02.09.2026
A practical guide to identifying and addressing the IP weaknesses that can undermine investor confidence and put a deal at risk.
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A company may have an impressive product, growing revenues and a charismatic founder. The pitch deck might mention patent applications, proprietary technology and unique know-how. Yet deals still fall apart during due diligence.
The reason is often simple: investors discover that the company does not fully own, control or protect the assets that make it valuable. While many IP issues can be addressed if identified early, others can delay transactions, reduce valuations, or derail a funding round entirely.
Here are five of the most common IP problems investors should look for, and founders should address, before a funding round begins.
Who owns the technology?
This sounds obvious, but ownership issues are remarkably common in start-ups. Founders often develop technology before the company exists. If the rights were never formally assigned to the business, the company may not own the very asset investors are funding.
Investors generally expect the company, not individuals, to own its core IP. If ownership is unclear, valuation can be affected and future investment rounds may become difficult.
Investors should ask to see evidence that key IP has been assigned to the company and founders should ensure that assignment agreements are in place and readily available.
Was the technology developed at a university, research institute or spinout?
Academic spinouts can be excellent investment opportunities and successful businesses, but they often come with complex ownership arrangements.
The company may not own the IP outright.
Instead, it may operate under:
An apparently valuable patent portfolio may be subject to restrictions that affect licensing, enforcement or exit opportunities. University-owned IP does not have to be a red flag, but investors and founders must understand the commercial terms attached to it.
Who built the technology?
Many startups rely heavily on:
A common misconception is that paying someone for development automatically transfers ownership but, in many jurisdictions, it does not.
If assignment clauses are missing, the contractor may still own part of the technology. This can become a significant issue if:
Investors should verify that contractors who contributed to key technology have assigned their rights to the company, and founders should ensure those agreements are in place from the start.
What third-party code sits inside the product?
Open-source software is an essential part of modern technology development. The issue is not using open source. The issue is using it without understanding the associated obligations.
Some licences may require:
These issues often remain undiscovered until due diligence begins. The bigger the business becomes, the more important it is to understand exactly what has been incorporated into the product and on what terms.
Investors should understand how the company manages its use of open-source software, including whether it maintains an open-source policy and software bill of materials. Founders should address any gaps before they become due diligence issues.
When was this technology first disclosed?
Founders are rightly encouraged to talk about their products. The problem arises when they disclose patentable inventions before taking steps to protect them.
Common examples include:
In many jurisdictions, including the UK and Europe, public disclosure can destroy patentability altogether, while some countries provide only limited grace periods. The company may have a great product but may have lost an opportunity to secure exclusive rights.
Investors should check whether key technology was disclosed publicly before any patent strategy was implemented. Founders should ensure that appropriate confidentiality measures are in place and, where appropriate, seek patent protection before making public disclosures.
Before investing in a technology business, ask:
☐ Does the company clearly own all core IP?
☐ Have all founders assigned their rights to the company?
☐ Are there any university ownership or licensing arrangements?
☐ Have contractors assigned ownership to the company?
☐ Does the company have appropriate processes for managing open-source software?
☐ Were patent applications filed before any public disclosure of patentable inventions?
☐ Can the company explain how its IP supports its competitive advantage and long-term value creation?
☐ Do we own all of our core IP?
☐ Have all founders, employees and contractors assigned their rights to the company?
☐ Are there any university or third-party ownership or licensing arrangements?
☐ Have filed patent applications for patentable inventions before publicly disclosing them?
☐ Do we understand, document and appropriately manage our use of open-source software?
☐ Are key patents, trade marks, domain names, and other IP assets owned by the company?
☐ Are our trade secrets and confidential information adequately protected?
☐ Could we explain our IP position clearly and confidently during investor due diligence?
When investors and founders think about IP risks, they often imagine complex patent disputes. In practice, many funding rounds are delayed by much simpler problems: missing assignments, unclear ownership records and poorly documented rights.
Fortunately, many of these issues can be identified and addressed before they become material transaction risks.
For both investors and founders, early attention to IP is important. Understanding who owns the company's key assets, what restrictions apply to them and how they are protected can help reduce risk, preserve value and smooth the path to investment.
Are you investing in a technology business or preparing to raise capital? Early IP advice can help uncover risks, strengthen deal confidence and prevent costly surprises. Speak with one of our patent attorneys today.
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