Originally the term "due diligence" was used in connection with broker-dealers. To avoid being held liable for nondisclosure of information broker-dealers could exculpate only by proofing they exercised "due diligence" in their investigation into the company whose equity they were selling, and disclosed the information they found in this process to the investor. Today "due dilligence" is carried out by a potential investor or buyer to study, investigate and evaluate a business opportunity before he is signing a final contract. If the merger or acquisition comprises intellectual property such as patents or trademarks, the due diligence process will investigate to point out the risks envolved, such as unclear ownership o IP rights. Sometimes even the seller is not aware of such risks himself.

A very comon issue is for example that in case of patents, there never was a transfer of the invention from the inventor to the applicant of the patents, e.g. the seller. Neither the inventor nor the applicant might be even aware at the time of the sale or merger that the invention still belongs to an employee of the company. Guess what might happen if the inventor founds out later. The worst scenarios are those where the employee has been made redundant. In this case he will show no mercy

However, due diligence is a time and resource consumming process. In the end a certain level of residual risk has to be accepted as in every days life resources are not unlimited. Due diligence is in its nature pure risk management.

Entrusted with an IP due diligence we first set up a list of possible issues and prioritize them according to the risk they bear for the envisaged transaction. For each issue we will give an estimate of the costs envolved, so that our client with our help is able to balance budget and possible damage to his investment.