During the diligence step for an M&A, it is surprisingly common to discover that some of the entity’s intellectual property (IP) was never formally assigned to the company in the first place. It's not the patents or the registered trademarks; it’s the overlooked assets.

Assets such as:

• Website content and marketing copy
• Graphics, videos, and blog articles
• Software written by contractors
• Domain names registered under a founder’s personal account
• Internal playbooks and operational know-how

While these assets often represent a meaningful portion of the company’s real value, they are rarely documented with the same rigor as patents or trademarks. That is when diligence begins to slow down.

How Diligence Looks Beyond Registered IP

When companies think about intellectual property, they usually focus on registered rights including patents, trademarks and copyrights, those assets do matter.

But transaction diligence often looks much broader. Buyers review the entire IP ecosystem of the business, including:

• Trademarks and brand assets
• Domain names and digital properties
• Software and technical documentation
• Website and marketing content
• Internal processes and operational know-how

Some of these assets are registered but many are not. Unregistered IP can still represent a significant competitive advantage, and diligence will often focus on whether the company actually owns and controls those assets.

A Real-World Example

Questions about intellectual property ownership can arise even in well-known technology companies.

In the early years of Snapchat, the company behind the app, Snap Inc., faced litigation from a former collaborator who claimed he contributed to the original concept and development of the platform.

The dispute centered in part on whether ideas and early work associated with the application had been properly assigned to the company. The case was ultimately resolved through a reported settlement in 2014.

While the dispute occurred well before Snap became a public company, the situation illustrates a common issue in fast-moving startups: early development work often occurs before ownership structures and IP assignments are fully documented.

When companies later pursue investment, acquisition, or public offerings, those early gaps can become important questions during the diligence phase.

Assignment Problem

In many smaller transactions however, the issue is not the size of the IP portfolio. It is whether the company actually owns the IP it relies on.

This frequently happens when:

• Founders created early assets before forming the company
• Developers were independent contractors without assignment agreements
• Marketing agencies produced website content without ownership provisions
• Domain names were registered outside the company

From a transaction perspective, unclear ownership creates legal risk around the assets being transferred.

Why This Matters

When diligence reveals uncertainty around IP ownership, a number of things can happen:

• Closing timelines expand
• Additional documentation is required
• Escrow requirements increase
• Valuation may be adjusted

Most of these issues are solvable but they are much easier to address before a transaction begins.

Preparing for IP Diligence

Companies anticipating growth, investment, or a future sale should periodically review:

• Trademark registrations and brand ownership
• Domain name ownership records
• Employee and contractor IP assignment agreements
• Copyright ownership for marketing and website materials
• Confidentiality practices protecting trade secrets and internal know-how

Cleaning up these issues early on, helps to ensure that the value built inside the company can be clearly transferred to a future buyer. In many acquisitions, intellectual property is not just a supporting asset. It is often the foundation of the business being sold. Yet some of the most valuable IP inside a company, is also the least documented and that tends to become visible during diligence.

The good news is that most of these issues are straightforward to resolve. They are simply much easier to address before entering the market. A short IP review ahead of a transaction can prevent many of the surprises that slow down diligence.

Have further concerns about IP issues when starting a business that may pop up during the diligence step? Contact a Foster Swift IP attorney to assist.