Why IP Assets Matter for Investors and to Growing Businesses

Intellectual property (IP) assets are among the most important and valuable that companies own. Especially for technology businesses and start-ups, IP rights can provide a competitive advantage over competitors, enable significant monetisation opportunities such as licensing and technology transfer, and enhance a negotiating position when raising investment. IP rights can also support R&D tax credits and reductions in corporation tax such as the Patent Box in the UK.

According to a January 2025 study by the European Patent Office (EPO) and EU Intellectual Property Office (EUIPO), companies with IP rights generate 23.8% more revenue per employee than those without. Small and medium-sized businesses that register IP rights report 44% higher revenue per employee compared to those that do not, reported the study.

However, strong IP protection is about much more than securing registration certificates. Evaluating the IP position of a company also entails an assessment of the extent and scope of protection, third-party issues, potential disputes, and how the IP fits with the corporate strategy.

Identifying the IP assets

When investing in a company, it is essential to establish what IP assets the company has, and how they relate to the business. IP assets include registered rights such as patents, trade marks and designs as well as unregistered but legally protectable assets such as copyright-protected works and trade secrets.

For technology-based businesses, patents are likely to be most important as they can protect technological innovation for up to 20 years from the date of filing. In addition to patents, trade secrets/confidential information can be important in protecting everything from recipes (such as the Coca-Cola formula) to algorithms, manufacturing methods and customer databases. Copyright can also be vital for protecting literary and creative works, including proprietary software code.

An effective IP strategy is not just about accumulating IP assets, however. It is essential to assess how the IP assets support the current and planned business goals and to identify any critical weaknesses in the IP position. This requires asking some key questions.

How to do due diligence

While patents often protect how a product or technology works, they are only one part of the picture. Trade marks and designs protect how a business presents itself to customers,  its name, branding and the look of its products,  and these rights can be just as important to commercial value as patents, particularly for consumer‑facing and growth businesses.

Patent due diligence starts by identifying how many patents and patent applications the company has, in which jurisdictions they are protected and how the patents map to the company’s key products and technologies. Among other things, it is important to ensure that the company owns, or has a licence to, the relevant patents, particularly in cases where the IP was created by contractors or other third-parties or in joint ventures. 

Other important matters to examine include how enforceable the patents are and what is the scope of protection (that is, how easy it is for competitors to design-around the patents), whether there are any potential or pending challenges to the validity of the patents or anything (such as prior disclosures) that could undermine their validity. If there are any unresolved disputes over the patents, the nature, status and progress of these disputes should be clarified.

Due diligence should also cover the company’s trade marks and registered designs, which are often central to brand value and market recognition. For trade marks, this includes identifying which brand names, logos or slogans are registered, the territories covered, and whether they align with the company’s key products and services. It is important to check that registrations are valid, renewed and owned by the company, and that the marks are actually being used in practice, as non‑use can put registrations at risk. Any disputes, oppositions or potential conflicts with third‑party marks should also be identified. For registered designs, due diligence typically focuses on the scope of protection, the remaining term, and whether the designs genuinely cover commercially important product features rather than minor aesthetic details. As with patents, investors will want reassurance that ownership is clear, that the rights are enforceable, and that competitors would find it difficult to adopt similar branding or product appearances without infringing.

Due diligence can also be carried out on unregistered IP rights, including copyright and trade secrets. This may include making sure there are records establishing ownership, the date of creation and chain of title. For copyright-protected assets such as software, checking assignments from third parties and compliance with open source agreements is essential.

Trade secrets are particularly vulnerable as once they are disclosed any legal protection is lost. Companies should therefore have policies in place to ensure that trade secrets are recorded securely and confidentially and that measures are in place to prevent theft or accidental disclosure. In practice, this might include confidentiality clauses in employment contracts, restricting access to key documents, and clear policies on using personal devices or cloud storage. A significant risk arises on the departure of key personnel, which can be reduced by contractual clauses and practical measures such as limiting access to key files.

Not all of these checks are needed for every business. The level of IP due diligence should be proportionate to the size of the business, the value of the IP, and the nature of the investment.”

Competitor analysis and FTO

While the focus of any due diligence is on the company itself, a comprehensive analysis will also review the position vis-à-vis competitors, customers and suppliers.

For example, the company should be able to identify how its IP assets give it a competitive advantage compared to others in the sector. It may also conduct freedom-to-operate (FTO) searches of third parties’ patent filings and take proactive steps to ensure that no third-party rights are being infringed.

IP and business growth

IP assets are key to the successful growth and development of innovative businesses. According to a 2023 study by the EPO and EUIPO, the filing of patent and trade mark applications by startup companies in the seed or early-growth stages is associated with a higher likelihood of subsequent venture capital funding: startups that applied for patents in the early stage have a 6.4 times higher likelihood of funding.

However, assessing the strength of weakness of an IP position is about much more than counting registrations: quantity is important alongside quality. Qualified patent attorneys can review the substance of patent claims and specifications to identify the breadth of coverage, how the patent relates to the current business and growth plans, and how the IP position compares with competitors. They can also examine how other IP assets, both registered and unregistered, reinforce the patent rights and provide additional layers of protection.

Ensuring that there is a robust, considered and commercially appropriate IP strategy in place can help identify new growth opportunities, increase profitability and ensure the company is well placed to benefit from future investment opportunities, including potential M&A deals and public offerings.