Deal diligence
When a company is bought, its patents are part of what changes hands. Patent due diligence is the review that confirms the company really owns those patents and that nothing limits their value. This guide covers what the review includes and where to start.
Patent due diligence looks at more than a list of patent numbers. It asks whether the company owns each patent cleanly, whether the patents are in force, and whether anything, such as a lien or an earlier license, limits what a buyer can do with them.
The single most important part is ownership, also called chain of title. Ownership is the documented path from the people who invented each patent to the company that holds it today. If that path is broken or incomplete, the buyer may not get what it is paying for.
A company can only transfer what it actually owns. If a named inventor never assigned their rights, or an assignment was never recorded, or an old lien was never released, the seller may not be able to hand over clean title.
When these problems surface after a deal closes, they are expensive. They can lead to claims against the seller, money held back in escrow, a lower price, or, in the worst case, trouble enforcing a patent against a competitor. Found before closing, most of them can be fixed with the right paperwork. The value of diligence is finding them early.
For each patent in the portfolio, work through the same short list:
Running this checklist for one patent is quick. Running it for a portfolio of dozens, while matching inventor names that are spelled differently across records and reconciling transfers across several USPTO databases, is slow and repetitive. Done by hand, it can take a senior associate well over a dozen hours per deal.
Patencial does the mechanical reconciliation. It reconstructs each patent’s chain from the named inventors to the current owner, flags the defects on the checklist above, and cites every finding to the USPTO record. The associate skips the reconciliation and spends their time on the judgment that actually needs a lawyer.
It is the review of a company’s patents before a deal, to confirm what the company owns, whether the ownership is clean, and whether anything limits the value of the patents. In a merger or acquisition it is usually done before signing or before closing.
If the target does not clearly own its patents, it cannot transfer clean ownership to the buyer. Everything else about a patent matters less if the ownership itself is in question, so ownership is the foundation of the review.
A buyer may face claims after closing, may need to hold back part of the price, may adjust the valuation, or in serious cases may have trouble enforcing the patents against infringers. Finding these issues early lets the parties fix them before the deal closes.
Done by hand, reconciling assignment records for a portfolio of dozens of patents can take a senior associate ten to twenty hours or more. Automating the record reconciliation cuts most of that time, leaving the judgment work to the attorney.
Patencial automates the mechanical part: it reconstructs each patent’s ownership from the named inventors to the current owner, flags defects like broken chains, missing inventor assignments, late recordings, and unreleased liens, and cites every finding to a USPTO record.
Patent chain of title verification
Reconstruct ownership from the named inventors to the current assignee, with every defect cited to a USPTO record.
Read guide35 U.S.C. 261: patent assignments and recording
What Section 261 requires for a valid assignment, and why the three-month recording window decides priority.
Read guidePost-AIA chain of title gaps
How assignee filing under the America Invents Act can leave an inventor assignment unrecorded, and how to find the gap.
Read guidePatent security interests and liens
How a pledged patent shows up in the USPTO record, and why an unreleased lien blocks a clean transfer.
Read guideUpload patent numbers. Get a source-cited chain of title report in minutes. No credit card required.