An IP due diligence is undertaken before entering into an IP trading transaction.
Sometimes, IP is not wholly owned by the party that believes itself to be the owner.
Sometimes, some critical part of the IP may be jointly owned with another person, such as a collaborator, or a critical part may be owned by a contractor, a student, or some other person.
The purpose of a due diligence is to ensure that the IP is owned in the manner that is consistent with the proposed IP trading transaction being considered.
If the IP is owned in a different manner, and no due diligence is undertaken, the risk is that the IP that was understood to be the subject of the transaction, such as an assignment or license, is not caught by the transaction, that is, in fact the subject IP is not assigned or licensed.
A due diligence is undertaken to:
before entering into any legal agreements over that IP.
An IP due diligence may also investigate the robustness of the IP.
This means for example:
an assessment would also be made of any prospective freedom-to-operate obstacles, that is, whether the use of the patented IP might infringe a third party’s patent.
"IP Audit and Due Diligence Booklet” published by the Intellectual Property Department and the Law Society of Hong Kong.