In corporate acquisitions and technology joint ventures, a party may be asked to make certain confidential information pertaining to its business available for the limited purpose of due diligence. This information is provided in order to allow a purchaser or potential joint venture partner to determine whether to move forward with the transaction. Such confidential information is provided in what is known as a “data room.” The purchaser or potential joint venture partner’s due diligence team—typically consisting of outside counsel and their support staff, in close coordination with their client’s in-house counsel—reviews the contents of the data room to better understand the risk exposure and potential obligations their clients may incur as a result of entering into the contemplated transaction. The specific composition of the diligence team varies depending upon the nature of the transaction, but it is common for teams to include attorneys with varying areas of expertise, including intellectual property litigation, licensing and commercial transactions. And with good reason.

While it is standard practice to disclose any existing or threatened patent litigations in the data room, this historical snapshot of known liabilities may be insufficient for IP specialists to assess all potential patent risks and liabilities. In light of the significant costs associated with patent litigation and the potential for injunctions banning the sale of products and services, evaluating exposure to patent litigation or licensing demands is a critical aspect of due diligence. IP specialists armed with knowledge of the underlying transactional goals can expose additional IP risks by reviewing information outside the data room.

Litigation Risks

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