IP Due Diligence for Technology M&A

Are patents exclusively assigned to the company?

• Check assignments from inventors, employees, and third parties

Make sure that employee and contractor agreements assign their IP to the company

Spin-Outs: review licensing agreements from university/corporation to confirm rights

Check for potential / existing litigation, legal disputes regarding ownership or infringement

Review issued patents, pending applications, and provisionals

Check time taken to have issued patents

Review core technology patents specifications and claims

• Do claims cover the core innovation?
• Is patent family live, Can continuations be filed?

Check prior art and novelty: Ensure patents are not easily invalidated by prior art

Has company conducted a Freedom to Operate (FTO) check by a third party?

Determine if patents geographical coverage is satisfactory

Is there a patent roadmap?

How many patents are open for continuations?

Third-Party Licenses: Identify any dependencies on licensed technologies and review exclusivity, royalties, and termination conditions.

Outbound Licenses: If the startup licenses its IP, assess revenue potential and restrictions.

Government or Grant Funding: If public funds were used, check for government rights

IP Pledges or Open-Source Commitments: Ensure no patents have been pledged to open-source initiatives or restrictive agreements.

Market Differentiation: Determine whether the IP creates a sustainable competitive advantage.

IP Strategy Alignment: Assess whether the patent portfolio aligns with the business model

Competitor Patent Risks: Review competitor patents for potential litigation threats

Past Litigation: Check for lawsuits, oppositions, or invalidity proceedings against the startup.

Risk of Infringement Claims: Identify whether the startup is at risk of being sued by incumbents.

Patent Enforcement Plans: Determine if the startup has a strategy for protecting and enforcing its IP.

IP strategy misaligned with the business model.

Unclear ownership or disputes over IP rights.

Key technology not patented or poorly protected.

Heavy reliance on third-party IP with restrictive licensing.

Lack of an FTO analysis, exposing the startup to infringement risks.

Risk Assessment: Weigh IP risks against the startup’s valuation and business potential.

Negotiation Leverage: Use findings to adjust deal terms

Add Agreement clauses

• requiring stronger IP protections following investment
• ensuring the startup commits to expanding its IP protection post-investment