IP diligence is rarely the reason a deal happens, and often the reason a deal stalls. An investor is not trying to decide whether your patent is clever. They are trying to answer two questions: does the company actually own what it says it owns, and would that ownership survive an acquirer's lawyers in two years. Nearly every finding that reprices a round traces back to one of those two.
The whole review is predictable. Here is what gets checked, and what to fix before anyone asks.
1. Chain of title, from every contributor
This is the first item and the most common failure. Diligence counsel will build a list of every person and entity that touched the technology and look for a signed, recorded assignment from each one.
- Named inventors. Assignments should be signed and recorded with the USPTO. Recording is not legally required to transfer, but an unrecorded assignment is a finding every time — see how patent ownership actually transfers.
- Founders. Did any of them start the work before incorporation, or while employed elsewhere? A prior employer's invention-assignment agreement can reach into your company's core asset, which is why employee invention rules matter even for work done years ago.
- Employees. Signed IP assignment agreements from day one, including interns.
- Contractors and agencies. The default rule in the US favors the contractor, not the paying client, unless there is a written assignment. Design firms, freelance firmware developers, and industrial designers are all in scope — who owns IP a contractor creates covers what the agreement has to say.
- Universities and federal grants. Bayh-Dole election, government license rights, and SBIR data rights all attach and all get flagged: who owns IP from a federal grant.
A cofounder who left without signing anything is the single most expensive item on this list, because the fix requires their cooperation and they now have leverage. IP in a founders agreement covers how to prevent that situation entirely.
2. Does the claim set actually cover the product?
Founders present a patent number. Diligence reads the independent claims and compares them to the shipping product and the roadmap. The recurring finding is drift: the patent covers the prototype from three years ago, and the commercial version replaced the mechanism the claims are built around.
Prepare a plain-English claim chart mapping each independent claim element to a feature of the current product. If an element is missing, say so before they find it, and explain the continuation strategy that addresses it. A pending continuation is a credible answer; silence is not.
3. Status, deadlines, and what is actually granted
Investors distinguish sharply between granted patents and applications, and the distinction affects valuation more than founders expect: a pending application is an option on a right, not the right itself. Have a single table ready listing every asset with:
| Field | Why it is asked |
|---|---|
| Application or patent number | Independent verification |
| Status | Pending, allowed, granted, abandoned |
| Priority date and expected expiration | Remaining term drives value |
| Countries | Coverage in the revenue markets |
| Next deadline and fee | Missed office actions and maintenance fees are lethal findings |
| Recorded owner | Must match the company, not a founder |
A missed national-phase deadline tells an investor something about operating discipline well beyond IP.
4. Prior disclosure and statutory bars
Expect a direct question about when the invention was first publicly disclosed, offered for sale, or shown at a trade show. A crowdfunding campaign or a conference talk more than a year before filing can bar the US patent outright and has already destroyed foreign rights. Have the disclosure timeline documented rather than reconstructed under pressure; the one-year grace period rules explain what counts.
5. Freedom to operate
Owning a patent does not mean you are allowed to sell your product. Those are separate questions, and sophisticated investors ask the second one. For a hardware product in a crowded field, expect to be asked whether an FTO analysis exists, who did it, and what it concluded. What an FTO search covers is the right preparation, and the distinction from a patentability search is worth understanding before the meeting.
6. Software, open source, and third-party components
Firmware and app code get their own pass. A bill of materials for software, generated by a scanner rather than by memory, listing every dependency and its license. Copyleft licenses in shipped firmware are a genuine deal issue because they can obligate you to release source. Also in scope: SDKs under restrictive terms, licensed reference designs, and any code written by a contractor without an assignment.
7. Trademarks, and the unglamorous items
Product and company name clearance, registered marks in the markets you sell in, domain ownership held by the company rather than a founder's personal account, and no pending oppositions. These are cheap to fix in advance and irritating to discover late.
8. The trade secret program
If the company's real advantage is process know-how rather than patents, diligence will ask what protects it. The answer needs to be a program — access controls, signed confidentiality agreements, an inventory of what is considered secret — not an assertion. Nothing is worth less than an unprotected secret.
The red flags that reprice a round
- An unsigned assignment from a departed founder or contractor
- Claims that no longer read on the shipping product, with no continuation pending
- A public disclosure predating the filing by more than a year
- Copyleft-licensed code in shipped firmware
- Patents recorded to an individual rather than the company
- A missed office action or maintenance fee
- A competitor patent identified during diligence that the company had never seen
Prepare the data room before you need it
Assemble one folder with the asset table, copies of all assignments and their USPTO recordation receipts, employee and contractor agreement templates with a signature log, the disclosure timeline, any search or FTO reports, the software license inventory, and the trademark register. Doing this in a week of calm beats doing it in a weekend during a term sheet negotiation, and it fits inside the broader plan described in building an IP protection strategy around a product.
Projects House is an engineering firm, not a law firm — the legal review belongs with IP counsel. Where we help is the technical evidence behind it: claim-to-product mapping, complete and current design documentation, a software bill of materials that matches what actually ships, and design changes when a competitor's claims turn out to be a problem. If you are heading into a raise and the engineering record is scattered, start with our contact form.