The high stakes of intellectual property in M&A: Ownership, scope, and risk

Buyers want proof that ownership is airtight. In the US, inventors own their inventions until rights are formally assigned, and one missing signature can derail a global transaction. In mixed jurisdictions, an unsigned US inventor can splinter ownership worldwide. A single gap in the chain can give that individual leverage to license the technology elsewhere, forcing costly settlements and uncertainty. The best practice is to document every step, from idea to ownership, and use immediate assignments. Verify signatures and demand complete upstream chains for licensed technology. A clean chain of title signals discipline and builds investor trust.

Scope defines how far ownership extends. Patents are property, but their value depends on how effectively they protect revenue. Strong portfolios show how IP blocks competitors, how broad the claims are, and how patents, trade secrets, trademarks, and copyrights interlock to defend market share. A narrow claim or uncoordinated filing strategy invites workarounds and weakens leverage. Savvy sellers link patents directly to business outcomes, maintain continuation filings to track market shifts, and integrate branding, code rights, and confidential know-how to widen the moat.

Trade secrets fill the gaps where patents cannot. But confidentiality alone does not create legal protection. Due diligence teams ask whether written policies exist, NDAs are enforced, and access controls are real. A company that can describe its “secret sauce” without exposing it, and prove it protects that information, earns credibility.

Freedom to operate (FTO) is the final test of market viability. It asks not whether a product is patentable, but whether it can be sold without infringing the rights of others. A company may hold powerful patents yet still face litigation. FTO analysis maps these risks, aligns launch timelines with patent expirations, and identifies where licences or design changes may be required. Buyers do not expect perfection; they expect preparedness.

Cross-border transactions multiply complexity. IP rights differ by jurisdiction – what is enforceable in Germany may be narrow in the US, and translations can distort claim scope. Due diligence must account for filing timelines, regulatory exclusivities, and enforcement strength in each market. A portfolio strong in Tokyo can be toothless in Texas.

For investors, the goal is not zero risk but confidence. They look for three signals: clear ownership, scope that shields the business model, and mapped third-party risks. Companies that audit assignments, link IP to revenue, assess FTO early, and enforce trade-secret policies turn potential liabilities into bargaining power.

Ultimately, IP diligence is about predictability. When ownership, scope, and freedom to operate are secure, IP becomes the foundation of trust in a deal. When neglected, it shifts from asset to anchor, eroding value through lawsuits and retroactive fixes. Firms that treat IP as strategy, not paperwork, earn better valuations, close faster, and inspire confidence that what they are selling is truly theirs to sell.

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Patent attorney Chris Halliday leverages over 25 years at the intersection of innovation and law to guide life sciences companies through patent prosecution, IP strategy, and transactions. He advises biotech, MedTech, and pharma clients on protecting and maximising their intellectual assets.