Intellectual property (IP) Due Diligence

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Intellectual property means intangible assets like patents, copyrights, trademarks and trade secrets which are owned and legally protected by the company or individual. it is a non-physical asset which is owned by the company or a person. IP is the most valued asset of the company.

Table of Content:

1. Intellectual Property Due Diligence

2. Importance of Intellectual Property Due Diligence

3. Intellectual Property Due Diligence Checklist

4. Types of Intellectual Property

5. Intellectual Property Attorneys

6. Procedure Intellectual Property Due Diligence

7. Frequently Asked Questions (FAQs)

What is IP due diligence?

IP due diligence is the investigation of the ownership of the assets owned by the company or individual to determine the actual value of intellectual property. 

In other words, IP due diligence provides in-depth knowledge about the value, ownership and any risk attached to the company’s intangible assets.

Goals of Intellectual Property is to Assess the value of the company’s all intangible assets. 

And it is to assess the depth, scope, ownership and future potential of the intangible assets.

Another goal is to avoid the risk and limitations attached to the intellectual property of the company.

Importance of Intellectual Property Due Diligence 

Some companies only deal with the intellectual property and don’t have any physical assets in existence. 

The Company’s worth can be determined by the strength of its intellectual property. 

Due diligence process is important for both buyers/investors as it helps them to know the acquisition of a target company is worth it.  

  • IP due diligence helps to maximise the value of intangible assets which can uplift the company’s balance sheet.
  • Due to ignorance of IP due diligence, the assets acquired can be overvalued or valued.
  • IP helps to identify the risk attached to the intangible assets of the company. It allows the investor/ buyer to resolve the risk before the agreement.
  • Operations of a company are organised to improve the marketability of its services or products.
  • Helps to secure the value of the assets of a company. 

Intellectual Property Due Diligence Checklist

An intellectual property due diligence checklist is the list of all the items to be checked during an investigation.

IP due diligence is a bit complex, so for smooth investigation paperwork and documentation is done. 

The checklist is prepared in advance for making the IP due diligence process simple as the checklist covers everything that needs to be reviewed during the potential deal.

1. Detailing everything regarding the creation of the product.

2. List everyone who worked on the product.

3. List all the documentation as well as the changes made.

4. Product review must also be viewed.

5. Any documents with the outsiders which helped in the creation of a product.

6. Any documentation regarding the sale, purchase of patents, copyrights, trademarks as well as trade secrets.

7. Details of workers’ status while they were working on the product.

Types of Intellectual Property

1. Patent: Patent is the ownership given to the inventor. Government grants the right to use, make or sell an invention for a limited period of time. Government grants exclusive rights to the inventors of the process, design, or invention in exchange for a comprehensive disclosure of the invention.

2. Trademark: Trademark is defined in Indian Trademarks Act, 1999 as “mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include a shape of goods, their packaging, and combination of colours.”

Trademarks help a business to differentiate from its competitors to what they make, buy and sell.

3. Copyright: It is an exclusive right awarded to the owner to copy, distribute, adapt and display a creative work for a limited period of time.

Intellectual Property Attorneys

intellectual property due diligence services or Investigation of intellectual property value requires a high level of knowledge and understanding about the same.

An intellectual property attorney is a legal professional, who are specialised in carrying out litigation only related to intellectual property cases which includes trademark, copyright and patents. 

Procedure of Intellectual Property Due Diligence

1. Prioritise goals

2. Investigate

3. Result

Prioritise goals: The first stage is to define a goal and prioritise the goal. 

A set of defined goals helps in saving time and money. The goals are to be investigated thoroughly. 

Defining the goals and prioritising them, makes the investigation work more effectively and efficiently.

Here are some examples:-
A. What is the goal of the transaction of the intellectual property?

B. By whom the purchased intellectual property is being used?

C. Does the business protect intellectual property?

D. What measures are taken to protect intellectual property?

E. How is intellectual property pertinent to the business objective?

Investigate: This is the process where facts are explored and information is collected. 

There are two questions that are supposed to ask while conducting an investigation:

Q1. What are the products and/or services involved in M&A deal?

Q2. Does the intellectual property cover these products/services?

These are the legal analysis that will take place during the investigation:

A. Ownership and status

B. Freedom of operation

C. Scope and protection

D. Strength

Result: Final stage of the process is to deliver the result of the investigation. 

This is the stage where all the information is combined and analysed. The result will decide whether the intellectual property is being sold or purchased.

Due diligence is a detailed investigation and verification of financial records before entering into a financial transaction.

  • Financial due diligence
  • Legal due diligence
  • Asset due diligence
  • Human Resource due diligence
  • Taxe due diligence
  • Intellectual Property due diligence



  • It is done to have an exhaustive understanding about the financial statements of a company, so the investor can make intelligible decisions, whether to invest in the company or not.

 

  • Financial due diligence is conducted by the acquiring party. Acquiring party can perform due diligence with an in- house team or can outsource to due diligence professionals.

 

  • Tax due diligence helps in gaining the existing tax structure of the target company. It assesses the unutilised tax opportunities and presents any tax risk available. Tax due diligence is to investigate the target company’s unrecognised taxes and tax expense, if any.

 

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