IP due diligence is a structured assessment of a company’s intellectual property portfolio to confirm ownership, validity, enforceability, and associated risks. In India’s innovation-driven economy, it not only safeguards transactions like M&A or investments but also enhances long-term strategic positioning.
Here’s a comprehensive overview of the process with the additional elements you requested.
What Is IP Due Diligence?
IP due diligence is the investigative and analytical process of evaluating a business’s intellectual property—including patents, trademarks, copyrights, trade secrets, software, domain names, and related contractual rights. Its purpose is to determine the scope, strength, and risks associated with these assets before critical business decisions.
This process ensures legal certainty and commercial clarity, especially in India, where innovation-led enterprises rely heavily on IP as their core value drivers.
Key Steps in the IP Due Diligence Process
Identifying and Listing IP Assets
- Create a complete inventory of IP, including registered and unregistered assets.
- Review internal records, R&D files, contracts, and filings at the Indian Patent Office, Trade Marks Registry, and copyright office.
- Ensure no hidden assets or liabilities are missed.
Verifying Ownership
- Examine chain of title for each asset.
- Confirm that IP developed by employees, contractors, or collaborators is properly assigned.
- Check for licensing restrictions or co-ownerships that may affect transferability or exclusivity.
Assessing Validity and Enforceability
- Ensure that patents, trademarks, and copyrights are valid and subsisting.
- Review pending challenges, oppositions, and potential expiry issues.
- Confirm maintenance fees (renewals/annuities) are up-to-date.
Freedom-to-Operate (FTO) Analysis
- Determine whether current or future products/services infringe on any third-party rights.
- Review Indian and international databases for overlapping rights.
- Provide recommendations to mitigate infringement risks.
Infringement Analysis
- Evaluate whether the company’s IP is being infringed by competitors and whether enforcement is viable.
- Assess ongoing or potential litigation related to IP infringement.
- Estimate potential damages, injunction risks, or reputational impact.
Prior Art Searching
- Conduct targeted searches to verify the novelty and non-obviousness of patents in the portfolio.
- Identify weaknesses that could lead to invalidation proceedings.
- Support valuation of patents by confirming their technological distinctiveness.
Landscape Analysis
- Map the broader IP environment in the relevant industry or technology domain.
- Analyze competitor filings, trends, and white spaces.
- Assess alignment of the company’s IP strategy with market and innovation trends.
Reviewing IP Agreements
- Examine licenses, NDAs, technology transfer agreements, assignments, and employee contracts.
- Identify restrictions, “change of control” provisions, sublicensing rights, or termination triggers.
- Ensure IP agreements are compliant with Indian law and enforceable post-transaction.
Why IP Due Diligence Matters in Transactions
Mergers & Acquisitions (M&A)
- Validates that core IP is secure and transferable.
- Aids in accurate valuation of intangible assets.
- Helps structure warranties and indemnities around IP risks.
Joint Ventures (JVs)
- Clearly defines ownership and usage rights for contributed and newly created IP.
- Prevents disputes about IP developed during the alliance.
Fundraising and Investments
- Proves to investors that IP rights are enforceable and unencumbered.
- Highlights strengths of the company’s market positioning.
- Reveals litigation or infringement risks that could deter investors.
Legal and Regulatory Framework in India
- Patents Act, 1970 – patents and utility protection
- Trade Marks Act, 1999 – brand names, logos, non-traditional marks
- Copyright Act, 1957 – literary, artistic, software, and creative works
- Designs Act, 2000 – industrial designs
- Companies Act, 2013 – disclosure, compliance, and transfer implications
- Information Technology Act, 2000 – domain names, software, and data protection
- Competition Act, 2002 – anti-competitive licensing practices
Compliance with this multi-layered framework ensures enforceability and smooth transfer of IP assets in transactions.
Conclusion: Strategic Value of Expanded IP Due Diligence
IP due diligence goes beyond ownership and registration checks. By integrating freedom-to-operate, infringement analysis, prior art searching, and landscape analysis, businesses gain a 360-degree view of their intangible asset portfolio.
In India’s fast-evolving, innovation-based economy, this holistic approach not only prevents IP-related surprises but also maximizes deal value, strengthens investor confidence, and creates long-term strategic advantage.
