1. What Is Intellectual Property Due Diligence?
Intellectual property due diligence is the process of investigating and evaluating IP assets, ownership, contracts, liabilities, disputes, and other intellectual property risks before a transaction or significant commercial decision.
Depending on the business, the review may examine trademarks, patents, copyrights, trade secrets, software, domains, licenses, assignments, employee agreements, contractor agreements, security interests, pending applications, maintenance obligations, international rights, enforcement matters, and related contractual restrictions.
The objective is to understand the legal rights the company actually possesses rather than relying solely on asset schedules or registration numbers.
For example, a business may state that it owns a large trademark portfolio.
Further review may reveal that some registrations have been canceled, certain marks remain personally owned by a founder, foreign registrations are held by former distributors, important applications identify the wrong entity, or a coexistence agreement restricts expansion into a valuable market.
The legal and commercial significance of the portfolio therefore depends on more than the number of listed assets.
2. When Is IP Due Diligence Needed?
IP due diligence can be important whenever a transaction depends materially on intellectual property.
Common contexts include mergers, acquisitions, asset purchases, stock purchases, venture financing, private equity investments, strategic investments, technology transactions, IP acquisitions, licensing arrangements, joint ventures, joint development projects, corporate reorganizations, spin-offs, commercial collaborations, and secured financing involving intellectual property collateral.
The scope should reflect the business.
A software-company transaction may focus heavily on source-code ownership, developer agreements, open-source software, data rights, patents, trade secrets, and AI use.
A consumer-brand acquisition may focus more heavily on trademarks, trade dress, copyrights, domain names, licensing, counterfeiting, social media assets, and foreign registrations.
A patent-heavy technology transaction may require extensive analysis of patent families, licensing rights, maintenance, claim scope, and third-party restrictions.
The review should concentrate on the intellectual property that actually creates or supports the value of the business.
3. What Is the Difference Between Buyer-Side and Seller-Side IP Due Diligence?
Buyer-side and seller-side diligence often review similar documents, but the objectives differ.
Buyer-Side IP Due Diligence
A buyer wants to know whether it will actually receive the intellectual property value it believes it is purchasing.
Questions may include whether the seller owns the relevant IP, whether important rights are missing, whether assets can legally be transferred, whether undisclosed licenses exist, whether third parties have ownership claims, whether registrations remain active, whether important licenses terminate after a change of control, and whether material disputes are pending.
The objective is to identify risk before capital is committed.
Seller-Side IP Due Diligence
A seller benefits from identifying potential problems before the buyer discovers them.
Seller-side diligence can uncover missing assignments, outdated ownership records, incorrect entity information, incomplete license schedules, expired registrations, ownership gaps, unresolved disputes, foreign-record discrepancies, and upcoming renewal deadlines.
Some issues can be corrected before the transaction begins.
Others may need to be disclosed, priced into the transaction, or addressed through representations, indemnification, escrow, or other deal terms.
Early seller-side diligence can therefore make the transaction process more organized and predictable.
4. What Intellectual Property Should Be Included in Due Diligence?
IP due diligence should extend beyond federally registered rights.
Depending on the business, the portfolio may include trademarks, service marks, trade names, logos, slogans, trade dress, common-law trademarks, patents, provisional applications, international patent rights, industrial designs, copyrights, unregistered creative works, software, source code, photography, artwork, packaging, written content, databases, trade secrets, technical know-how, algorithms, manufacturing processes, confidential business methods, domains, licenses, coexistence agreements, settlement agreements, distribution agreements, development agreements, work-for-hire agreements, and employee invention assignments.
Government registration records are important, but they do not necessarily reveal every commercially significant right.
Trademark rights can arise through use without federal registration.
Copyright can arise automatically when qualifying original expression is fixed.
Trade secrets have no federal registration system at all.
The diligence process should therefore begin with the business itself and then use government records, contracts, and other evidence to verify the legal position.
5. How Are Trademarks Reviewed During IP Due Diligence?
Trademark diligence should examine more than the existence of a registration certificate.
A review may address federal registrations, pending applications, common-law marks, ownership, first-use information, goods and services, geographic use, filing basis, renewal requirements, licenses, coexistence agreements, consent agreements, oppositions, cancellations, litigation, enforcement history, domains, foreign registrations, and security interests.
Current status should be verified directly.
USPTO records can help identify prosecution history, maintenance filings, ownership information, and whether registrations remain active.
Ownership also requires careful analysis.
Trademark assignments generally must transfer the goodwill associated with the mark.
Pending intent-to-use applications can also be subject to statutory restrictions on assignment before an acceptable allegation of use has been filed.
A transaction should therefore not assume that every trademark or pending application can simply be placed on an asset schedule and transferred at closing.
Learn About Trademark Assignments
6. How Are Patents Reviewed During IP Due Diligence?
Patent diligence can involve issued patents, pending applications, continuations, divisionals, foreign counterparts, ownership, inventorship, assignment documents, claim scope, expiration, maintenance fees, terminal disclaimers, licenses, settlements, PTAB proceedings, enforcement history, validity challenges, litigation, and government rights where applicable.
Public patent and assignment records can provide valuable information, but recordation alone does not necessarily establish that the underlying ownership transaction was legally valid.
The actual assignment documents may need to be reviewed.
Patent maintenance is also important.
Many U.S. utility patents require periodic maintenance-fee payments to remain in force.
A due diligence review should therefore determine not only whether a patent once issued but also whether it remains active, enforceable, properly owned, and commercially relevant to the target business.
7. How Are Copyrights Reviewed During IP Due Diligence?
Copyright diligence can be particularly important because registration is not required for copyright ownership to exist.
A company may own substantial copyrighted material without having a registration for every work.
Relevant assets can include software, source code, websites, photographs, videos, artwork, advertising, product graphics, illustrations, manuals, written content, databases, training materials, music, and audiovisual works.
The review may ask who created each material work, whether the creator was an employee or independent contractor, whether a qualifying work-made-for-hire relationship existed, whether copyright was assigned, whether the assignment was signed, whether licenses are exclusive, and whether third-party material is incorporated into the work.
Stock photography, licensed content, agency-created material, and contractor work can require particular attention.
Potential termination rights may also matter when older copyright assets are involved.
Because copyright ownership can exist without registration, Copyright Office records should be treated as one part of the ownership analysis rather than the complete answer.
Learn About Copyright Acquisitions & Ownership Due Diligence
8. How Are Trade Secrets Reviewed During IP Due Diligence?
Trade secrets cannot be verified through a federal registration database because no federal trade-secret registration system exists.
The review instead focuses on the information the company claims as confidential and the measures used to preserve its secrecy.
Relevant questions can include who has access to the information, what confidentiality agreements exist, how access is restricted, whether contractors and vendors are subject to appropriate obligations, how employee departures are handled, whether cybersecurity and physical controls exist, and whether confidential information has been publicly disclosed.
Federal trade-secret protection depends in part on the owner taking reasonable measures to maintain secrecy.
A data-room schedule labeled “Trade Secrets” therefore does not establish protection by itself.
Potential red flags can include unrestricted source-code access, confidential technical documents available publicly, contractor relationships without NDAs, shared credentials, formulas distributed without confidentiality restrictions, and failure to terminate access when employees leave.
Trade-secret diligence should examine operational practices as well as contracts.
9. How Are Software and Technology Assets Reviewed?
Software businesses often depend on several overlapping forms of intellectual property.
Diligence may examine source-code ownership, employee contributions, contractor agreements, copyright, patent rights, trade secrets, open-source software, third-party libraries, APIs, commercial software licenses, SaaS arrangements, repositories, documentation, datasets, customer agreements, development contracts, escrow arrangements, and security obligations.
A central question is whether the company owns or has sufficient rights to every material component required to operate its product.
A software platform may contain code written by founders, employees, domestic contractors, overseas developers, open-source projects, commercial third parties, licensed datasets, APIs, and AI-assisted development tools.
Each component can create different ownership and contractual consequences.
Control of a repository does not necessarily establish ownership of every line of code inside it.
10. How Should AI-Generated and AI-Assisted IP Be Reviewed?
Artificial intelligence can introduce additional ownership and diligence questions.
Where material software, content, designs, inventions, or other assets were created using AI tools, the review may examine which systems were used, who used them, what material was generated, how much human authorship or inventive contribution was involved, whether confidential information was submitted to third-party platforms, and whether platform terms affect resulting output.
For copyright-related assets, human authorship can be particularly important.
A company representing that it owns copyright in AI-heavy content may need to distinguish protectable human-created expression from material generated entirely by an AI system.
Patent inventorship raises a separate issue.
Only natural persons can be named as inventors under current USPTO standards, even when AI tools assisted the inventive process.
AI diligence can also examine whether the company has internal policies governing AI use and whether employees or contractors have incorporated AI-generated material into valuable assets without appropriate review.
11. How Are Domain Names and Digital Assets Reviewed?
Domain names can have substantial independent commercial value and should be reviewed when material to the business.
Diligence may examine registered domains, registrant identity, registrar accounts, expiration dates, renewal settings, DNS control, administrative access, international domains, defensive registrations, pending UDRP or ACPA matters, prior purchase agreements, and security controls.
Particular attention should be given to domains held personally by founders, employees, or outside agencies rather than by the company.
Related digital assets may include social media accounts, websites, email infrastructure, customer data, software, and other online accounts.
These assets should not be treated as interchangeable.
A company can own a domain while another party owns the corresponding trademark or website copyright.
Transaction documents should identify what is actually being transferred.
Learn About Domain Name Strategies & Investigations
12. Why Is Chain of Title Important?
Chain of title answers a basic question:
How did the current owner acquire the intellectual property?
Consider a startup where one founder designed the logo, a freelancer created the website, an outside developer wrote the first software code, two founders conceived a patentable invention, and a marketing agency created product photography.
The company may use all of those assets every day.
Due diligence should determine how the legal rights moved from the original creators into the company.
Relevant documents may include founder assignments, employment agreements, patent assignments, copyright assignments, work-for-hire provisions, asset purchase agreements, merger documents, license agreements, trademark assignments, and IP contribution agreements.
A gap in chain of title may sometimes be corrected.
It can also reveal that the company never obtained an asset it believed it owned.
13. How Are Employee and Contractor IP Agreements Reviewed?
Employees and independent contractors should not be treated identically.
The diligence process may review employment agreements, confidentiality agreements, invention assignments, copyright assignments, work-made-for-hire provisions, consulting agreements, independent-contractor agreements, founder agreements, intern agreements, and separation documents.
The objective is to determine whether intellectual property created for the company is actually owned by the company.
Contractor relationships deserve particular attention.
Paying an independent contractor does not automatically transfer copyright ownership.
The work-made-for-hire doctrine also has specific statutory requirements, and many commissioned works do not qualify.
Appropriate assignment language can therefore be critical.
Learn About Work Made for Hire & Copyright Ownership Agreements
14. How Are IP Licenses Reviewed?
A company’s most important intellectual property may be licensed rather than owned.
The business may also have granted commercially significant rights to other parties.
Due diligence should therefore examine both inbound licenses, under which the company receives rights, and outbound licenses, under which the company grants rights.
Relevant questions can include whether the license is exclusive, what intellectual property is covered, what territory and field of use apply, whether sublicensing is permitted, whether assignment requires consent, whether a change of control triggers termination, who owns improvements, who controls enforcement, whether minimum royalties apply, and whether either party has alleged breach.
A transaction can lose substantial value if a critical technology or brand license terminates when control of the business changes.
Licenses should therefore be analyzed as part of the transaction structure rather than simply listed in the data room.
Learn About IP Licensing Agreements
15. What Are IP Encumbrances and Security Interests?
Intellectual property can be subject to third-party rights or restrictions.
These may include security interests, liens, exclusive licenses, collateral assignments, co-ownership, settlement restrictions, government rights, options, rights of first refusal, or contractual limitations on assignment.
A buyer should determine whether it is acquiring the IP free of unexpected competing interests.
Government IP records may be useful but are not always conclusive.
Depending on the transaction, diligence may require review of IP-office records together with broader lien, financing, and contractual documentation.
An asset can be legally owned by the target and still be subject to restrictions that materially reduce what the buyer can do with it.
16. How Are Pending Disputes and Enforcement Matters Reviewed?
IP disputes can materially affect transaction value.
A diligence review may examine trademark oppositions and cancellations, patent litigation, PTAB proceedings, copyright disputes, cease-and-desist correspondence, domain disputes, UDRP proceedings, ACPA claims, counterfeiting matters, trade-secret allegations, license disputes, royalty disputes, government inquiries, and settlement agreements.
Demand letters can be just as important as lawsuits already filed.
A target may accurately state that no litigation is pending while still facing serious infringement claims that could develop into litigation after closing.
Past enforcement also matters.
Settlement agreements may contain releases, coexistence restrictions, geographic compromises, or other provisions that continue to affect the IP long after the dispute itself ended.
17. How Are Registration Status and Maintenance Deadlines Reviewed?
A registration number does not necessarily mean an IP right remains active.
Status should be independently verified.
Trademark registrations require periodic maintenance filings and renewals.
Many U.S. utility patents require maintenance-fee payments.
Design and plant patents do not follow the same maintenance-fee system.
Modern copyrights generally do not require periodic federal renewal filings, although older copyrights can present separate historical renewal issues.
Foreign portfolios may have different annuity, declaration, renewal, and use requirements.
The diligence process should therefore verify status according to the particular type of IP right and jurisdiction rather than assuming that every registration operates the same way.
18. Is IP Due Diligence the Same as a Freedom-to-Operate Search?
No.
IP due diligence and freedom-to-operate analysis answer different questions.
IP due diligence asks what the company owns or controls, whether those rights are active, what restrictions exist, whether ownership documentation is complete, what liabilities exist, and what third parties already possess rights in the assets.
A freedom-to-operate analysis asks whether the company’s commercial activity may infringe enforceable third-party patent rights.
A company can own valuable patents and still lack freedom to operate.
For example, a company may own a patent covering an improvement while another party owns a broader patent covering the underlying technology.
Ownership of the improvement patent does not automatically provide permission to practice the broader patent.
Patent-heavy transactions may therefore require both portfolio due diligence and a separate freedom-to-operate analysis.
Learn About Patent Searches & Prior Art Analysis
19. How Does IP Due Diligence Affect Purchase Price and Deal Terms?
IP due diligence does not determine financial valuation by itself, but it can materially affect how a transaction is valued and structured.
Suppose a buyer believes the target’s principal asset is an exclusive technology platform.
Diligence reveals that an important patent expires soon, foundational code is owned by a third party, material software was created without assignments, a major customer has a broad license, and the brand cannot be used in an important foreign market.
Those findings may affect purchase price, escrow, holdbacks, indemnification, representations and warranties, closing conditions, asset allocation, post-closing obligations, or whether the buyer proceeds at all.
Due diligence can also identify additional value.
A company may possess underused copyrights, valuable domains, unregistered trademarks, licensable technology, foreign expansion opportunities, or curable ownership rights that were not previously treated as strategic assets.
The review should identify both risk and opportunity.
20. What IP Issues Should Be Addressed in the Transaction Agreement?
Due diligence findings should ultimately be reflected in the transaction documents.
Depending on the deal, IP provisions may address owned-IP schedules, licensed-IP schedules, ownership representations, registration status, chain of title, employee and contractor assignments, pending disputes, licenses, open-source software, trade-secret protections, maintenance obligations, data rights, software rights, domains, security interests, transfer restrictions, third-party consents, closing assignments, post-closing cooperation, indemnification, and disclosure schedules.
The transaction agreement should reflect what the diligence process actually found.
A broad representation that the target “owns all IP necessary for the business” is far more meaningful when the parties have identified the relevant assets and investigated the underlying ownership and contractual records.
Learn About IP Agreements & Transactions
21. How Does Due Diligence Differ in an Asset Purchase and a Stock Purchase?
Transaction structure affects the mechanics of IP transfer.
Asset Purchase
In an asset acquisition, the buyer generally needs to identify which specific intellectual property rights are being transferred.
That may include trademarks, patents, copyrights, domains, trade secrets, licenses, applications, and contracts.
The buyer should also determine whether individual rights are assignable and whether third-party consent is required.
Stock Purchase or Equity Acquisition
In a stock purchase, the legal entity that owns the IP generally remains the same.
That does not eliminate the need for diligence.
The buyer still needs to determine whether the company actually owns the rights, whether change-of-control clauses are triggered, whether material licenses require consent or can terminate, whether subsidiaries or founders hold important assets, and whether existing IP liabilities remain inside the acquired company.
The transfer mechanics differ, but the ownership and risk questions remain significant.
22. How Does IP Due Diligence Apply to Joint Ventures and Development Agreements?
Joint ventures and collaborative development projects require both backward-looking and forward-looking IP analysis.
The parties should understand what each participant already owns and what may be created together.
Questions can include what background technology each party contributes, who owns existing IP, who will own new inventions or copyrights, how inventorship will be determined, who pays for prosecution, who owns improvements, who can commercialize the results, whether field-of-use restrictions apply, whether sublicensing is permitted, and what happens when the collaboration ends.
Due diligence before entering the relationship can help prevent a party from contributing technology it does not actually own or promising rights that have already been granted elsewhere.
23. What Are Common IP Due Diligence Red Flags?
Common red flags include core IP owned personally by a founder, contractor-created work without assignments, inactive registrations presented as current, missing patent assignments, trademark applications filed by the wrong entity, undisclosed exclusive licenses, change-of-control restrictions, foreign registrations owned by distributors, unpaid patent maintenance fees, threatened infringement claims, trade secrets shared without meaningful confidentiality controls, unidentified third-party code, AI-generated assets represented as fully owned without authorship analysis, domains controlled through employee or agency accounts, and coexistence or settlement agreements restricting future expansion.
A red flag does not automatically mean the transaction should end.
Some issues can be corrected before closing.
Others may be addressed through purchase-price adjustments, escrow, specific indemnification, representations, closing conditions, transition arrangements, or other deal protections.
The purpose of diligence is to identify the issue early enough for the parties to respond deliberately.
24. What Documents Should Be Included in an IP Due Diligence Data Room?
A useful IP data room should include records concerning ownership, registration, licensing, disputes, and commercialization.
Depending on the business, materials may include trademark registrations and applications, patent schedules, patent applications, copyright registrations, domain schedules, assignments, founder IP agreements, employment agreements, contractor agreements, licenses, coexistence agreements, consent agreements, settlement agreements, joint development agreements, publishing agreements, work-for-hire agreements, franchise or distribution contracts containing IP rights, open-source policies, trade-secret policies, NDAs, cease-and-desist correspondence, litigation documents, TTAB matters, PTAB matters, domain disputes, foreign IP schedules, renewal records, and maintenance records.
The request should be tailored to the business.
A consumer brand, software platform, publishing company, and biotechnology company will not require identical diligence materials.
25. How Are International IP Portfolios Reviewed?
Intellectual property rights are territorial.
A U.S. registration does not automatically establish equivalent rights in other countries.
International diligence may therefore examine foreign trademark registrations, Madrid Protocol rights, foreign patents, PCT applications, European patent rights, design registrations, Hague registrations, local copyright arrangements, licenses, coexistence agreements, distributors, assignment recordations, renewals, annuities, local use requirements, oppositions, cancellations, litigation, and ownership records.
A common issue arises when a company believes it owns a worldwide brand but important foreign registrations are actually held by distributors, manufacturers, former partners, founders, or subsidiaries.
International diligence should determine what rights actually exist in commercially important jurisdictions and whether the contemplated transaction will transfer or otherwise control those rights.
Learn About Worldwide Trademark Portfolio Management
Learn About International Copyright Protection
26. What Should Happen to IP After the Transaction Closes?
Closing does not end the IP work.
Post-closing tasks may include recording assignments, updating USPTO ownership records, updating foreign registries, transferring domains, consolidating registrar accounts, changing correspondence information, transferring prosecution files, docketing renewals and patent maintenance fees, obtaining third-party consents, updating licensing notices, transferring code repositories, updating trade-secret access, implementing new confidentiality controls, and integrating IP portfolios.
Public recordation should also be distinguished from the underlying legal transfer.
The transaction documents establish the rights between the parties.
Recordation updates public records and may provide statutory benefits, but recordation does not automatically cure a defective transfer agreement.
Learn About Global Recording of Assignments & Changes
27. How Can Cohn Legal Help With IP Due Diligence?
Cohn Legal, PLLC assists clients with intellectual property issues arising in asset purchases, acquisitions, investments, joint ventures, joint development relationships, licensing transactions, assignments, and other commercial matters.
An engagement can begin by identifying the transaction, the assets driving its value, the relevant jurisdictions, and the intellectual property categories requiring the most attention.
Cohn Legal can assist with review involving trademark portfolios, patent portfolios, copyright assets, trade secrets, software, domain names, ownership, chain of title, employee and contractor assignments, licensing arrangements, coexistence agreements, development agreements, pending disputes, TTAB matters, domain disputes, maintenance issues, recordation history, international rights, transactional IP provisions, and post-closing portfolio updates.
The objective is not merely to produce a checklist.
IP due diligence should identify the intellectual property issues that can materially affect the transaction and translate those findings into practical recommendations for ownership, risk allocation, deal terms, and post-closing integration.
Discuss an IP Due Diligence Matter
Speak With an Intellectual Property Attorney
IP Due Diligence Requires Teamwork
Working With You, For You
Effective IP due diligence requires collaboration between legal counsel and the people who understand the business.
Legal records may identify who owns a patent or trademark.
The business team can explain which patent supports the flagship product, which trademark customers actually recognize, which contractor developed the core software, which license generates meaningful revenue, and which confidential information creates a competitive advantage.
That context helps the diligence process focus on the intellectual property that matters most to the transaction.
Where the review identifies underused or unprotected IP, additional strategies may include licensing, assignment, registration, international expansion, portfolio consolidation, or enforcement.
Explore IP Licensing Agreements
Explore IP Agreements & Transactions
No Surprise Billing
Transparency From the Beginning
Cohn Legal believes clients should understand the anticipated legal fees before work begins.
We discuss the scope of the engagement and applicable fees in advance so clients can make informed decisions about their legal work without unexpected billing surprises.
Discuss an IP Due Diligence Matter
Contact Cohn Legal
FAQ
IP Due Diligence Frequently Asked Questions
Why is intellectual property due diligence important?
A transaction may depend on intellectual property that the target does not fully own, cannot freely transfer, has licensed to another party, or has failed to maintain.
Due diligence helps identify those issues before the transaction closes.
Who needs IP due diligence?
IP due diligence can be useful for buyers, sellers, investors, startups raising capital, private equity firms, businesses entering joint ventures, companies acquiring technology, licensors, licensees, and parties to collaborative development projects.
The appropriate scope depends on the transaction.
When should IP due diligence begin?
Ideally before the parties become irrevocably committed to the transaction.
Starting early creates more time to investigate ownership, obtain missing documentation, seek consents, correct records, and address material risks in the deal terms.
Is IP due diligence only for large acquisitions?
No.
A relatively small transaction may depend heavily on one trademark, patent, software platform, copyright portfolio, domain, or trade secret.
The financial size of a transaction does not necessarily determine the importance of IP diligence.
Should unregistered IP be included?
Yes.
Commercially important trademarks, copyrights, trade secrets, software, know-how, and other rights can exist without federal registration.
How do you verify trademark ownership?
The review can include USPTO records, assignment records, underlying transfer agreements, corporate records, evidence of use, licenses, and other ownership materials.
A database owner entry is one part of the analysis rather than necessarily the entire answer.
How do you verify patent ownership?
Recorded patent assignment information can be reviewed together with the actual assignment documents and relevant corporate records.
Recordation itself does not necessarily establish that the underlying transfer was legally valid.
How do you verify copyright ownership?
Copyright diligence may involve Copyright Office records, employment relationships, work-made-for-hire analysis, written assignments, licenses, publication records, and information showing how the works were created.
Because copyright can exist without registration, a registration search alone is insufficient.
What is chain of title?
Chain of title is the sequence of ownership through which the current owner acquired its intellectual property rights.
For example:
Creator → Founder → Corporation → Acquirer.
Each required transfer should be supported by appropriate legal documentation.
What if a founder personally owns an important trademark?
That can create a material ownership issue.
The parties may need to determine whether the mark and associated goodwill should be assigned to the company or buyer before closing.
What if an independent contractor created the company’s logo or website?
The contractor agreement should be reviewed.
Paying a contractor does not automatically transfer copyright ownership.
Appropriate assignment or work-made-for-hire provisions may be necessary depending on the work and circumstances.
Are trademark applications freely transferable?
Not all of them.
Certain intent-to-use applications are subject to statutory assignment restrictions before an acceptable allegation of use has been filed.
Those applications should be reviewed carefully during a transaction.
Does a trademark assignment need to include goodwill?
Generally, yes.
Trademark assignments ordinarily transfer the goodwill connected with and symbolized by the mark.
What are IP encumbrances?
IP encumbrances are third-party rights or restrictions affecting an asset.
They can include licenses, liens, security interests, co-ownership, settlement restrictions, collateral assignments, and contractual limitations.
Can an important IP license terminate after an acquisition?
Potentially.
Some agreements contain assignment or change-of-control provisions requiring consent or permitting termination.
Material licenses should therefore be reviewed individually.
Are trade secrets part of IP due diligence?
Yes.
The review can examine what confidential information exists and whether the company has taken reasonable measures to preserve secrecy.
Operational practices can be just as important as written NDAs.
Should domain names and social media accounts be included?
Yes when they are commercially important.
The review should determine who controls the accounts, how ownership is documented, whether access is secure, and whether important domains or social accounts are held personally by founders, employees, or outside agencies.
Should AI-generated content be included in IP due diligence?
Potentially.
Where material assets were developed using AI, the review may need to examine human authorship or inventorship, platform terms, confidentiality issues, internal AI policies, and whether the company’s claimed ownership matches the underlying legal rights.
Can AI be named as a patent inventor?
No under current USPTO standards.
Only natural persons can be named as inventors even where AI tools assisted the inventive process.
Is patent due diligence the same as freedom to operate?
No.
Patent due diligence focuses primarily on the company’s own patent assets, ownership, status, contracts, and related risks.
Freedom-to-operate analysis examines whether commercial activity may infringe enforceable third-party patent rights.
Can IP due diligence guarantee that every right is valid?
No.
Due diligence can substantially improve the parties’ understanding of ownership, status, restrictions, risks, and available evidence, but intellectual property rights can still be challenged.
What happens if due diligence finds a missing assignment?
The parties should determine whether the ownership gap can be corrected.
In some circumstances, a new or confirmatory assignment may be obtained before closing.
Whether that is possible depends on who currently possesses the relevant rights and whether that party remains available and willing to transfer them.
What if a former contractor refuses to sign an assignment?
That can create a significant transaction issue.
The parties may need to analyze existing agreements, actual ownership, available remedies, valuation, deal structure, and risk allocation.
Can IP problems affect the purchase price?
Yes.
Material problems involving ownership, enforceability, geographic coverage, licenses, disputes, or transferability can affect valuation, escrow, indemnification, closing conditions, and whether a buyer proceeds.
Can due diligence identify new value as well as risk?
Yes.
A review can uncover underused rights, licensing opportunities, foreign expansion opportunities, valuable domains, unregistered assets, and other IP that was not previously treated as a strategic business asset.
Does IP due diligence determine the financial value of intellectual property?
Not by itself.
Legal due diligence evaluates rights, ownership, restrictions, and legal risk.
Formal financial valuation may require separate financial, economic, or valuation analysis.
How long does IP due diligence take?
It depends on the transaction.
Relevant factors include the number of assets, jurisdictions, quality of the data room, complexity of ownership, licensing relationships, disputes, and transaction deadlines.
How much does IP due diligence cost?
The cost depends on the scope and complexity of the review.
A single-asset ownership review and a multinational transaction involving hundreds of patents, trademarks, licenses, and agreements require very different levels of work.
The anticipated scope and fees can be discussed before the engagement begins.
What should a seller do before opening a data room?
A seller can begin organizing IP schedules, registrations, assignments, employee and contractor agreements, licenses, dispute records, renewal information, domain records, and foreign portfolio information.
This can help identify obvious gaps before buyer diligence begins.
What happens after closing?
Post-closing work can include recording assignments, updating ownership records, transferring domains, obtaining consents, updating foreign registrations, integrating portfolios, and docketing future maintenance and renewal deadlines.
Does recordation automatically transfer IP ownership?
No.
The underlying legal agreement creates or documents the transfer.
Recordation updates public records and may provide statutory benefits, but it does not cure an otherwise defective transaction merely because a government office accepts the filing.
Understand the IP Before You Value the Deal
A company’s intellectual property may be central to why a transaction is attractive in the first place.
The commercial value of a brand, patent family, technology platform, copyright portfolio, domain portfolio, or trade-secret program depends on more than whether the assets appear on a spreadsheet.
A meaningful diligence review should determine:
What IP exists?
Who owns it?
How was ownership acquired?
Is it still active?
What rights have already been granted to others?
Can it be transferred?
What disputes exist?
What restrictions survive closing?
Does the company actually control the assets supporting its business?
Cohn Legal assists clients with the intellectual property components of acquisitions, asset purchases, investments, joint ventures, joint development arrangements, licensing transactions, and other IP-related commercial matters.
