Summary
This post outlines key intellectual property considerations for startups that are often scrutinised by venture capitalists and investors. It presents a detailed checklist covering the value and structure of IP portfolios, ownership clarity, risk mitigation, and licensing potential. The analysis extends to specific IP forms such as patents, trademarks, and copyrights, highlighting compliance, due diligence, and legal agreements. Special attention is given to e-commerce startups and the need for comprehensive legal instruments. The post emphasises that these questions are illustrative and encourages startups to seek expert advice for their specific situations.
The following are basic questions that venture capitalists and investors typically ask before investing in a start-up, covering the full range of intellectual property due diligence.
General IP Due Diligence Questions
- What is the value of intellectual property for the start-up’s business, revenues, and competitive advantage in the market?
- Is the start-up IP driven?
- How strong is the start-up’s IP portfolio when compared with its competitors?
- Is IP ownership clear, and are all linking documents in place?
- Will the IP portfolio help in retaining revenues, and opening new revenue opportunities?
- Is the start-up’s IP licensable and sellable?
- What is the financial value of the start-up’s IP portfolio?
- Has the start-up protected all forms of IP such as patents, trademarks, copyrights, designs, etc.?
- Does the start-up have a well-framed IP and confidentiality policy and process in place? Is it following the policy or process strictly?
- Is the start-up following IP best practices?
- Has the start-up taken the necessary steps to avoid or mitigate IP risks?
- Are there any litigation, oppositions, conflicts, or encumbrances with respect to the start-up’s IP?
Patents
- Is the start-up technology driven?
- Does the start-up have exclusivity in the market through its patents?
- What is the quality of its patents, and where do they stand with respect to similar patents and technologies?
- Have patents been filed on time? Are there any risks from prior sale, publication, or other actions before patent filing?
- Has the start-up signed appropriate agreements with employees, inventors, consultants, and others to secure clear ownership?
- What is the worth of the patent portfolio? Is it being efficiently managed?
- Have patent applications been filed in all relevant markets? Is the opportunity of filing still open, and are the patent filings within required timelines?
- Are the patents licensable? Who are some potential licensees?
- Are the start-up’s patents in good hands? Does it follow patent best practices?
- What is the worth of the start-up’s patent portfolio?
- Has the start-up taken steps to avoid or mitigate patent risks through freedom-to-operate analysis and other risk assessments?
- Are there any pending patent disputes, litigation, oppositions, or invalidation proceedings?
Trademarks
- Does the start-up hold strong trademarks?
- Has it filed for registration of its marks in relevant classes?
- Has the start-up cleared trade mark risks?
- Have searches been performed properly? Are there any diluting or conflicting marks?
- Does the start-up hold domain names with respect to its marks?
- What is the financial value of the start-up’s trade marks?
- Is there a proper agreement with mark or logo designers?
- Are there any pending trade mark litigation, oppositions, or conflicts?
- Are trade mark notices properly given?
Copyrights
- Has the start-up protected its copyrights appropriately?
- Does it have any copyright registrations?
- Are copyright notices placed on all works?
- Is copyright ownership clear?
- Are there proper agreements with web designers, creative designers, etc.?
- If the start-up is content driven, are the copyrights being licensed appropriately?
- Are rights being appropriately divided and sub-divided? Are there specific agreements for specific means or modes?
- Are rights acquisition agreements clear and free from encumbrances?
For E-Commerce Start-ups
Does the start-up have a well-defined set of legal instruments?
- Terms and conditions
- Privacy policy
- User agreements
- Take-down policies, if required
Does the start-up’s IP help in stopping competitors or making it difficult for them? What is the IP’s competitive value?
Are all interfaces, processes, marks or logos, domain names, inventions, etc. appropriately protected?
Is the start-up an intermediary? Does it follow all requisites to claim intermediary safe harbour?
The list of questions above is illustrative and not exhaustive. The nature of questions varies based on the nature of the business, the level of investment, and the extent of progress made. This does not constitute advice or opinion of any sort. A start-up should obtain the opinion of an expert before embarking on an investment acquisition plan.
Disclaimer
This article is for general information and does not constitute legal advice. Readers should consult a qualified attorney before acting on any matter discussed here.