Overview
Intellectual property due diligence reveals the reality beneath representations. In M&A transactions, the target's IP may constitute its primary value—or its primary liability. In investment rounds, IP ownership clarity affects valuation and exit potential. In technology licensing, the licensor's chain of title determines whether the license conveys enforceable rights. IP due diligence provides the factual foundation for these consequential decisions.
Due diligence encompasses multiple dimensions: ownership verification traces title from inventors through assignments to current ownership; validity analysis assesses whether registered rights are likely to survive challenge; scope analysis determines what the IP actually covers; freedom-to-operate analysis identifies third-party rights that may constrain operations; and enforcement history reveals how rights have been asserted and defended.
The depth of due diligence should match transaction stakes. A material acquisition warrants comprehensive investigation. A minor investment may justify limited review. The key is understanding what questions matter for the specific transaction and how much uncertainty is acceptable. Due diligence cannot eliminate risk, but it can quantify risk for informed decision-making.
Key Considerations
Ownership Verification
Chain of title analysis tracing rights from creation through all transfers to current ownership.
Validity Assessment
Analysis of registered IP for grounds of invalidity including prior art, formality defects, and abandonment.
Freedom-to-Operate
Identification of third-party rights that may be infringed by planned commercial activities.
Encumbrance Review
Licenses, security interests, and other encumbrances affecting ownership or exploitation rights.
Litigation History
Past, pending, and threatened proceedings involving the IP or related rights.
Maintenance Status
Fee payment status, renewal deadlines, and administrative compliance.
Applying the TCL Framework
Technical
- Technical due diligence determines whether the IP provides the competitive advantage claimed. For patents, this means assessing claim scope against actual products and competitor alternatives. For trade secrets, it means evaluating whether the information is truly valuable and truly secret. For software, it means understanding dependencies, open source components, and code provenance. Technical expertise is essential for meaningful due diligence.
Commercial
- Commercial due diligence connects IP to business value. How do the IP rights support the target's market position? Are competitors constrained by these rights or finding alternatives? What is the remaining useful life of the IP? How do licensing revenues compare to enforcement costs? The commercial perspective determines whether IP due diligence findings affect transaction value and terms.
Legal
- Legal due diligence verifies that rights exist, are owned by the purported owner, and can be transferred or licensed as contemplated. This includes: reviewing registration certificates and prosecution files; verifying assignment chains; identifying encumbrances; assessing compliance with maintenance requirements; and evaluating the strength of unregistered rights. Legal conclusions inform deal structure, warranties, and indemnities.
"Due diligence is not about finding problems—it is about understanding reality. The worst outcome is not discovering issues; it is being surprised by issues that should have been discovered."
Common Pitfalls
Surface-Level Review
Accepting registration certificates without verifying chain of title or assessing validity creates false confidence.
Ignoring Unregistered IP
Focusing only on patents and registered trademarks while ignoring trade secrets, copyright, and unregistered marks.
Overlooking Encumbrances
Failing to identify existing licenses, security interests, or other third-party rights affecting the IP.
Insufficient Technical Review
Legal review without technical understanding may miss scope limitations or invalidity issues.
Inadequate Documentation Review
Employment, contractor, and collaboration agreements determine ownership—not reviewing them risks ownership gaps.
IP Due Diligence Framework
IP due diligence in India requires navigation of multiple registries and legal frameworks. The Patent Office maintains patent records including assignments and licenses. The Trademark Registry maintains trademark records. The Copyright Office maintains copyright registrations though registration is not required for protection. The Registrar of Companies records security interests affecting IP. Due diligence must also consider: employment agreements (Section 17 ownership issues), contractor agreements (assignment requirements), foreign IP rights (registrations in relevant jurisdictions), and regulatory approvals (particularly for pharmaceutical patents). Information access may be limited—some records are not publicly searchable, requiring direct verification with right holders.
Practical Guidance
- Define due diligence scope based on transaction materiality and key risks.
- Request comprehensive IP schedules with registration details, assignments, and encumbrances.
- Verify chain of title for key assets through registration records and document review.
- Conduct freedom-to-operate analysis for core products and planned activities.
- Review employment and contractor agreements for potential ownership gaps.
- Assess maintenance status and upcoming deadlines for registered rights.
Frequently Asked Questions
Related Practice Areas
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