How to Prepare for IP Due Diligence – The Ultimate Guide for Ventures

An intellectual property (IP) due diligence is a comprehensive audit of a company’s intangible asset portfolio (patents, trademarks, trade secrets, copyrights), carried out by potential investors,  partners or buyers when the venture is raising capital. It is an essential part of evaluating your venture’s strengths, weaknesses, and risk exposure to help determine financial value and market standpoint so that potential investors or partners can take an informed decision on investment or collaboration. It is good practice to conduct regular IP audits internally to the venture to make its own self-assessment of the IP it owns or manages.

Integrating diligence readiness into daily operations is key for ventures to secure IP investments and avoid any delays for getting investments. In fact, IP conflicts can block product launches or commercial agreements, or simply cause unnecessary costs to a venture’s go-to-market strategy.

Key steps for ventures to prepare for a due diligence process:

1. Create an IP inventory in a SBOM

If software is a core asset of your venture’s business model, map and do an inventory of all intangible assets including proprietary source code, third-party libraries, open-source components, acquired licenses, technical documentation using a comprehensive software asset inventory; known as a software bill of materials (SBOM).

2. Build an IP portfolio and ownership register

Make sure your venture keeps an up-to-date register of all intangible assets and IP rights it owns: from patents to design rights, copyrights, trademarks, etc. Your venture must provide evidence that they own the IP and the chain of ownership, giving access to contracts, development agreements, and copyright assignments. This will help establish which codes, datasets, brands, domain names, and other intangibles the company controls, how they are managed, and their registration/renewal status.

3. Create a licensing and obligations report

Accompanying the Chain-of-Title and policy dossier, the company should provide a licensing and obligations report that classifies permissive vs. copyleft terms, check license compatibility, and confirm distribution obligations, enabling investors to verify license compliance.

4. Provide a risk and licensing report

Assess infringement risk: patent searches, similarity analysis, litigation probability, freedom to operate (FTO) verification.

This should help investors clarify hidden liabilities such as pending or threatened litigation, regulatory exposure, security or technical debt, and the risk of unintended disclosure of trade secrets.

5. Security report and freedom-to-operate analysis

The security report evaluates the security posture of the company by identifying known vulnerabilities, analyzing third-party dependencies, and verifying patch status. As part of this process, the company should conduct a FTO, identifying which third-party rights are in use, the basis on which they were acquired or licensed, and any conditions or infringements that could restrict future scaling.

6. Preparing an effective data room

The company’s virtual data-room (VDR) will be the primary vehicle for the entire IP due diligence process where a venture can upload reports, certificates, contracts, and evidentiary files. To facilitate the investor’s or external audit a data-room must be organized and your venture should:

• Assign clear responsibilities – legal, technical, and managerial teams must understand their roles.
• Create a definitive snapshot – establish a read-only branch of all repositories and record cryptographic hashes.
• Create a software bill of materials (SBOM) that lists every third-party component and license.
• Create a master IP register that includes both registered and unregistered assets.

7. Issue a Bring-Down Certificate

The company’s management must confirm that no material IP changes occurred after the data-room launch by issuing a bring-down certificate; a legal document that is issued when financing has been granted to confirm that representations and warranties that were made at signing remain true on the closing date.