Intellectual Property due diligence

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In a knowledge-heavy industry, the utilization of intellectual property is often the core business. The monetization must be preceded by the creation and protection of intellectual property. So the takeover of such a company is driven by due diligence of intellectual property. You have to devote special attention and care to this topic.

In the software industry intellectual property is often the most important asset of a company. Besides employees and intellectual property there often are no other significant assets or means of production. But how is intellectual property generated and leveraged in the software industry?

Sources of intellectual property rights in the Software Industry

In software companies products are created by own staff and contracted service providers. Own software components, but also third party software components (third party software, open source software, freeware) are used on the basis of usage rights.

In addition, a software company can accumulate intellectual property through acquisitions of companies or by acquiring someone else's intellectual property.

Before you create software, make sure that you own the required intellectual property or that you have rights to use third party intellectual property.

Utilization of intellectual property rights in the Software Industry

The utilization of intellectual property in software companies usually is granting of rights to use intellectual property to customers and granting sublicensing rights to third party resellers. A software vendor might also reveal its intellectual property to a system integrator to enable them to provide services to the software vendorĀ“s customers.

Comprehensive intellectual property due diligence

So what is important if you acquire a software company regarding intellectual property? In a holistic IP due diligence, the stock of intellectual property rights, relations with all sources and all the relations of exploitation are examined. With the acquisition of a software company the following views on intellectual property are relevant:

  • Status and review of intellectual property at the target

  • The current state and future possibilities of utilization of IP

Review of existing intellectual property

Here you examine how intellectual property was created, acquired or licensed in the software company along the following questions:

  • Has the target sufficiently taken measures that work results of employees and service providers are intellectual property of the target?

  • Which patents, trademarks, copyrights, title protection, competition law and subsidiary measures exist and have been taken by the target?

  • Which clauses regarding intellectual property rights are in customer and cooperation agreements to ensure that no intellectual property "is lost"?

  • Which third party intellectual property was and is used by the target and does the target have the appropriate usage rights?

Get more information in the new book!


Or watch my new video series on intellectual property management:

Books about IP due diligence

Software IP due diligence site

(C) Dr. Karl Popp 2014

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