Business Escrow for Intellectual Property Transfers

Intellectual property transactions are notoriously complex and can require significant time to complete. During this lengthy timeframe, there are significant risks for both buyers and sellers. Fortunately, business escrow services exist to help mitigate this risk.

An escrow agent is a third party that holds money or anything else of value while two parties complete a transaction. By engaging an escrow agent during an intellectual property transaction, both the buyer and the seller can rest assured that their interests are protected.

Escrow Protects Buyers of Intellectual Property

When engaging an escrow agent to assist with an intellectual property transaction, the buyer places funds or other collateral with the agent. The escrow agent then holds these assets securely during the due diligence period and releases them to the seller only when the terms of the contract are met.

The escrow process encourages a smooth relationship between buyer and seller where each has assurance that the other will uphold the terms of the contract. It also helps to protect the buyer from losses in many different circumstances such as:

• data is lost, destroyed, or compromised.
• patents or copyrights lose their value.
• misrepresentation is discovered during due diligence.
• the seller changes their mind, backs out of the sale, or is otherwise unable to complete the transaction.

A competent escrow agent will also protect buyers from circumstances arising outside of the sale – like bank failure. The most robust protection against this risk is government insurance from the FDIC or NCUA and the right escrow agent will ensure that all funds are covered.

Escrow Protects Sellers of Intellectual Property

Escrow services also protect sellers of intellectual property by requiring the buyer to have collateral upfront and held by a neutral third party. This gives the seller assurance that the buyer can complete the transaction when the time comes and that the purchase funds are secured.

Escrow also benefits sellers by ensuring that they are paid promptly. After the delivery of the property and satisfaction of all contract terms, the escrow agent releases the purchase funds to the seller without delay.

Depending on the terms of the contract, the seller may be entitled to other forms of protection as well. For example, if the buyer backs out of the deal the seller could still be compensated for lost time and effort. These safeguards can be built into the escrow agreement and the escrow agent can hold funds securely to fulfill such terms.

How To Choose an Escrow Agent

There are many escrow agents, but all of them do not offer the same level of service. Your chosen agent should offer three things – a full suite of services, a strong track record, and access to the most robust protection for cash.

The right escrow agent will offer all the tools you need to complete your transaction with ease. This includes the ability to draft a mutually beneficial escrow agreement that protects both parties. Your agent should also have a team of professionals to support you as you implement the agreement.

The importance of experience cannot be overstated when it comes to business escrow services. Your chosen agent should have spent years honing their processes to ensure a smooth transaction for you. This experience should be evident in testimonials and reviews from past clients.

Finally, your escrow agent should offer access to the ultimate protection for business cash – government insurance from the FDIC or NCUA. This coverage is typically limited to $250,000 per account ownership category at each insured financial institution, so be sure to locate an escrow agent that can provide access to extended protection for all your cash.

Reduce Risk During Intellectual Property Transfers With ADM

At ADM, our business escrow services reduce risk during large, lengthy, and complex transactions like the transfer of intellectual property. When you partner with us, you will have access to government insurance for all escrow funds – even for transactions well above the FDIC or NCUA limit.

Our team specializes in escrow for businesses and has over 15 years’ experience ensuring transactions occur seamlessly. With our experienced team and comprehensive level of service, escrow is a breeze.

To learn more about our business escrow services, contact us today.

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