By S&S Co. Advocates & Solicitors · Published 29 September 2026 · Informational content, not legal advice: see our disclaimer
Why IP Due Diligence Is a Distinct Workstream
In many transactions, intellectual property: brands, patents, proprietary software, trade secrets and content libraries. Represents a substantial part of the target's real value, yet IP issues are sometimes treated as a checkbox item within broader legal due diligence rather than a focused workstream. Undetected IP defects can materially affect valuation or even the acquirer's ability to use the target's core assets post-closing.
Verifying Ownership and Chain of Title
The first task is confirming the target actually owns what it claims to: checking that patents, trademarks and designs are registered in the target's name (not a founder's personal name or an affiliated entity), that employee and contractor agreements contain proper assignment-of-inventions and works-for-hire clauses, and that any historical assignments were validly executed and recorded with the relevant registry.
Checking Registration Status, Renewals and Encumbrances
Due diligence should confirm that registrations are current and properly renewed, identify any pending oppositions, rectifications or invalidation proceedings, and check for encumbrances such as existing exclusive licences, security interests or pledges over the IP that could restrict the acquirer's use or transfer of the asset after closing.
Litigation Exposure and Third-Party Rights
Diligence should also surface any ongoing or threatened infringement claims: both those brought by the target against others and, critically, any claims that the target's own products or branding infringe a third party's rights, since an acquirer inherits that exposure. Reviewing key licence-in and licence-out agreements for change-of-control clauses is equally important, since some licences terminate or require consent upon an acquisition.
Frequently Asked Questions
Why can't IP due diligence just be folded into general contract review?
IP ownership questions are often more technical and registry-specific than ordinary contract review: verifying chain of title, registration status, oppositions and encumbrances typically requires searches with the relevant IP registries, not just a review of the target's contract files.
What happens if a target's core trademark is registered in a founder's personal name?
This is a common defect discovered in diligence. It means the target company itself does not own the mark, and the acquirer should require a formal assignment to the target (and recordation of that assignment) as a condition to closing.
Do existing licence agreements automatically transfer in an acquisition?
Not necessarily: many licence agreements contain change-of-control clauses that can trigger termination or require the licensor's consent, so these need to be reviewed and addressed before closing, not discovered afterward.
What if the target is itself facing an infringement claim from a third party?
An acquirer generally inherits that litigation exposure post-closing, so any pending or threatened third-party infringement claims against the target should be factored into deal risk allocation, indemnities, or pricing.
References & Further Reading
This article references the following statutory provisions. Readers should always verify current rules, fees and timelines against the applicable statute and rules as amended, since these are revised from time to time.
- Trade Marks Act, 1999; Patents Act, 1970; Copyright Act, 1957 (assignment and recordation provisions relevant to ownership verification).