From Innovation to Business and Beyond
All Transactions Are Technology Transactions
Today, targets’ technology assets form more often the key drivers for mergers, acquisitions and joint ventures. Business critical technology assets have a fundamental impact on the deal dynamics. Proper intellectual property management of such assets (or the lack thereof) may make or break the deal.
From Innovation to …
1) … Implementation and Intellectual Property Protection
Digitalization and sustainability objectives accelerate development of new technologies across all industries. Thanks to online banking and mobile wallets, long in the past appear the days when one actually had to stand in a bank queue. Online-experiences challenge offline experiences as innovative solutions transform every aspect of our lives at and off work from shopping behaviour turning mobile-first (who still has time to brows racks at brick and mortar shops?) to the way we track our health, physical performance and recovery. But how to spot the hidden opportunities from all of the innovations that warrant investments and attract funding inevitably required by further development and implementation of the innovations? For sure, instinct for innovation is required to successfully path the long way from an idea or innovation to implementation and commercialization. Technology lawyers have a crucial role in providing strategic legal advice for development of disruptive technologies. One has to decide early on whether to seek intellectual property protection for the results of R&D or whether to rely on non-registered IP or even to make an informed decision to keep the asset trade secret and build other safeguards to protect such proprietary information.
- Is the technology sold, licensed or provided as a service?
2) … Commercialization and Business
A great innovation, even if it has potential for becoming the basis of disruptive technology and is eligible for IP protection, may remain worthless, if it cannot, for one reason or another, be properly brought on the markets in saleable form and reach the target audience. In order for the innovation to sell, there must be a proper business plan addressing the opportunity and its execution. It may appear simple, but one must really understand how to operate within the ecosystem: who are the direct customers, distributors, end customers, where does the revenue come from and what infrastructure should be built in order for the plan to fly. One of the most interesting, yet also challenging tasks for technology lawyers is to support businesses going disruptive and design the actual terms and conditions for releasing the technology on the markets. Is the technology sold, licensed or provided as a service? Who owns the rights in intellectual property and proprietary data? How to protect cash flow while managing the underlying business risks? Going global mandates also compliance with wider regulatory landscape.
3) … Unicorns and Technology Transactions
If the business takes off and is – or has potential for being – augmented by a steady stream of revenue, related technology assets may become lucrative targets on the M&A markets. However, the importance of proper scoping the technology assets and related intellectual property rights to marketable entities cannot be overemphasized. Standalone acquisition of technology, without proper packaging, including properly carved-out ancillary IP rights or the team of key employees, may result in a relatively fast failure and abandonment of the technology after acquisition, while in case of a carefully crafted scope, the technology could become the basis for a smash hit. For the same reason, both sellers and buyers should actually know the IP landscape of the technology assets subject to the transaction, including software (whether proprietary, open or free software) potentially eligible for protection under overlapping IP rights. Overtime technologies come and go, which is why the duration of copyright protection for software assets is miles too long. However, ramping down technologies makes room for new ones. Still, at the time of closing, there is usually a fair expectation of a successful acquisition. Only time will tell what the life cycle of the acquired technology assets will be.
This article is originally published in D&I Quarterly Q3/2019. D&I Quarterly brings together a selection of D&I’s experts’ articles published at D&I Insight, our platform for insight into all the latest in law and business.
photo: Wilmer Martinez, Unsplash