Conducting intellectual property due diligence for an Australian M&A or investment transaction
IP due diligence verifies that the target actually owns or controls the IP it claims, that the IP is valid and enforceable, and that there are no encumbrances or disputes that could reduce its value. Poor IP due diligence is one of the most common sources of post-acquisition disputes.
This is an 8-step workflow for identifying, verifying, and assessing the intellectual property assets of a target entity as part of a transaction, covering trade marks, patents, designs, copyright, and trade secrets.
Before you start
- Access to the target's data room or IP records
- A preliminary list of the target's claimed IP assets
- The transaction structure (share sale, asset sale, or licence)
- Budget and scope for third-party searches
The workflow
Request and catalogue the IP schedule
Obtain the target's IP schedule listing all registered and unregistered IP: trade marks, patents, designs, domain names, copyright works, trade secrets, and know-how. Cross-check against public registers for completeness.
Verify ownership and chain of title
For each registered right, search the relevant register (ATMOSS for trade marks, AusPat for patents, IP Australia for designs) to confirm the target is the registered owner. Trace any assignments, ensuring they were properly executed and recorded.
Check validity and renewal status
Confirm that registrations are current and renewal fees are paid. For patents, check whether maintenance fees are up to date and whether any claims have been narrowed during examination. For trade marks, check for any pending removal actions.
Review IP agreements and encumbrances
Examine all licences (in and out), assignments, co-ownership agreements, security interests (PPSR registrations), and development agreements. Identify any change-of-control provisions that could be triggered by the transaction.
Assess employee and contractor IP ownership
Review employment contracts and contractor agreements to confirm IP created by employees and contractors has been properly assigned to the target. Under Australian law, the default position for contractors is that they own the IP they create unless assigned.
Identify disputes, oppositions, and infringement risks
Search for any pending or threatened IP disputes, opposition proceedings, or infringement claims involving the target — both as plaintiff and defendant. Check court registries and IP Australia opposition records.
Evaluate unregistered IP and trade secrets
Assess the target's protection of unregistered IP: confidentiality agreements, access controls, trade secret policies, and copyright ownership records. Unregistered IP is often the most valuable but hardest to verify.
Prepare the IP due diligence report
Compile a report summarising the IP portfolio, ownership status, validity, encumbrances, risks, and recommended warranty and indemnity protections for the transaction agreement. Flag any material issues requiring resolution before completion.
What you will have at the end
A completed IP due diligence report identifying all material IP assets, their ownership status, encumbrances, risks, and recommended protections for the transaction documents.
Common issues
- The target's IP schedule is incomplete or outdated, missing key unregistered rights
- Assignments from contractors not properly executed, leaving ownership gaps
- Registered IP with lapsed renewals that cannot be restored
- Licence agreements with change-of-control clauses triggered by the transaction
- PPSR security interests registered against IP assets by lenders
Run this workflow on a real matter
Quillio searches public IP registers, cross-references the target's claimed IP schedule, and flags ownership gaps or approaching renewal deadlines. See /practice-areas/commercial-lawyers or start a free trial.
This workflow is a general guide. The scope and depth of IP due diligence should be tailored to the transaction value, the target's industry, and the significance of IP to the business.
Try this workflow with Quillio.
Quillio can run this workflow on a real matter, with citations to current AU authority on every step. The free trial requires no credit card.
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