Raising funds requires a startup to have a valuable brand, technology, product designs, content, data, trade secrets or proprietary know-how. These assets can play a central role in funding, acquisition, licensing, partnerships and market expansion, making intellectual property one of the most important assets for a startup. However, many startups build their IP portfolio informally during the early stages. Founders often believe that creating a brand before incorporation, designing the logo or website, and designing a product can give them a competitive edge. On the contrary, these untimely steps can act as a roadblock during investment due diligence.
This is where IP due diligence helps a startup assess whether it actually owns and controls the intellectual property that forms the very foundation of a business. It also helps investors identify potential risks relating to third-party infringement, weak or inadequate assignment/licensing documentation, unregistered rights, pending disputes, open-source software, employee-created works and confidentiality breaches. A strong IP portfolio can improve valuation and reduce transaction delays, while ensuring investors that the business can scale without avoidable IP disputes or ownership challenges.
Identify the Core IP Assets
The first step is to identify the intellectual that is central to the startup’s business model. Not every startup would have every type of IP, but most have at least one or more key intangible assets. For instance, trademarks are considered the most important asset for any business, as they include the startup’s name, product names, logos, taglines, app names, domain names, packaging, social media handles and brand identity. These IP assets help distinguish the startup’s goods or services from those of competitors and play a critical role in building customer recognition and goodwill.
Similarly, patents and patent applications are central to valuation for deep tech, pharma, med tech, engineering, biotechnology, green technology or hardware startups. A design registration can help a startup protect the external appearance of its products, especially when it comes to fashion, product, furniture, consumer goods, packaging or lifestyle startups. For businesses that are engaged in sectors such as media, education, gaming, marketing, or entertainment, copyright protection is key for strong investment readiness. Therefore, for any startup, the common first step in IP due diligence is to identify not only the IP that the startup has registered, but also the IP it actually uses in its business. This also ensure that all material IP assets are accounted for and appropriately protected.
Ownership and Pre-Incorporation IP
A common problem faced by startups in IP due diligence is establishing the ownership of IP created before incorporation. Many times, founders develop their business name, prototype, code, pitch deck, product design, website or technical concept before the company is even formally incorporated. The gravity of the issue increases if such assets were created by the founders individually and never assigned to the company. In such cases, the startup may not legally own any of the IP it uses. This can lead to risk for investors since the company’s business may depend on assets still held by one or more founders personally.
Here, it is important for a startup to establish and for investors to check whether any pre-incorporation IP has been assigned to the company through written assignment agreements. This may include trademarks, domain names, software code, inventions, prototypes, designs, content, data and confidential know-how. The startup must also ensure that domain names, app store accounts, social media handles, repository accounts and cloud accounts are held in the company’s name and not in the personal name of a founder, employee or consultant.
Trademark Checklist for Startups
Trademarks are highly important for startups as brand identity is often built early and marketed aggressively. Investors often check whether the startup has conducted proper clearance searches before adopting its brand. For this, a startup must perform a thorough trademark due diligence to check the following before approaching investors:
- The filing or registration status of a startup’s name and logo (establishing the chain of title).
- The correct classes under which the mark is filed.
- The goods and services sold under the mark.
- Any objections, oppositions or similar marks that may create conflicts.
- Ownership of the mark.
- Exact use of the mark by the startup.
- Consistency of the mark with the domain name and social media handles of the startup.
- Whether the brand can be protected or is it descriptive or generic.
- If the startup plans to expand internationally and file a trademark in key foreign markets.
Patent Checklist for IP Due Diligence
Sectors such as information and technology, pharmaceuticals and medical devices, biotechnology, engineering and deep tech rely heavily on patent diligence. Investors generally check whether the startup has identified patentable inventions and whether patent applications have been filed in India or abroad. Therefore, it is important for a startup to review whether the patent claims actually cover its core product or technology, or whether the filing is too narrow to provide relevant IP protection.
This also includes thorough examination of the inventorship and ownership in a patent. In cases where employees, consultants, academic institutions or research partners contributed to the invention, the startup must have proper assignment documents in place.
Additionally, Indian startups filing a patent application in any other jurisdiction must also keep track of their foreign filing compliance requirements under the Patents Act. If a patent holder is a resident in India at the time of filing the patent application outside India without first filing in India or obtaining foreign filing permission, it can create severe legal consequences for the startup.
Patent due diligence also includes a detailed freedom-to-operate (FTO) review to identify and assess any existing third‑party patents or pending patent applications that could potentially be infringed by the development, manufacture, use, or commercialisation of the proposed product or technology. This also helps ensure that appropriate risk‑mitigation strategies can be put in place before the startup approaches an investor.
A startup should review the following as part of its patent due diligence process before approaching investors:
- The filing, prosecution and grant status of patents and patent applications.
- Ownership of the patents and patent applications.
- The inventorship of the patented invention and whether all inventors have been correctly identified.
- Whether there is a clear chain of title evidencing the transfer of rights from inventors to the startup.
- Whether appropriate assignment agreements have been executed with founders, employees, consultants, academic institutions, research partners and other contributors to the invention.
- Any co-ownership rights, encumbrances, licences or third-party interests affecting the patents or patent applications.
- Whether the patent claims adequately cover the startup’s core product, technology or innovation.
- Whether the scope of the claims is sufficiently broad to provide meaningful and enforceable protection against competitors.
- Any pending examination reports, objections, oppositions, revocation proceedings or patent-related disputes.
- Compliance with foreign filing requirements, including obtaining prior permission where required under the Patents Act, 1970.
- The jurisdictions in which patent protection has been sought and whether the filing strategy aligns with the startup’s business and expansion plans.
- The remaining patent term and maintenance status of granted patents.
- Whether the startup has conducted a freedom-to-operate (FTO) assessment.
- Any existing third-party patents or pending patent applications that could be infringed by the development, manufacture, use, sale or commercialisation of the startup’s products or technology.
- Whether appropriate risk-mitigation measures, such as design-arounds, licensing arrangements or invalidity analyses, have been considered to address identified FTO risks.
This review helps ensure that the startup’s technology is adequately protected, ownership is clear, regulatory requirements have been complied with, and potential infringement risks are identified and managed before investor scrutiny.
Copyright Due Diligence Checklist for Startups
Many businesses involve copyright-protected assets, such as software, website content, UI/UX design, marketing material, photographs, videos, training material and product documentation. This makes it important for the startup to have proper employment agreements to establish ownership when such copyrightable material is created by employees, and written assignment agreements when such work is done by freelancers, consultants, agencies or outsourced vendors for the startup. Further, a startup must perform a thorough copyright due diligence to check access to records, open-source software use and compliance with the applicable open-source licence terms, third-party Application Programming Interfaces (APIs) and Software Development Kits (SDKs), software licences, documentation of development history as well as AI-generated code or content usage before approaching investors. Copyright due diligence may also cover review of the ownership of written content, photographs, videos, music, graphics, illustrations and course material. Any use of stock images, licensed music or third-party content must also be supported by proper licences.
Design Due Diligence
Design registration protects the visual appearance of a product, including shape, configuration, pattern, ornamentation and surface features. Investors check whether the startup has registered key product designs before its launch. If the startup has already displayed the product on social media platforms, e-commerce websites, catalogues, pitch decks or exhibitions, it may lead to prior publication issues. Startups must also examine whether the design was created internally or by an external designer, and whether rights were duly assigned to the company.
Contract Management in IP Due Diligence
IP due diligence is not limited to IP registration, but also includes how the relationship between the startup and its employees, consultants, developers, designers, agencies and interns is managed. A strong, watertight contract must be put in place when a startup engages any of these individuals, especially when the individual is directly involved in the creation, use or management of the startup’s IP assets. This includes having proper IP assignment clauses, confidentiality/non-disclosure obligations, invention assignment, moral rights waiver, restrictions on unauthorised use of company data, and post-termination confidentiality. The agreement must also clearly mention that all work product created for the startup belongs to the company.
IP Disputes and Notices
Investors also check whether the startup has received or sent any IP-related notices before issuing funds. This includes cease-and-desist letters, takedown requests, platform complaints, trademark objections, oppositions, copyright claims, patent warnings, design piracy allegations and domain name disputes. A startup must not consider such notices as irrelevant, as they can indicate serious legal risk to its IP assets. It must consistently check if the dispute affects the core brand, product or technology of the business before investors are involved.
Third-Party Use Licences
During the early stages, startups heavily employ third-party technology, APIs, platforms, data, payment gateways, software tools, fonts, stock images, cloud services and content libraries. An IP due diligence extends to checking whether the startup’s licences permit commercial use, modification, sublicensing, distribution and scaling. If the startup’s core product depends on a third-party licence that can be terminated easily, this can severely affect valuation.
Digital Assets Due Diligence
Domain names, mobile apps, app store accounts, social media pages, and digital storefronts are commercially important for a startup, as a large segment of consumers rely on digital channels to make purchases, identify new brands, and compare products. Therefore, it is important for a startup to perform proper due diligence regarding domain name ownership, control of app store accounts, social media handles and admin access, and consistency in brand names across platforms. Digital control gaps can create operational risk, especially if a founder exits or a dispute arises.
Investment Documentation
A key factor that startups often overlook is preparing proper investment documents that clearly reflect the IP diligence findings. A startup must ensure that the following information is properly laid out in all its investment documentation and presentations:
- Proof of ownership and valid rights to use its IP.
- Proper assignment of founder/employee/consultant-created IP to the startup.
- Proof of no infringement of third-party IP.
- Proper confidentiality and trade secret protection measures.
- Compliance with open-source software licences and confirmation that no open-source obligations adversely affect the startup’s proprietary technology.
- Disclosure of any IP disputes or notices.
- Accuracy of all the registrations and applications disclosed to investors.
Conclusion
IP due diligence is a test of whether the startup actually owns the assets that support its business and valuation, and how strong its IP portfolio is. A startup may have a strong product, identified market and a strong team, but weak IP management can lead to potential investment risks. As IP due diligence helps investors identify these risks before capital is committed, building a clean IP portfolio early improves the credibility of the startup, supports its valuation and improves the startup’s standing during fundraising. In a globally competitive market, IP due diligence can be a key differentiator in raising funds and converting intangible value into legally strong commercial assets.
Authors: Manisha Singh and Priyanka Gupta