ip due diligence

What is IP Due Diligence?

IP due diligence is the process of reviewing a company’s intellectual property to confirm ownership, assess risk and understand its value before a transaction or investment. It helps buyers and investors ensure that the target’s key assets are protected and capable of supporting future growth when transferred over to the new owner.

You will typically carry out IP due diligence during mergers and acquisitions, fundraising, licensing deals and strategic partnerships.

Why IP due diligence is important

Intellectual property often represents a significant part of a company’s value, especially in the technology sector. If it is unclear who owns an innovation or the selling company has not secured its rights robustly, the deal may not deliver the expected benefits for the buyer.

IP due diligence helps you:

  • Confirm that the company actually owns the IP it claims
  • Identify risks such as infringement or expired protections
  • Support valuation and negotiation decisions

Without this process, you risk acquiring assets that cannot be used or defended effectively.

What IP due diligence covers

A thorough review focuses on both the legal status and practical use of intellectual property. This includes registered rights, contractual arrangements and how the business relies on its IP.

Area

What to review

Why it matters

Ownership

Registration records and assignment agreements

Confirms the company has legal rights to the IP

Protection

Patents, trademarks and geographic coverage

Shows whether IP is protected in key markets

Licensing

Inbound and outbound licence agreements

Identifies restrictions on use or transfer

Disputes

Ongoing or past infringement claims

Highlights legal and financial risks

Usage

How IP supports products and services

Links IP to commercial value

Types of IP to review

IP due diligence covers a wide range of assets, depending on the business:

  • Patents and patent applications
  • Trademarks and brand assets
  • Copyrights and creative works
  • Trade secrets and proprietary know-how
  • Software, codebases and technical documentation

Key risks it can uncover

IP due diligence often uncovers issues that could affect the deal:

  • Unclear ownership where rights have not been properly assigned
  • Gaps in protection across important markets
  • Infringement of third-party rights
  • Over-reliance on licences that can be terminated or restricted

How IP due diligence fits into a transaction

IP due diligence takes place during the wider due diligence phase of a deal. Its findings influence the valuation of the selling company, meaning that you may have to renegotiate contract terms and assess your risk allocation.

Not only might the buyer request the seller adjust the purchase price, but they might want to include specific warranties or indemnities and even require remedial actions before completion. This ensures the final agreement reflects the true condition of the IP assets.

The role of virtual data rooms in IP due diligence

A virtual data room helps manage IP due diligence by providing a secure environment for sharing sensitive information. You can organise documents such as patents, licences and technical files in a structured way, making them easier to review.

Granular permissions ensure that only authorised parties can access confidential materials, while activity tracking provides visibility over who has reviewed key documents. This is particularly important when dealing with trade secrets or proprietary technology.