Due diligence in M&A transactions aimed at IP

At a time when artificial intelligence (AI) is making monumental strides, technology and intellectual property (IP) hold the key to victory in business competition. General legal due diligence for any business entity transaction usually involves a comprehensive investigation into the legal aspects of a target company, including its history, relevant qualifications, material assets and liabilities (including intellectual property assets), external guarantees, material contracts, affiliated relations, tax payments, environmental protection performance, and litigation and/or arbitration.

In due diligence for M&A transactions aiming at IP, experienced investors will separately engage IP counsel to look into such IP-related issues as trademarks, patents, know-how, copyright and trade secrets that an investment project may involve.

They may even hire technical experts to work alongside their IP counsel with regard to key technologies involved. This is critical in technology-intensive investment projects. The following three basic principles should be adhered to at all times when such IP due diligence is being conducted.

Zhao Lihui is a partner of East & Concord Partners, and Zhang Changdan is a PhD in civil and commercial law at the Renmin University of China