Your company’s intellectual property (commonly referred to as “IP”), is undeniably important, often its most valuable asset. In most instances it’s usually intangible, so the type of care and security that IP requires is far different from that of any physical assets. Therefore, knowing what IP is, how it should be handled and why it needs to be looked at through a different lens than other company assets is mandatory.


In short, IP is a class of assets that are products of original, creative thought. A brand like Coca-Cola is a great example — the brand name, logo, packaging and the recipe are considered IP. Intellectual Property falls under one of the following categories:


  • Copyrights
  • Patents
  • Trademarks
  • Industrial design
  • Geographical indications
  • Trade secrets


What Is IP Due Diligence?

Simply put, due diligence is an audit, review or investigation performed to confirm the facts in a pending business deal. There are several types of due diligence, including financial, operational and real estate. Of course, knowing how valuable IP assets can be, especially in a business deal, intellectual property due diligence is an important one as well.


As with other types of due diligence, intellectual property due diligence is a deep dive into a company’s IP, in order to determine the value of it. IP due diligence can be performed on the IP of one’s own company (in the event of wanting to sell or just to gauge the current value) or on someone else’s company (in the event of wanting to buy or merge). Virtually every instance of IP due diligence is conducted by intellectual property attorneys.


Why Conduct IP Due Diligence?

IP due diligence is similar to other types of due diligence, to assess the value of an asset. When buying or selling property, it’s important for both parties to come to an agreement over the value of all the assets, IP included. In addition, it’s also important because it avoids risk — knowing not only what the value is but how the IP can be used, and acknowledging the risks and limitations that are attached.


The Endgame

As mentioned above, the overall goal of IP due diligence is to get a fair and accurate assessment of the IP of a company. Before buying (or selling) a company (or a portion thereof), it’s important, similar to any other tangible asset, to get a fair value of the property. IP due diligence is commonly used in the following situations:


  • There is interest from another party to purchase your IP
  • Your company is interested in purchasing another company’s IP
  • A company is interested in licensing your IP (or vice versa)
  • A potential IP trade with another company is pending
  • Preparing for IPO or issuing stock become necessary


The Process of Intellectual Property Due Diligence

Generally, there are three steps in the IP due diligence process. They are the following.


  • Prioritize goals: Agree that the goals of the due diligence process are well defined and determine what parameters and guidelines are enacted to make the process more efficient. Put a deadline in place so the process doesn’t drag on ad infinitum.
  • Conduct the investigation: This is the heart of the matter — the digging for facts and information. In the investigation phase, it’s important to keep the endgame in mind and remain focused on the task at hand. All factors must be scrutinized, including potential risks and liability, ownership status and control, current licensing deals and any pending lawsuits, among other possible issues.
  • Analyze the results: At the end of the day, it’s all about the facts and figures. These can be nailed down by investigating a company’s IP assets and putting the findings into a succinct, cohesive format that clearly spells out the results of the due diligence.


Of course, the entire investigation requires a good chunk of time and multiple parties, each of whom has a different role in the process. The amount of documentation required (and produced) can be massive and requires a solution that can help streamline the transaction and save money for all parties involved.


The Role of a Virtual Data Room

The best (and the most sophisticated solution) is utilizing a virtual data room, commonly referred to as a VDR. A VDR is an online location, a place where companies store (and share) confidential information in a “workspace” for any due diligence transaction.


In today’s fast-paced business world, employing a VDR is a necessity. When it comes to selecting a company to host a virtual data room for your IP due diligence, what you should look for is the following.


  • ​​Top-notch security: It’s vitally important that your trusted virtual data room partner offers enterprise encryption, a necessity that will keep all your data safe.
  • User-friendly interface: An intuitive control panel that enables you to access all areas of your virtual data room, monitor all activity and view activity logs.
  • Easy data management: The ability to seamlessly upload data from your workstation to your virtual data room as well as update and edit files that reside in your workspace.


CapLinked, an industry leader in the VDR space, provides virtual data rooms for companies in multiple industries performing due diligence. The cutting-edge features of CapLiinked VDRs include document and version management, high-level administrative controls, multiple layers of security, encryption and 24/7 customer support. To learn more about how CapLinked can help expedite and lower the cost of your M&A with a virtual data room, sign up for a free trial.


Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer products industries.



Wells Fargo – Intellectual Property: What It Is, How To Protect It

Association of Corporate Council – One Size Does Not Fit All: Tailoring IP Due Diligence to the Transaction

UpCounsel – IP Due Diligence Checklist: Everything You Need to Know