IP audit before a fundraising round: what the investor will ask you for
In a due diligence request list, the IP section often fits in three lines. Behind each one, the investor's lawyer is looking for a specific defect. Here is what they are looking for, and how to fix it before they find it.
Once a fund enters exclusivity, its counsel sends the startup a document request list. The section on intellectual property looks short, almost administrative. Many founders answer it by uploading an export of their trademark portfolio and a handful of contracts.
That underestimates what is at stake. Each request is worded to expose a gap between what the company uses and what it is legally entitled to use. Reading the list from the perspective of the person who drafted it is the best way to prepare for it properly.
The three IP requests, decoded
Here is the IP section as we draft it for our own audits, and what each line is designed to verify.
List and description of the intellectual property rights the company owns or merely uses
What is requested
For each group company, all rights relating to the business: trade name, acronym, business sign, registered trademarks and pending applications, logos, patents, designs, know-how and confidential information, copyright works, software and databases.
What the investor is looking for
The line between "owns" and "uses". That is often where the problem lies: a core asset features in the pitch deck, yet the company only uses it, sometimes without any contract at all.
Common findings
- The trademark is registered in the founder's name, filed before the company was incorporated.
- The logo was designed by an agency or a freelancer who never assigned their rights.
- The trademark is only protected in France, while the company sells in Francophone Africa, where only a filing with OAPI covers its 17 member states.
- The "confidential" know-how is not covered by any non-disclosure agreement or internal protection measure.
Copies of licence agreements, granted or obtained, and of rights granted to or by third parties
What is requested
Licences in both directions: those the company has granted to its customers or partners, and those it benefits from, including for the software its teams use every day. Where no signed contract exists, the main terms of those licences.
What the investor is looking for
Anything that could prevent the company from exploiting, developing or selling its technology after the deal.
Common findings
- An exclusive licence granted too early to a customer or distributor, locking up a market or territory.
- An inbound licence that is non-transferable, or terminable on a change of control, which the deal itself may trigger.
- Open-source components under copyleft licences (GPL, AGPL) built into the core product, which may require the code to be published.
List of domain names registered or applied for
What the investor is looking for
Who actually controls the address of the website, the platform and the email. A domain name is not an intellectual property right in the strict sense, but it is often the most visible commercial asset.
Common findings
- The main domain is registered on the personal account of a founder, a former co-founder or the web agency.
- Key extensions (country codes, variants) were never reserved and are held by a third party.
The questions that follow your first answer
Once the inventory is in, the audit traces each asset back: who created it, in what capacity, and by what instrument the rights came to belong to the company. Three types of creator account for most of the issues.
| Creator | What French law provides | What you need to produce |
|---|---|---|
| Founder and executive | The president of a French SAS is a corporate officer, not an employee: the automatic transfer that applies to software created by employees does not apply to them. Their creations, including those predating incorporation, remain theirs until they assign them. | An assignment from the founders to the company, expressly covering pre-incorporation creations. |
| Employee | Economic rights in software created in the course of the employee's duties vest in the employer. So do inventions made under an inventive mission, subject to additional remuneration. For other works (design, content), the employee remains the rights holder in principle. | Employment contracts and job descriptions that reflect the duties actually performed, and assignments for works other than software. |
| Contractor, agency, freelancer, intern | No automatic transfer. An invoice is not an assignment. A copyright assignment must be in writing and specify each right assigned, its scope, its purpose, the territory and the duration. | A compliant assignment clause in each contract, or a confirmatory assignment signed after the fact. |
For trademarks, patents and designs, the assignment must also be recorded with the relevant office (INPI, EUIPO, OAPI) to be enforceable against third parties. An assignment that is signed but never recorded leaves the company exposed.
Fixing an assignment is easy when the creator is still on board. It becomes a negotiation when they left on bad terms and realise that their signature is the condition for your round.
Preparing a fundraising round?
We audit your intellectual property using the same grid your investor's lawyer will use.
Book a call →Building your IP file before the term sheet
The right time to answer the IP section is before you receive it. A founder who has already gathered the following documents can respond within days, and keeps the discussion on the value of the technology rather than on its weaknesses.
- An asset register that follows the structure of request 8.1 and shows, for each line, the registered owner, the territories covered and the renewal dates.
- Registration certificates and register extracts for each right, including recorded assignments.
- An assignment file organised by creator: founders, relevant employees, contractors.
- A licence inventory, inbound and outbound, with their exclusivity, assignment and change-of-control clauses, and a list of the open-source components in use.
- A domain name table with the registrant, registrar, account access and expiry date.
- A record of confidentiality measures for what you choose to keep secret rather than patent: non-disclosure agreements, restricted access, document marking.
Frequently asked questions
It is a lawyer's review of the company's intellectual property rights before the investor examines them: ownership, assignments, licences, domain names and protection of trade secrets. The goal is to fix the gaps while there is still time, rather than discover them during due diligence.
No. As a corporate officer, they do not benefit from the regime that applies to employee creations. Their creations, including code written before or after incorporation, must be assigned to the company in writing.
No. Without a written and sufficiently precise copyright assignment clause, the agency remains the owner of the rights in its work.
No. In the 17 OAPI member states, protection requires a filing with OAPI, which covers all of these countries in a single procedure.
Preparing a fundraising round?
We audit your intellectual property using the same grid your investor's lawyer will use, and we fix what needs fixing before negotiations begin.
Book a call →