Analyzing IP Strategies in AI and Blockchain M&A: Optimizing Business Value and Innovation
Introduction of AI and Blockchain Technologies in IP Strategies for M&A
The rise of artificial intelligence (AI) and blockchain technology is fundamentally transforming the field of mergers and acquisitions (M&A), specifically in the technology sectors.[1] Companies deal with complex issues related to intellectual property (IP) protection, evaluation, and mitigation, as companies increasingly acquire AI and blockchain firms for acquisition.[2] AI technology make innovative ways for IP-strategy creation and enforcement, but it also brings legal and regulatory challenges that require sophisticated methods to ensure regulatory compliance and maximize value in M&A transactions.[3] Blockchain technology has become a crucial tool for IP protection because of its decentralized and immutable ledger [4], which are used for verification of ownership of patents, trademarks, and copyrighted materials.[5] For example, IBM has shown that securing IP on a blockchain technology protects assets and information, by reducing unauthorized modifications or disputes over ownership rights of such assets and information.[6] According to Deloitte, blockchain technology’s security makes it easier and simpler for M&A due diligence because it provides an immutable record that can be trusted by all parties involved.[7] Using blockchain in this manner secures records of ownership, which would streamline due diligence processes.[8] For example, IBM’s collaboration with IPwe (an IP transaction platform) illustrates the beneficial role of blockchain in patent valuation and due diligence. It does this by emphasizing the efficiency and traceability that blockchain technology can offer in M&A IP transactions.[9]
Besides Blockchain technology, AI also plays an important role in IP risk assessment in M&A transactions.[10] It allows companies to efficiently analyze IP portfolios.[11] These AI tools have the capacity to identify high-value patents, assess infringement risks of those patents, and analyze actionable decisions for those IP assets, which improves the speed and accuracy of the due diligence process.[12] To illustrate, Norton Rose Fulbright has noted AI’s ability for risk mitigation for IP due diligence by preemptively identifying potential IP conflicts, leading to preventing costly post-acquisition disputes. [13] Moreover, AI-driven IP tools speed up the efficiency of the due diligence process by automating complex analysis, which allows companies, involved in the due diligence process, to focus on strategic decision-making rather than time-consuming manual reviews, post-due diligence. [14] Accurately evaluating IP assets at faster speeds is crucial for the success of M&A transactions, especially in AI and blockchain sectors, which are intangible assets.[15] Traditional evaluation strategies often fail to capture the unique and intangible aspects of AI and blockchain, prompting companies to adopt AI-driven and blockchain-enhanced valuation platforms to compete in the modern market.[16] For example, IPwe and IBM’s AI-driven platforms provide them with detailed analysis of patent portfolios, allowing them to assess each patent’s relevance with their market, financial impact, and synthesis with the acquirer’s strategic goals.[17] These AI-driven tools assist companies in understanding the value of their IP assets better, providing them insights that can help the companies in negotiation strategies in M&A transactions.[18]
The Legal and Regulatory Aspects of AI and Blockchain Need Reforms
The legal aspects surrounding AI and blockchain are complex, particularly in cross-border M&A transactions. [19] International jurisdictions vary widely in their regulations and compliance with IP, which complicates global negotiations and trades for companies utilizing AI-driven and blockchain technologies in their M&A strategies.[20] For example, the European Union’s new Markets in Crypto-Assets (MiCA) regulation introduces a specific framework for crypto-assets across member states, which would affect blockchain companies involved in M&A.[21] Specifically, Greenberg Traurig notes that MiCA will allow companies to operate their AI-driven and blockchain technologies throughout the EU with a single authorization, simplifying compliance for blockchain assets in cross-border transactions.[22]
A problem of AI-generated content from AI-driven tools presents a unique challenge for IP management of ownership and liability issues.[23] As AI tools continue to evolve, they produce novel content that may not fit within existing IP’s regulatory and compliance frameworks, raising questions about whether AI-generated works can be patented or copyrighted.[24] In, Thaler v. Vidal, the court explored AI inventorship, where they considered whether AI can be recognized as an inventor of their own contents under patent law–where the courts said no.[25] Many patent offices like the U.S. Patent and Trademark Office and European Patent Office have each independently “held that only a natural person can be an inventor [under patent law].”[26] The American Bar Association notes that these developments show the need for reforms in IP regulatory and compliance law to clarify ownership rights related to AI-generated IP.[27]
NFTs Use in IP and M&A Strategies and Negotiations
Companies also increasingly use non-fungible tokens (NFTs) and smart contracts to manage IP in M&A transactions, licensing and royalty agreements.[28] NFTs are unique data points in a blockchain structure that have value due to its unique identification. [29] Firms use NFTs to tokenize their IP assets, giving them a verifiable record of ownership, usage rights, and royalty rights.[30] Deloitte notes that by recording ownership within NFTs, companies can utilize automation of royalty payments and enforce IP terms, which reduces conflicts over IP ownership.[31] Using NFTs in this way is beneficial in M&A, where records of IP ownership and terms are essential to minimizing legal and regulatory risks.[32]
ESG and Cross-Border IP Compliance with Regulatory Legal Frameworks
Environmental, social, and governance (ESG) considerations are also becoming a priority in M&A, as IP assets related to sustainable technology gain traction.[33] Blockchain technology can help companies monitor ESG compliance. [34] It does this by providing a record of environmental and social data sets associated with the particular IP assets.[35] For example, companies in clean technology sectors use blockchain to manage compliance with environmental regulations.[36] This trend aligns with the broader paradigm shift towards sustainability and ESG-focused M&A, especially as firms increasingly look to long-term environmental goals.[37]
Blockchain also plays a significant role in cross-border IP enforcement, by simplifying the verification of IP ownership across jurisdictions.[38] Because the international scene of modern business requires reliable methods for enforcing IP rights internationally, companies use blockchain to facilitate IP transactions that are accessible to all parties involved in the transaction.[39] Furst notes that as more companies use blockchain technology for IP management, it will become an essential tool for navigating through the complexities of international IP enforcement.[40] This is particularly valuable in M&A, where differences in IP laws across countries can pose challenges to acquiring and integrating foreign IP assets.[41] AI and blockchain technologies are transforming the nature of IP strategies in M&A, by offering innovative tools to further IP protection, evaluation, and risk management.[42] Blockchain’s decentralized and unique data points have transformed what it means to record IP ownership more securely, while AI-driven tools make faster and more accurate IP assessments that can reduce the business effort and time into decision-making.[43] But these advances also introduce new legal challenges, concerning ownership and liability for AI-generated content within the IP world.[44] As the legal IP field continues to evolve and learn with the evolution of AI-advancement, companies will continue to rely on AI-driven and blockchain technologies to improve business efficiency in M&A outcomes, particularly in the technology sector.[45]
Footnotes
