Managing Patents Post-business Exit

Rich Goldstein

Founder & Principal Patent Attorney

I know that when exiting a business, it’s almost impossible not to wonder what happens to your intellectual property (IP). You certainly do not want to lose out on what you created/acquired. 

Through years of interacting with inventors in business over several years, I’ve gotten the rundown on various approaches to take in a situation like this. 

In this article, I’ll walk you through handling and managing patents post-business exit. 

Managing Patents Post-business Exit

Exiting a business can be both a relief and a source of concern for many entrepreneurs. While the stress of running a business may be behind you, you’re now faced with managing the assets and intellectual property you accumulated throughout the business’s lifespan. 

Two men sitting at a table, engrossed in their work on a laptop

It’s important to know that protecting your patent does not stop after you exit a business. If anything, the need for protection is now higher than before. To keep your patent secure from infringement, you need to learn how to manage it properly. However, that’s not the only reason for proper management. Here’s a look at more. 

Why Should You Manage Your Patent When Exiting a Business?

Protecting your patent when exiting a business is important for several reasons. Not only does it secure the value of the patent and the asset it protects, it also maximizes the opportunities for future growth and success. The following are reasons it’s important to manage your patent post-business exit:

Preserves Asset Value

Patents protect intellectual property that can contribute significantly to the general value of a business. By managing your patents when exiting a business, you can preserve the value of these IP assets and make certain they continue to benefit the company, even long after your exit.

Generates Revenue

Patents can serve as a source of revenue through various strategies, such as

  • Licensing agreements
  • Selling the patent rights
  • Selling your invention 
  • Enforcing the patent and winning a patent infringement claim 

By managing patents effectively after preparing for a business exit, you can take advantage of opportunities to generate more money through one of the means above. This provides additional funds and assures the business remains strong after your exit. 

Protects Against Infringement

Post-exit, maintaining the integrity and value of patents may necessitate enforcement actions to protect against infringement. Section 271 of Title 35 U.S.C. outlines various acts that constitute patent infringement. 

Get in touch with a trusted intellectual property law firm for advice on how to best protect your intellectual property from infringement. 

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Best Strategies to Manage Your Patent When Exiting a Business 

According to U.S. patent law, the inventor or inventors initially hold the rights to a patent. However, in a business context, the employer may own the rights to an employee’s invention under the doctrine of “work for hire” or through contractual agreements. 

Section 261 of Title 35 of the United States Code (U.S.C.) outlines the general rule that patents are granted to the inventor or inventors. Here are some of the best strategies you can employ to manage your patent when exiting a business.

Sell Your Patent 

Selling your patent is a valid option, especially if your exit strategy is selling your business. You can either sell it to the same person or another buyer. This sale can provide a lump sum of cash upfront, offering immediate liquidity and a clean break from your business. 

Before selling your patent, there are certain steps you can take to make sure you get a favorable deal. They include: 

Valuation

Conduct a thorough valuation of your patents to determine their fair market value. Consider factors such as the market demand, scope, potential for future revenue, and the uniqueness of the product. 

Identify Buyers

Look for potential buyers who may be interested in acquiring your patent. This could include patent aggregators, competitors, or investment companies.

Negotiation 

Negotiate with potential buyers to secure the best possible deal for your patents. If you can, make sure you negotiate for upfront payment, royalties, and a chance for future collaboration.

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Legal Assistance

Whatever you do, make sure you have the backing of an IP attorney when selling your patent. They are sure to help you navigate the complexities of patent sales and protect your interests throughout the process.

License the Patent 

Assignments and licensing agreements play pivotal roles in managing patents post-business exit. Section 261 of Title 35 U.S.C. governs the assignment of patent rights, specifying that assignments must be made in writing and signed by the parties involved.

As with selling, you will also have to conduct a valuation of your patent before licensing it. Furthermore, you may want to get legal help in drafting a patent licensing agreement that details the terms of the license, including its: 

  • Scope
  • Duration 
  • Territory 
  • Royalty rates
  • Payment schedules 
  • Termination clauses
  • Exclusivity
  • Quality standards 
  • Fee

Keep the Patent

Retaining ownership and control of your patent can be beneficial if you intend to start up new ventures after exiting your business. Keep in mind, however, that the reason for your exit plays a role in determining whether you get to keep your patent. 

For instance, if you are exiting your business due to bankruptcy, you may need to surrender your IP for sale to pay off your creditors. 

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Related Questions 

How Do You Maintain a Patent?

To maintain a patent, you have to pay annual maintenance or renewal fees to your national or regional patent office. This means you must regularly monitor renewal deadlines and make sure payments are made promptly to keep the utility patent in force.

Can a Lawyer Help With My Business Exit Strategy?

Yes, a lawyer can help with drafting and executing your business exit strategy. Getting legal help from a qualified law firm will allow you to navigate the complexities of leaving a business. It will also guarantee that your interests and that of the business are protected throughout the process. 

Can I Still Benefit From My Patent After I’ve Sold My Business?

Yes, you can still benefit from your patent after selling your business, depending on the terms you negotiated during the sale. For instance, you can retain your rights to receive royalties from the continued use of your patent by the new owner. Alternatively, if you retain ownership, you can choose to use the patent in future business ventures. 

Conclusion 

Managing your patents after leaving your business exit is important to guarantee their continued value. Whether through selling, licensing, or retaining ownership, you must carefully consider your options to maximize the benefits of your patents. Make sure you get legal advice from a qualified IP law firm. 

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