Intellectual Property (IP) can often be an organization's most important asset. A thorough review is important to claim the IP asset's full value and the ability to claim the full associated rights, such as the right to sue or claim damages.

Conducting IP Due Diligence Is Essential

IP typically entails an organization's patents, trademarks, copyrights, and domain names, but can also include other types of intangible assets, such as data, know-how, domain names, and software. IP due diligence focuses on the review, audit, and reporting of IP to assess the scope and validity of IP rights owned, claimed by, or licensed to the organization. This review is commonly conducted as a part of an acquisition, merger, sale, or license. But each IP owner can (and should) conduct a review to assess the quality and value of its own rights.

Key Objectives

Every corporate transaction is different. But like the acquisition of any other property interest or right, it is important in every deal to avoid the potential cost and risks of purchase or license by first reviewing and assessing the value and adequacy of the target IP. Start the due diligence review immediately and always in furtherance of the goals of the transaction.

Context matters. The type and purpose of the transaction, the amount of investment or compensation, the perceived importance of the IP, the goals of the purchaser or licensor conducting the review, and the nature and commercial value of the associated business or assets are key considerations.

Review related and relevant documentation supporting ownership, rights, or assertions. Review related development or creative processes and associated documentation evidencing innovation and originality. Interview appropriate individuals involved in the creative or development process. Identify, audit, and report all relevant IP rights.

Assess the third-party landscape to determine past, present, or potential claims, litigation, or proceedings involving the IP. No transaction seeks to acquire or license a liability. Support the due diligence review with appropriate representations or warranties to back the claims of a seller or licensor. Consider a similar approach to reviewing and auditing one's own in-house IP assets.

Intellectual Property Due Diligence Checklist

IP due diligence can range from a bare minimum of review to comprehensive reviews of the associated business operations, processes, and personnel. The main goal in each situation is to ensure ownership or claimable rights and avoid credible third-party IP claims. But regardless of the nature of the transaction, effective IP due diligence generally includes the following:

• Identify and take inventory of all the technology and intangible assets, whether registered or merely claimed
• Review the scope and existence of related IP rights claimed, held, or owned in connection with such assets
• Assess the legal right, validity, and status of the associated IP rights
• Review the related exploitation of the rights under the IP through the examination of related contracts involving the licensing, acquisition, or disposition of the associated IP rights
• Review any associated legal claims, proceedings, or settlements involving the IP (or associated business) in all applicable jurisdictions where creation or development occurred, related business was operated or undertaken, and future business may be operated or undertaken. As a part of this exercise, scrutinize whether any of the target IP is subject to threatened third-party infringement claims and develop a risk assessment for continued use of the IP (or technology) or operation of the associated business
• Consult with a financial professional regarding the related financial value of the claimable IP assets