M&A deals. Blank Rome LLP reports that intangible assets contribute over 80% of corporate value.¹ IP and copyright lawyers take center stage in this crucial phase, meticulously evaluating the target company’s IP portfolio and scrutinizing patents, trademarks, copyrights, trade secrets, and other assets.² Their processes aims to uncover any potential infringement risks, encumbrances, or validity concerns that could undermine the value of the acquired IP assets.³

According to Financier Worldwide, “for a vendor, a structured approach to IP due diligence will maximize the value of its IP assets. For a purchaser, a failure to carry out IP due diligence could result in paying for assets that are worth less than originally thought.”⁴ Further, according to a study, comprehensive patent analysis may be able to predict the success of an M&A deal.⁵

One recent high-profile example highlighting the importance of IP due diligence is Microsoft’s $68.7 billion acquisition of Activision Blizzard, announced in January 2022. With an M&A deal like this, centered on an almost purely IP transaction, Microsoft lawyers must have spent extensive time and resources pouring over trademarks, risks, and the strategic value of intangible assets to Microsoft to assure the company is getting fair value for their payment.

“The impact can be tremendous,” said Constantine Linnik, a seasoned IP attorney. “If diligence uncovers fraud, infringement, or no documented ownership of intellectual property, then the deal may be called off.”⁶

A notorious case of an M&A deal turning sour due to incomplete IP due diligence was when Volkswagen acquired Rolls Royce without realizing that it had purchased the car company without purchasing the right to use the Rolls Royce trademark.⁷ This oversight resulted in significant legal complications, emphasizing the critical importance of thorough IP evaluation in such transactions.

In copyright, transactions involving creative works, software, or digital assets require a specialized, and often seasoned, understanding of copyright law. Copyright lawyers are instrumental in evaluating the ownership and assignment of copyrights, assessing the scope of protection, and identifying potential infringement risks.⁸

IP and copyright lawyers become indispensable advisors as M&A deals progress from due diligence to negotiation and structuring. They assist in drafting and reviewing IP-related provisions within the transaction agreements, ensuring that the transfer of IP rights is properly documented and that the acquirer’s interests are adequately protected. These legal professionals collaborate with the combined entity’s legal and business teams to facilitate the proper integration of acquired IP assets into the acquirer’s existing portfolio, assuring such  IP rights are maintained and enforced, while also corroborating the alignment of IP strategies with the combined company’s objectives.⁹

In the fast-paced world of M&A, where deals can be won or lost on the strength of a company’s intangible assets, the role of IP and copyright lawyers has become increasingly pivotal. Their expertise extends far beyond legal technicalities; they are strategic advisors, risk mitigators, and value creators, essential partners in unlocking the full potential of intellectual property in the context of complex business transactions.¹⁰

As companies prioritize the acquisition and protection of intellectual property, the demand for skilled IP and copyright professionals will only continue to rise, solidifying their position as indispensable advisors in the high-stakes world of M&A transactions.

Eddie Halwani is a Second-Year Law Student at the Benjamin N. Cardozo School of Law and a Staff Editor at the Cardozo Arts & Entertainment Law Journal. Eddie is interested in Intellectual Property and Corporate law. Eddie is also currently the Legal Extern at Jefferies, a multinational investment bank.