Purchasing a Patent – Patent Purchase Agreements (Part 3 of 3)

When purchasing a patent asset, your patent purchase agreement will need to cover a number of terms, to ensure you’ll have everything you need at the time of purchase, and that you won’t need to go back to the seller at a later point.

Examples of such terms include (1) proper and complete patent listings; (2) provisions ensuring inventor cooperation; (3) built-in due-diligence windows, if needed; (4) explicitly-recited consideration; (5) properly recited assignment-provisions; (6) an assignment exhibit; (7) other relevant deliverables; and (8) appropriate seller representations and warranties.

In this post, I’ll be discussing (8).

(8) Representations and Warranties

This section is your insurance.  If the seller violates a representation or warranty, you will get an automatic refund, usually up to the amount paid under the contract, pursuant to any likely-included limited-liability section.

Include at least the following representations and warranties from the seller:

–The seller has full power and authority to enter into the agreement and transfer the assets.

–The seller owns all right, title, and interest to the patent assets.

–There are no previous licenses, covenants not to sue, or any other related restrictions to monetize the patents.  If there are, you’ll need to see all prior agreements and ensure your determined target list and market share are still on the table.

–The seller and has no obligations posed upon it by any standards-setting committee.  If there are, just like above you’ll need to be made aware of all such obligation and ensure your determined target list and market share are still on the table.

–If patent owner claimed “small entity” status during prosecution, ensure the claimed status was appropriate and there were no licensees to the patent that were not a “small entity.”  If there is a violation of “small entity” status designation during prosecution, conduct legal research to determine the effect on the patents and your campaign outlook. 

–There is no statutory bar to patentability (e.g., prior sale or disclosure more than one year prior to the priority date of the patent asset).

–The inventor or owner of the patent application engaged in equitable conduct during prosecution, and did not make a material misrepresentation or omission that would affect patentability (e.g., misrepresentations or omissions to the patent office, a court, or standard-setting organization).

–The seller notifies and provides documentation regarding prior notice of infringement given to any third party and any commenced enforcement actions (e.g., any pending litigations?). 

–The seller provides notice of any previous, pending, or threatened declaratory judgment proceedings, reexaminations, post-grant reviews, Inter Partes Review proceedings, etc.

–The patents were not found invalid or unenforceable.

–The seller provides notice of any threats of invalidity or unenforceablity, and the basis for such threats.

–All maintenance fees and annuities have been timely paid on the patent assets.


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