IP Due Diligence in Mergers and Acquisitions

In an acquisition, the target’s intellectual property is often the main reason for the deal, and IP due diligence is what confirms you are actually buying what you think you are.

Getting it wrong means discovering after the close that key patents are invalid, trademarks are unregistered or the company never owned the code in the first place.

What due diligence checks

• Ownership of every patent, trademark and copyright
• Validity and remaining life of key assets
• Existing licenses and encumbrances
• Pending litigation or infringement risks

Red flags to watch

• IP held by founders rather than the company
• Missing assignments from contractors
• Unpaid maintenance fees on key patents
• Undisclosed licensing obligations

Run thorough IP due diligence before you sign, and you will not inherit someone else’s ownership problems along with their assets.

Fixing what you find

Due diligence is not just about finding problems, it is about pricing or fixing them before the deal closes.

• Price red flags into the deal
• Require fixes before close
• Get reps and warranties