IP Due Diligence Checklist
At Mage, we help you verify intellectual property ownership before closing. Our approach surfaces chain of title issues, contractor assignment gaps, open source risks, and trademark defects so nothing slips through the cracks.
Why We Prioritize IP Due Diligence
IP due diligence is "forensic" work. We help you confirm that the target company actually owns the assets it claims to sell and that those assets are free from encumbrances that could destroy their value post-close.
Famous Failure: Volkswagen & Rolls-Royce (1998)
VW paid $790M for Rolls-Royce factories and car designs, assuming the brand name came with them. The trademark was actually owned by a separate entity. VW owned the factory but had no right to use the Rolls-Royce name or logo.
Chain of Title Verification
Goal: Ensure a continuous, unbroken history of ownership from the original creator to the current seller.
How Attorneys Verify Ownership
Public Database Searches
USPTO Assignment Database, EPO Register, WIPO records. Look for recorded paper trail for every transfer.
Assignment Document Review
Original invention assignments, purchase agreements, merger documents showing IP transfer.
Red Flag: Break in Chain. If Company A sold a patent to Company B, but the A-to-B transfer was never recorded, Company B cannot prove it has the right to sell the asset.
Employee & Contractor IP Assignments
Goal: Confirm that every person who wrote code, designed a logo, or invented a product has legally signed their rights over to the company.
Employees
In most U.S. jurisdictions, work by employees is "work made for hire" and automatically belongs to the employer.
Best Practice: Still look for signed PIIAAs (Proprietary Information and Inventions Assignment Agreements).
Contractors
High RiskUnless a written contract explicitly assigns IP to the company, the contractor retains ownership of their work.
Risk: A founder or early contractor who left on bad terms might still personally own the core algorithm.
What to Request in Due Diligence
Signed PIIAAs for all current employees
Signed IP assignment agreements for all contractors
Consulting agreements with IP ownership clauses
List of all founders/early contributors and their assignment status
Any disputes or claims related to IP ownership
Open Source Software (OSS) Risks
Goal: Identify "copyleft" code (like GPL) that could legally force the buyer to release their own source code to the public.
The "Tainting" Effect
If a target copied GPL-licensed code into their proprietary product, the entire product might legally be subject to the GPL, meaning it can no longer be sold as proprietary software.
License Risk Levels
High Risk (Copyleft)
GPL, AGPL, LGPL - Can "infect" proprietary code, requiring source disclosure
Medium Risk (Weak Copyleft)
MPL, EPL - Requires sharing modifications to the specific library only
Low Risk (Permissive)
MIT, Apache 2.0, BSD - Can use in proprietary software with attribution
Case Study: Cisco & Linksys (2003)
When Cisco acquired Linksys for $500M, they discovered the WRT54G router used GPL code without releasing the source. The Free Software Foundation sued, forcing Cisco to release the source code, creating the OpenWrt community.
Best Practice: Request a Software Composition Analysis (SCA) report using tools like Black Duck, FOSSA, or Mend.io before closing.
Patent Portfolio Analysis
Goal: Verify that patents are valid, enforceable, and actually cover the company's revenue-generating products.
Key Verification Points
Maintenance Fees Paid
Have all renewal fees been paid? If not, the patent may have lapsed.
Claim Scope
Does the patent actually protect the product, or are claims too narrow?
Terminal Disclaimers
Are there limitations on how long the patent protection lasts?
Prior Art / Validity Challenges
Any IPR proceedings or prior validity challenges?
Trademark Registration Verification
Goal: Ensure the brand is protected in all key markets and isn't vulnerable to cancellation.
Verification Checklist
Global Coverage
Is the mark registered in all key markets? (US, EU, key Asian markets)
Use in Commerce
Is the mark actually being used? In many countries, 3-5 years of non-use allows cancellation.
Correct Classes
Is the mark registered in the correct "class"? (e.g., software vs. t-shirts)
IP Due Diligence Checklist
Complete list of all patents, trademarks, copyrights, and domains
Chain of title documentation for all registered IP
Signed IP assignments from all employees (PIIAAs)
Signed IP assignments from all contractors/consultants
List of inbound licenses (IP licensed FROM others)
List of outbound licenses (IP licensed TO others)
Software Composition Analysis (SCA) report for OSS risks
Patent maintenance fee payment history
Trademark use evidence and renewal status
Any IP-related litigation, disputes, or cease & desist letters
How Mage Keeps You Organized
IP Clause Extraction
We automatically identify and extract IP ownership, assignment, and license provisions across your data room
Gap Detection
Our analysis flags missing contractor assignments, unrecorded transfers, and chain of title breaks
OSS Risk Scanning
We surface open source license risks and help you build a complete picture of software composition