U.S. securities law term describing false or inaccurate statements, or omissions of important information, concerning a company’s business or prospects, which can lead buyers of its shares to over-estimate their value or the company’s likelihood of success. Inaccurate or deceptive statements about intellectual property rights have been held to be material misstatements, for example:
- Statements that a company had a pending patent and possessed trade secrets for its technology in the United States, when in reality the patent had already been assigned to another company;
- Stating that a company had a patent when it had only made patent applications and was in fact reliant on third-party technology;
- Falsely stating a company owned patents or patents-pending on Internet-related inventions;
- Misstating the value and extent of a business’ copyright assets;
- Implying a company had U.S. patent protection when it in fact only held a Russian Patent;
- Concealing the rejection of a patent application;
- Concealing an adverse court ruling relating to intellectual property;
- Falsely stating that technology was not subject to third party IP rights because it had been developed in a clean room; and
- Misleading statements about the FDA approval process or status of a drug or medical device.
Because many senior managers poorly understand intellectual property rights, the risk of a material misstatement in this area is high.