What is Intellectual Property Due Diligence?

Due diligence investigations are usually conducted in conjunction with an investment or transaction, such as a licensing deal, merger, or acquisition. Depending on the situation at hand, the investigation could also include an assessment of the copyrights, patents, trademarks, trade secrets, and any other intellectual property of the target company and an independent investigation of each property’s potential liabilities, potential weaknesses and strengths, logistical information (filing dates, expiration dates, maintenance fees, assignment records, etc.), prosecution history and related prior art, ownership information, and inventorship. The following provides a broad overview of some of the issues unique to each branch of intellectual property in performing an intellectual property audit & due diligence.

Patent Due Diligence

In a due diligence investigation involving patents, the investigation could include a review of the patents, patent applications, invention disclosures, and their associated file histories. The investigation could reveal issues with inventorship, claim amendments, prior art references, and possible prosecution history estoppel. The due diligence investigation could also include reviewing ownership agreements, ensuring that the chain of title is continuous and correct, assessing whether any third parties have a security interest in the subject patents or patent applications, and verifying that all issue and maintenance fees have been paid. Depending on the investigation, a review of the records in both in the U.S. Patent and Trademark Office (USPTO) and in any Uniform Commercial Code (UCC) filings may be warranted. In some cases, a review of any patent pending or patented products covered by an issued patent may also be warranted to check for proper markings and compliance with company standards.

Copyrights Due Diligence

In a due diligence investigation involving copyrights, the investigation could include a review of copyrighted works of commercial value. The investigation could reveal issues with authorship and ownership of such works. For example, the investigation could include verifying that employees and consultants executed express assignments of the copyrights to the apparent copyright owner. The due diligence investigation could also include reviewing ownership agreements, ensuring that the chain of title is continuous and correct, assessing whether any third parties have a security interest in the subject works, and verifying that all registrations were completed properly. When the subject works include software, the investigation could include reviewing any licenses in which the subject works were named (or should have been named). In some cases, the investigation may warrant reviewing the works for proper copyright notices.

Trademark Due Diligence

In a due diligence investigation involving trademarks, the investigation could include a review of registered marks (both domestic and foreign) and common law marks. The investigation could include verifying ownership and licensing agreements, ensuring that the chain of title is continuous and correct, assessing whether any third parties have a security interest in the marks, and verifying that all registrations were completed properly. If the marks are involved in a licensing agreement, the investigation could include verifying that the goods and services associated with such marks meet specified quality standards. The due diligence investigation may also warrant reviewing the products, promotional materials, websites, and other materials for proper trademark markings and assessing whether any potential infringements may be identified. In cases involving products imported from a foreign country, the investigation could include an inquiry into whether any of the registered trademarks were recorded with U.S. Customs.

Trade Secret Due Diligence

In a due diligence investigation involving trade secrets, the investigation could include a review of the procedures and protection systems in place to maintain the trade secret. For example, the investigation could include a review of employment agreements, employee handbooks, standard operation procedures, licensing agreements, confidentially agreements with third parties, and security measures related to the trade secret.

Technology & Data Legal Counseling

Our technology law team provides technology & data counseling services on a broad range of issues, including:

See our Legal FAQs page for the answers to more intellectual property law questions.

Klemchuk PLLC is a leading intellectual property law firm focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. We help clients protect innovation and increase market share through investments in IP.

This article has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact-specific situation under federal law and the applicable state or local laws that may impose additional obligations on you and your company. © 2023 Klemchuk PLLC