What is Due Diligence in IP?

In M&A, partnerships, or fundraising—due diligence isn’t just a box to tick. It’s the difference between a shrewd deal and a legal nightmare.

Skip it and you lose control before the deal is even signed.
Do it properly, and legal due diligence strips away the gloss, showing you the raw truth of what you’re buying.

What Is Due Diligence?

This isn’t about shuffling paperwork. It’s a forensic probe—an unflinching commercial and legal audit before you seal the deal.

It is your legal X-ray. The only way to see risk before it hits your balance sheet.

What You Can’t Afford to Miss

1. Confirm Ownership
   You’re not just buying assets—you’re inheriting risk. If trademarks or patents are jointly held, restricted, or under dispute, That is a deal breaker.

Miss this, and that “strategic acquisition” could turn into a courtroom brawl.

2. Litigation Landmines
   If the company’s entangled in unresolved claims, you’re not merging—you’re adopting their legal battles. And courts don’t care if you “didn’t know.”
3. Freedom to Operate
   Assume your product doesn’t infringe on someone else’s IP? A cease-and-desist could kill your launch before it starts.
4. Compliance: No Room for Error
   Missing licences, shaky NDAs, or regulatory gaps? That’s not oversight—it’s a liability you’re signing up for.
5. Valuation: Pay for Reality, Not Hype
   Ignore pitch decks. Anchor valuation in evidence, not optimism.. Use market benchmarks, income models, or cost-based methods—but anchor them in verified assets. Paying premium for expired patents? That’s not a deal; it’s daylight robbery.

The Due Diligence Process: Cut the Fluff

1. Scope It Properly
   Focus on what matters: core IP, critical contracts, liabilities, regulatory risks. Everything else is noise.
2. Gather the Paper Trail
   Licences, contracts, litigation history, ownership records. One missing document, and your entire deal could collapse.
3. Trace It Back
   Verify ownership. Confirm dates. Check for competitor overlaps. Assumptions belong in pitch decks, not contracts.
4. Spot the Red Flags
   Lapsed registrations, gaps in IP ownership, open claims—these aren’t quirks. They are legal liabilities waiting to cost.
5. Call It Out—Then Fix It
   Reports should expose risks, not sugarcoat them. If the IP portfolio’s built on shaky ground, say so—then outline how to fix it.

Where It Really Counts

Mergers & Acquisitions
Due diligence shows what you’re really buying. Weak IP? Hidden liabilities? Overvaluation? That’s not an acquisition—it’s a ticking time bomb. Walk away before it blows.

Funding Rounds
Investors don’t buy hype—they buy protection. Show them your IP is locked down, patents enforceable, contracts ironclad. If it is not watertight, the funding will disappear.

Licensing Deals
A single botched clause can turn a licensing deal into a royalty nightmare. If the paperwork isn’t airtight, you might end up paying for work you thought you owned.

Why Bother? (Besides Dodging Disasters)

• Better Decisions: See the real risks—not the polished sales pitch.
• Stronger Leverage: Identify value and leverage it. Spot risk and use it strategically.
• Catch Costly Errors Early: Expired patents, overlapping claims, hidden disputes—due diligence finds what others miss.

What Can Go Wrong? (Spoiler: A Lot)

• Missing Paperwork = No Defence
  Oral agreements? Incomplete contracts? If it is not in writing, you will struggle to defend it in court.
• Cross-Border IP Chaos
  IP laws vary wildly. One wrong move across borders and you lose control of your IP.

UK-Specific Risks You Must Check

• Legal: Compliance with the Companies Act, UK GDPR, shareholder agreements—especially in scale-ups and JVs.
• Financial: Scrutinise HMRC filings, pension liabilities, FSMA adherence. Numbers lie when unchecked.
• Commercial: Competition Act risks, consumer protections, brand positioning—how things are sold matters as much as what’s sold.

Final Word

Due diligence isn’t a delay tactic. It’s how sharp businesses avoid catastrophe.

Do it right, and you gain control, clarity, and leverage. Skip it, and you’re not making a deal—you’re stepping blind into a lawsuit.

Serious firms investigate before they invest. That’s how you win—not just survive.