As a result of this discovery, the buyer filed a lawsuit against the seller group and its lawyers in a Maine federal district court.
M&A Stories
April 18, 2023
Introduction
In the world of acquisitions, patents play a crucial role in safeguarding the value of technology. Unfortunately, in a recent case, a buyer found out after the deal was closed that the seller did not possess patent protection for their composite decking and outdoor railing systems. This revelation led to a lawsuit against the seller group and their legal representatives in a Maine federal district court.
The deal
The buyer, specializing in wood and vinyl fencing, as well as vinyl and aluminum fence systems and railing manufacturing, acquired the assets of the seller in 2018 for approximately $10.8 million. The seller was known for manufacturing composite decking and outdoor railing systems, making this acquisition significant for the buyer’s business.
The lawsuit
According to the buyer’s post-closing discovery, it became apparent that the seller had misrepresented their technology’s patent protection during the asset purchase agreement. This realization forced the buyer to seek patent protection on their own and subsequently sue the seller group for damages.
See Barrette Outdoor Living, Inc. v. Integrity Composites, LLC, No. 2:20-cv-00213-JDL, United States District Court, D. Maine (March 31, 2023).
Comment
This unfortunate lawsuit could have been avoided through thorough due diligence by the buyer. Conducting a comprehensive investigation would have uncovered the lack of patent protection before closing the deal. The key takeaway for buyers is to ensure they have competent patent counsel who diligently verifies the existence of patent protection before finalizing any agreements. This simple precaution can prevent costly legal disputes down the line.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Podcasts https://www.buzzsprout.com/2142689/12339043
Check out my books: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles and Selling Assets of a Small Business: Problems Taken From Recent Legal Battles
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