Patent due diligence checklist: 6 things investors expect to see

For startups and mid-sized companies, patent due diligence is one of the most overlooked parts of early IP management—until it becomes a problem. Whether you're preparing for acquisition, closing a funding round, or evaluating an M&A target, IP due diligence can make or break a deal.

This checklist covers what patent due diligence actually examines, what issues commonly surface, and how to prepare your IP house before someone else looks through it.

Why patent due diligence matters

Patent due diligence is the process by which a buyer, investor, or partner systematically evaluates the quality, ownership, and risk profile of a company's patent portfolio. It's not just a formality—undiscovered IP issues are one of the most common reasons acquisitions stall or close at reduced valuations.

Common issues that surface in due diligence:

• Missing inventor assignments (IP not properly owned by the company)
• Gaps in the chain of title (transfers not properly documented)
• Thin provisional applications that won't support strong non-provisional claims
• Prior art that wasn't identified before filing
• Applications abandoned due to missed deadlines
• IP that was created by contractors without proper assignment

The patent due diligence checklist

1. Ownership and chain of title

Every patent or application should have a clear, documented chain of title from the inventors to the company. This means:

• All listed inventors have signed assignment agreements
• All assignments have been recorded with the USPTO
• Prior employers of founders and key engineers have no claim to the IP (particularly relevant if inventions were developed while the inventor was still employed elsewhere)
• Contractor IP has been expressly assigned (not implied)
• Any IP licensed from universities or prior employers has clear terms and doesn't restrict commercialization

2. Portfolio inventory and status

A complete inventory of all patents and applications, including:

• Filing dates and priority dates for each application
• Current status (pending, allowed, issued, abandoned)
• Any office actions pending, with response deadlines
• Maintenance fee status for issued patents (missed maintenance fees cause patents to lapse)
• Any existing licenses, covenants not to sue, or other encumbrances

3. Application quality

For pending applications and recently issued patents:

• Are the claims written broadly enough to provide meaningful protection?
• Do the claims cover the company’s actual products and processes?
• Was a prior art search conducted before filing?
• Is the specification detailed enough to support the claims?
• Are there continuation applications in progress to maintain a live patent family?

4. Freedom to operate analysis

Does the company have the right to make, use, and sell its products without infringing third-party patents? This requires:

• Identification of any third-party patents that might cover the company’s products
• Analysis of whether those patents have been licensed, have expired, or can be designed around
• Assessment of whether any patent holder has previously asserted or threatened to assert their patents

A full FTO opinion is expensive ($5,000–$15,000), but basic FTO research should be part of any IP strategy.

5. Open source and third-party code

For software-intensive products:

• What open source software is incorporated into the product?
• What are the license terms of each open source component?
• Do any open source licenses (particularly GPL) impose obligations that could affect the company’s ability to commercialize or sell the product?
• Has the company complied with attribution and notice requirements?

6. Employee and contractor agreements

All current and former employees and contractors who contributed to the IP should have signed:

• IP assignment agreements covering work done in the scope of employment/engagement
• Confidentiality agreements protecting trade secrets
• Documentation of any exceptions (prior inventions carved out)

7. Litigation and third-party claims

Any history of IP disputes:

• Pending or threatened infringement claims against the company
• Ongoing or completed litigation involving the company’s patents
• Demand letters received or sent
• Inter partes reviews (IPRs) or post-grant proceedings

How to prepare before due diligence

The best time to clean up your IP house is before you're under the time pressure of an active deal.

• Get assignments recorded: If any inventor assignments aren’t recorded with the USPTO, fix this now. It’s straightforward when everyone is cooperative; it becomes complicated if people have left the company.
• Audit your contractor agreements: Pull every contractor agreement and verify IP assignment terms. Fix any gaps while you can still reach people.
• Track your deadlines: Missed maintenance fees and conversion deadlines are avoidable problems. Set up a docketing system or use a patent management service.
• Document your prior art searches: If searches were conducted informally, document what you found and why you believe your claims are distinguishable.
• Consider a pre-diligence audit: Before a significant fundraise or M&A process, a patent attorney can conduct an internal review and identify issues before buyers do.

How Patentext helps with IP hygiene

Patentext helps startups file quality patent applications with proper documentation from the start—so the IP house is in order when due diligence comes around. Our process includes structured invention disclosure, proper chain-of-title documentation, and patent agent review at every stage.

Get started today

‍

This article is for informational purposes only and does not constitute legal advice. Patent laws are complex and vary by jurisdiction. For personalized guidance, consult a qualified patent attorney or agent.