Additional Considerations on IP Due Diligence for Prospective Investors of Emerging Life Sciences Companies

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Following our first article on IP due diligence considerations for prospective investors of emerging life sciences companies, we’re taking an in-depth look at the due diligent action items that can help with decision-making and risk-assessment calculations for a potential investor.

Some Further Details on Due Diligence Action Items:

Validity, Enforceability and Scope of Protection of the Company’s IP Assets

Strengths and weaknesses of a company’s IP estate can be identified by performing detailed analyses of the IP assets, including their validity, enforceability and scope of protection provided by the patent estate over commercial and lead products.

The assessment generally starts with a fact-based investigation of the company’s products and IP assets that are the focus of the prospective business transaction. Detailed information and descriptions of the products should be provided by the company, along with a list of their IP assets, including: utility patents, published and non-published patent applications, design patents and applications, trademarks, and copyrights.

The IP assets are analyzed for their validity and enforceability. For instance, the status of each patent (active, registered, pending, abandoned, or expired), as well as the expiration date and upcoming maintenance payment date for any issued patents, should be evaluated for correctness and potential issues.

The assessment is designed to determine the scope of the patent protection and strength of coverage, and to identify any potential roadblocks the company’s IP or ability to make, use and/or sell their commercial products/methods/services may encounter. Possible strategic actions can also be developed to navigate around potential roadblocks.

Patent Protection of the Company’s Commercial Products

To effectively determine the scope of the patent protection provided by these assets, the claimed features described in the company’s patents and pending applications should be mapped onto the commercial products, and the key components of each should be identified. This analysis should reveal possible strengths and weaknesses of the current IP portfolio. In some cases, additional strategic patent filings can be suggested to shore up any possible weaknesses and expand on existing strengths.

When appropriate, an assessment of any Orange or Purple Book listings will further be used to enhance the review.

Freedom to Operate

In extensive due diligence investigations (e.g., Level Two or Three as described in our previous article), a freedom-to-operate (FTO) analysis is performed to determine if the company’s commercial products do not infringe on another’s IP rights. In other words, does the company have freedom to develop, make, commercialize, or sell the products in the jurisdictions (markets) of interest? This analysis involves searching and reviewing patents from others in the technology space that may pose a possible infringement risk. When identified early in product development, the risk can be mitigated by modifying the product or possibly taking a license to relevant patents.

A review of the patent landscape can also reveal new IP opportunities for the company’s current scientific goals as well as new developments in the future.

Ownership Rights

Another key aspect of evaluating IP assets is determining ownership rights. This can involve reviewing disclosed and recorded ownership information and other formality documentation, searching for any gaps in the chain of title, as well as analyzing IP-related agreements, such as any contracts, licenses, or other agreements owned by a third party or jointly owned by a third party.

Scope of the IP Due Diligence

The scope of an IP due diligence investigation should be dictated by the circumstances of the transaction being considered. Timing and considerations of the business’ objectives should match the scale and scope of the investigation. In some scenarios, IP patent portfolios are assessed in terms of validity and enforceability in specific jurisdictions while in others, information about global coverage is essential.


Orrick IP professionals can advise on a due diligence assessment of a company’s IP assets to help with investment decisions and due diligence. Please contact Gargi Talukder for more information.