If you are thinking of purchasing a company or considering a merger, it is vital that you are conducting appropriate due diligence of the target company’s IP position, particularly if the target company is IP rich and the very purpose of your purchase is to acquire said IP.
The key points you should be assessing in your due diligence are as follows:
- IP Ownership and Chain of Title
- Confirm the target company (not a founder, employee, or affiliate) is the registered/legal owner of all key IP assets.
- Verify that assignment agreements (assigning the IP to the company) exist for IP created by founders, employees, contractors, and consultants.
- Check for any missing or defective assignments, especially IP created before incorporation.
- Identify any co-ownership arrangements or joint development agreements affecting IP rights.
- Registered IP Rights
- Trade marks: List all registered trade marks, pending applications, jurisdictions, classes of goods/services, and renewal status.
- Designs: List all registered design rights and their territorial scope.
- Domain names: Include ownership, registrar details, and renewal/expiry dates.
- Patents: List all patents and pending applications, jurisdictions covered, expiry dates, and payment status of renewal/maintenance fees.
- Unregistered IP Rights
- List all possible copyright in software, content, marketing materials, and documentation.
- List all unregistered trade marks.
- List all possible database rights.
- Confirm creation dates and authorship records where relevant.
- Trade Secrets and Confidential Information
- Identify what constitutes the company’s trade secrets (source code, formulas, processes, customer data, know-how).
- Review confidentiality/NDA agreements with employees, contractors, and third parties.
- Assess internal security measures protecting confidential information.
- Check for any history of leaks, breaches, or unauthorised disclosures.
- Licensing Arrangements
- Identify any licenses governing use of third party IP the company relies on (including open-source software), key terms, exclusivity, royalties, and termination rights.
- Identify any licenses permitting use of the company’s IP the company has licensed to others, revenue implications, and any change-of-control clauses.
- Check for change-of-control provisions that could be triggered by the acquisition itself.
- Review any open-source software usage and compliance with associated licence obligations.
- Litigation and Disputes
- Any pending, threatened, or historical IP litigation (infringement claims made by or against the company).
- Opposition or invalidity proceedings against registered rights.
- Settlement agreements and any ongoing obligations arising from them.
- Cease-and-desist correspondence sent or received.
- Employee and Contractor IP
- Employment contracts: confirm IP assignment and confidentiality clauses are present and enforceable.
- Contractor/consultant agreements: confirm work-for-hire or assignment provisions.
- Identify key personnel whose departure could affect IP knowledge or continuity.
- Review non-compete and non-solicitation provisions where relevant.
- IP Value and Commercial Use
- How central is the IP to the company’s revenue and competitive position.
- Any encumbrances (e.g. IP used as loan security or subject to liens).
- Freedom-to-operate considerations — does the company’s product/service risk infringing third-party rights.
- Branding consistency and proper trade mark usage across markets.
- IT and Data Considerations
- Software ownership (in-house developed vs. third-party licensed).
- Data protection and privacy compliance affecting data-related IP assets.
- Cybersecurity measures protecting IP-related systems.
- Deal-Specific Considerations
- Identify any IP-related conditions precedent or warranties needed in the purchase agreement.
- Consider whether specific indemnities are needed for identified IP risks.
- Assess whether an IP assignment or licence needs to be executed at completion.
- Confirm no IP will be excluded from the transaction inadvertently (e.g. personal IP retained by a departing founder).
If you need IP advice, get in touch with our legal team at info@briffa.com or through our website form. Our IP experts are here to help.
