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HGF: Get your ducks in a row, and the money will flow.

By Elliot Stephens

Are you preparing for your next investment round? We know that there is a lot to think about, but having your IP investment pack ready early should be high up on the list. Prospective investors will always ask questions relating to your IP portfolio, and it is important to handle them promptly and efficiently. Often, the best way to prepare for due diligence is to pre-empt the difficult questions and to have your answers and documents prepared in advance.

Perhaps most importantly in Series A fundraising, you should demonstrate that you are “IP savvy”, and have all of the relevant documentation to hand. In particular, you should develop, and document, a policy on how your company identifies and protects your innovative concepts, designs and branding. Ideally, this should assume the form of a clear internal procedure, including how new designs and inventions are identified, how your future products are marked and branded, as well as how arising IP is documented and protected. If you have any other developed IP strategies, such as patent filing strategies, these should also be included as part of the pack.

It is also important to collate and document all of your registered intellectual property rights – including both patents and trade marks – as well as any applications that are pending. These should be summarised in a single report which provides a quick overview of what is protected, in which jurisdictions, and the duration of protection. Any published documents – including patent applications, granted patents and trade marks – should also be made readily available to accompany the report. Additionally, it is good practice to collate any documented know-how and trade secrets into a centralised register for ease of review.

Another important aspect is a clean chain of title for all IP rights. IP assignments, employment contracts, terms of business, and joint development agreements should be collated and documented to demonstrate ownership for each piece of IP – whether it is registered or not. The documents should be signed by all relevant parties, and should also be dated. It is also good practice to centralise all information in the form of an assignment or ownership register – which allows future investors to quickly understand that you have been diligent in this respect. The register will also allow you to identify any unassigned IP, which you should review and rectify ahead of seeking investment.

The questions of “do you monitor your competitors?“ and “what does the FTO position look like?” shouldn’t catch you off guard. Although your investors will want to undertake their own diligence, it is best to do your homework by reviewing your competitor’s IP rights and the overall IP landscape in your technical area. Usually, a summary of your freedom to operate position – including high level commentary on results of any third party IP searches or opinions – is useful to provide early certainty to investors. To this end, we encourage companies to undertake third party IP searches at an early stage, even if they are brief initial searches. This can include searching for IP filed by direct competitors, reviewing IP on any products commercialised in your technical area, or undertaking a wider freedom to operate search.

On a final note, we encourage companies to ensure that your house is in order at an early stage, as your prospective investors will thank you for it. An audit of your IP policies, strategies and documentation is important ahead of an investment round. It is often useful to collate all of the relevant information at an early stage, so that you can quickly prepare your answers to the more difficult questions during due diligence. Additionally, by preparing your IP investment pack early, you can identify any risks and mitigate them before discussions with your future investors. We know how important it is to close the deal as soon as possible, so remember: “get your ducks in a row and the money will flow”.

If you need support for preparing your IP investment pack, please feel free to get in touch with Elliot Stephens, Patent Attorney, by email: estephens@hgf.com or telephone: 0191 205 8360.

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