Piracy, hacking and ransomware are major issues in almost any business. M&A deals would be severely hampered if buyers were to find their expensive acquisitions are liable to be ripped off and copied. What is needed? Here is our take.
Data security:
All businesses need to regularly consult data security specialists and install appropriate measures – passwords, data protection systems and plenty of back-ups. M&A buyers will include a data security review in their due diligence procedures – along with a data privacy review.
Legal side:
Full legal advice should be obtained from both commercial lawyers and patent attorneys. In particular, check whether inventions and innovations have appropriate patent protection etc. Check whether copyright protection applies to software. And check whether trade names and logos have appropriate trade-mark protection. In short, check with experienced advisors whether all intellectual property and other assets are appropriately protected.
Does AI help spot a copycat?
A good AI (artificial intelligence) agent may help provide an initial general picture and point out things it is programmed for. AI agents may help detect a copycat situation and where it is located if an agent is trained on something appropriate – ranging from a database to the entire internet. Universities have long used software to detect whether students have handed in plagiarized assignments.
Competitive advantage:
Does a business have a competitive advantage over its competitors? This is possible even if no legal protection is possible e.g. because the knowhow concerned is in the public domain. Examples of competitive advantage include: two-to-three year knowhow development lead; quality; experience; solid reputation or brand name; etc.
Old generation:
Suppose a customer seeks to buy one of your products, reverse engineer it then copy it? Care is needed. One possibility is to sell such customers a semi-obsolete product. For example, Fiat sold many old car models to communist countries in the 1980s.
Accounting and documentary control:
If entering into a joint venture or cost sharing arrangement, make sure your side keep the accounting records and other documented items. Accounting control is worthwhile because of the financial and operational information derived. Just make sure you add in appropriate passwords and other data security measures.
Good regular communication:
Surprises may happen behind your back if you don’t stay in touch with all your contacts.
Language & culture understanding:
It is no secret that some people from some nations are more prone to copycat suspicions than others. But don’t treat this as a rule of thumb, exceptions happen.
Risks:
Take all appropriate means to reduce the risk of copycats getting involved. For example, is insurance possible in your sector?
What do you do if you spot a copycat?
Consult lawyers and IP attorneys regarding the possibility of legal action. Consider whether or not to proceed with a proposed transaction. Also consider whether the copycat is as good as the original item you are interested in.
We once experienced a case where a unique newspaper article we wrote was copied and appeared in a different newspaper. However, a few changes were made to the text to make the copycat article look different, Unfortunately for the copier, the resulting copycat article made little sense because the essential points had been changed.
In the case of software, is the look and feel of the copycat program as good as the original?
In the case of manufactured items, is the quality of the rip-off as good as the original? Or was the original manufacturer’s name and logo also ripped off? If so, is it time for the original manufacturer (or a legitimate M&A buyer) to introduce and publicize a new better version?
In conclusion:
Don’t let copycats get away with it. Prevention is better than cure. So is plentiful backing up against ransomware requests.
For more information:
- Email us at: leon@hcat.co
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