Acquisition of IP assets in bankruptcy
Currently, due to the Covid19 situation, Norwegian businesses experience challenging times, which may lead to bankruptcies. In addition to physical assets, a bankruptcy estate also sells off the bankrupt company’s intellectual property rights (IPR) and other IP assets. Here, there are bargains to be made; however, great caution is required.
In the event of bankruptcy in a company holding IPRs, the bankruptcy estate wants to sell these rights to the highest bidder. The sale of such rights can either take place as part of a larger transfer of the entire portfolio of company assets, or through individual sales. The bankruptcy estate will not provide any guarantees concerning each asset, and often has limited detailed knowledge. Thus, the IPR is bought at the risk of the purchaser.
Uncertainty about value of IPR
As assets, IPRs, and IP in general, occupy a special position by being far more difficult to value than more traditional assets such as real estate, inventories and machinery. This opens both for very good purchases – and at the same time for higher risk. This applies to, among other things, IP assets such as customer lists and databases, and to IPRs such as trademarks and patents.
The bankruptcy estate will work hard to obtain the best possible knowledge of the assets to ensure the correct and best possible prices for these assets. The insolvent company’s former owners and participants are also obliged to provide the bankruptcy estate with as good and correct knowledge as possible. However, the uncertainty concerning value of IP will remain high. For example, the company’s former owners and participants will often have a vested interest in underestimating the value of the assets to be able to buy out the intellectual property rights at the lowest possible price. The bankruptcy estate will usually have limited time and resources available. In practice, what often happens is that IPR is sold at the highest bid.
Knowledge is the key
If a competitor or a company with complementary technology files for bankruptcy, this might constitute a rare opportunity for your company to secure and strengthened IPR and technology at a low and predictable cost.
The key to making the right choice is good knowledge of what you are purchasing, both from a technical, marketing and legal perspective. Should your company wish to purchase IPR from a bankruptcy estate, we recommend that you consult with your advisors to obtain the best possible understanding of these assets.
Firstly, your advisor will be able to provide an overview of which trademarks, patents and the like, which are registered with the bankruptcy estate. Normally, the advisor will be able to provide an overview of all trademarks and patents before the bankruptcy estate has made these available for purchasing. An early overview will provide a head start relative other potential stakeholders.
Furthermore, the right expertise will secure and provide firm knowledge of the technical and legal limitations of patents for determining their value for the company, and thus the basis for a prizing range.
Moreover, a good advisor will be able to provide strategic input on how to manage the rights. In some cases, for example, the company’s interest may primarily be to remove the patent as an obstacle – not to enforce it. In this way, it may be appropriate to ensure that the patent is not bought and make sure it expires, or to cooperate with others with the same interest in purchasing the patent and then to license it freely or as part of a patent pool.
Together with the company’s knowledge of the market, Onsagers, with its technical and legal expertise, may facilitate a well analyzed strategic purchases and enhanced competitive advantages. We are ready to set up a video meeting and contact you to make an appointment, if you use our contact form or contact one of our consultants directly.