Daniel Vinnik
Daniel Vinnik

Lawyer

Phone numbers
+38 (073) 007-44-41

Expert in international corporate, IT, and crypto law. Has extensive experience in business setup and support in the USA, EU, LATAM, and the Middle East. Specializes in corporate structuring, compliance, KYC/AML, IP, GDPR, as well as regulation of crypto and fintech projects.

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IP Due Diligence (Audit) for Business

IP Due Diligence (Audit) for Business

IP due diligence (or IP audit) is a check of whether a company really owns the intellectual property it earns and whether it can safely use it tomorrow morning. Because in the legal world, “we did it” does not mean “we can legally sell it”.

In short: IP DD answers three questions:

  • what exactly is an IP asset;
  • who owns it;
  • what are the risks (and how to eliminate or accept them).

When is IP Due Diligence needed the most?

The most common triggers:

  • M&A / investment / sale of a share: the investor wants to understand that he is buying not only a team and a presentation.
  • partnership / license / franchise / distribution: the counterparty asks for guarantees of rights and the absence of disputes.
  • relocation / structure with a holding: IP must be correctly “placed” in the right company and country.
  • product scaling: entering new markets, marketplaces, advertising – and suddenly a “letter of happiness” appears about infringement of rights.
  • internal hygiene: when a company has grown faster than its contracts.

IP Due Diligence (Audit) for Business

What exactly is checked in an IP Audit?

IP DD is not limited to “do we have a trademark or not”. They check everything that creates or protects the value of the product.

Software and content rights (for IT this is #1)

  • whether the transfer of property rights from employees/contractors is formalized;
  • whether there are correct IP clauses in employment/gig/contractor agreements;
  • who owns the source code, design, documentation, UI/UX, content;
  • whether the rights are not mixed between a group of companies (“code in LLC, domain in FOP, brand in founder”).
It will also be useful: Cost of trademark registration (TM) in Ukraine

Open-source compliance (often “mine” under the agreement)

  • which OSS libraries are used;
  • whether the use complies with licenses (MIT/Apache/GPL/AGPL, etc.);
  • whether there is an obligation to open the code or transfer derivative works.

TM, brand, domains, social networks

  • TM registrations (classes, territories, owner, validity, encumbrances);
  • risk of conflict with other people’s trademarks;
  • domains: who owns them, where they are registered, is there access control;
  • accounts in marketplaces/social networks: who they are registered for, who is the administrator.

Patents, utility models, industrial designs (if relevant)

  • are there objects, is there a point in registering them;
  • are you not violating other people’s rights (minimum level of freedom-to-operate).

Contracts that “touch” IP

  • contracts with clients (who owns the result, is there a license, guarantees, indemnity);
  • contracts with contractors (ownership, subcontracting, confidentiality);
  • NDA / NCA / non-solicit (so that it doesn’t “leak” out of your head);
  • platform terms (app stores, marketplaces) — sometimes they “take” more rights than it seems.

Disputes, claims, blocking

  • existing/potential disputes;
  • claims from copyright holders or former contractors;
  • DMCA/complaints/blocking accounts.

Typical “red flags” (which then cost more than an audit)

  1. no signed IP Assignment / acts / correct terms in contracts with developers;
  2. key code was written by “a friend of a friend is a freelancer”, and legally he has the rights;
  3. TM is registered to the founder, not the company;
  4. domain/accounts are issued to an employee/marketer (and he is no longer “on the team”);
  5. GPL/AGPL is used at the heart of the product, and the sale is going on as a “closed SaaS”;
  6. customer contracts contain guarantees “we don’t violate anything” without any verification;
  7. the brand name turns out to be “occupied” in key countries/classes.

How IP Due Diligence works: a 6-step process

  1. Scope and goals. What assets? What jurisdictions? For what (investment, sale, internal cleaning)?
  2. Data room and document checklist. The company collects documents; we immediately see where the “hole” is.
  3. Legal analysis + chain of title reconciliation. Rights should not “appear out of thin air”. They should be transferred/created/registered.
  4. Interview / clarification. Short questions to CTO/PM/HR/marketing. Often this is where the real picture opens.
  5. Risk Matrix + prioritization. Risk = probability × consequences. It is important not to “scare”, but to rank.
  6. Report + Roadmap for eliminating risks. Specific actions: what contracts, what registrations, what changes to templates, what confirmations to collect.

What documents are usually needed (short checklist)?

For software/content

  • register of developers (staff/contract), copies of contracts;
  • IP clauses / assignment / acceptance certificates;
  • policy for working with code/repositories (who has access);
  • list of third-party components (OSS) or SCA report (if any).

For a brand

  • TM certificates / applications / correspondence with patent attorneys;
  • licenses / permits for using the brand (if any);
  • list of domains, registrars, accesses.

For commercial contracts

  • template agreements with customers/partners;
  • key contracts where IP is critical (enterprise, white-label, franchise);
  • NDA / DPA (if necessary).

For disputes

  • claims/letters/complaints;
  • court/arbitration materials (if any).

Table: what do we check and what are the most common risks?

Object of verification Key question Evidence/document Typical risk
Source code / repositories Who is the copyright holder? contracts, IP assignment, deeds, access policies contractor/ex-employee rights
UI/UX, design, content Are property rights transferred? contracts with designers/content “bought the layout” ≠ bought the rights
OSS components Are licenses compatible with the product model? library list, policy, SCA GPL/AGPL risks, disclosure obligation
Trademarks Who is the owner and where is the protection? Certificates/applications/classes TM on an individual or in the wrong classes
Domains/Accounts Who controls access? whois, registrar, 2FA, admin loss of control, blocking
Customer Agreements Who owns the work product? MSA/SOW, license terms exclusive/excessive warranties
Disputes/claims Are there any active conflicts? letters/complaints/courts “surprise” during the investment

What does the client get at the exit?

IP DD (Audit) → Report → Risk Matrix → Action Plan (Roadmap) → Fix Pack

Examples of a “fix pack”:

  • updated contracts with contractors/employees with correct IP assignment;
  • decisions on re-registration of domains/accounts and access policy;
  • plan for registration/expansion of TM (classes/countries);
  • OSS policy and process of approval of libraries;
  • corrections of guarantees/indemnity in contracts with customers.

Practical part: how to prepare for an audit in 24–48 hours?

  1. make a list of people who created the product in the last 2–3 years;
  2. collect their contracts and find out if there are property rights there;
  3. prepare a list of domains and accesses (registrar, mail, 2FA);
  4. form a list of TMs/applications/brands;
  5. extract 5–10 key contracts with customers;
  6. If there is OSS, at least prepare a list of critical libraries.

How can we help?

The Prikhodko & Partners team supports IP due diligence for both internal audits and M&A/investment deals:

  • we form a clear scope and checklist for your product (software-first);
  • we create a chain of title by code/content/brand;
  • we prepare a Risk Matrix with priorities and specific actions;
  • we provide a package of documents for correction (contracts, IP assignment, NDA, policies);
  • if necessary, support for TM registrations and IP structuring between group companies.

IP due diligence does not “guarantee that there will be no problems”. It guarantees something else: problems become visible before they become expensive. To get a consultation and find out the cost of IP Due Diligence (Audit) for your business – fill out the form below.

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