Mergers and acquisitions are fast-moving. Both sides work under pressure, chasing timelines, hitting diligence checkpoints, and pushing to close. But nothing slows down a deal faster than a problem buried in the company’s intellectual property.
IP isn’t just a legal asset. It’s often the reason the deal exists. It might be the core product, the customer experience, the technology, or the very brand the buyer wants to acquire.
When the IP isn’t clean — or worse, when it isn’t fully owned or understood — it can throw the entire process off course.
This article breaks down the most common IP problems that come up in M&A. We’ll show how they happen, what they mean for the deal, and what to do about them. Because when the IP is right, the deal moves. And when it’s not, everything slows down.
Let’s start with where things tend to go wrong.
Unclear IP Ownership
Where Ownership Gets Muddled
One of the most common IP issues in a deal is confusion over who actually owns the intellectual property.
This usually starts early in a company’s life — when things are moving fast, and paperwork gets left behind.
A founder builds the product before the company is even formed. A freelancer designs a logo without an assignment agreement. A developer writes code under a handshake deal.
Each of these moments creates uncertainty. And when a buyer steps in, that uncertainty becomes a problem.
Because if ownership isn’t clear, rights aren’t clear either. And buyers don’t pay full price for risk.
Missing or Incomplete Assignments
The biggest red flag is a missing assignment — when there’s no document proving that someone transferred their rights to the company.
This includes former employees, contractors, or early collaborators.
Even if the person is long gone, their absence in the chain of title creates a legal hole.
Buyers will want that gap closed before the deal closes. That can mean tracking people down, negotiating terms, or drafting retroactive documents under tight timelines.
And if that person refuses to cooperate or is hard to reach, the deal may be paused or even restructured.
Unrecorded Ownership in Public Registries
In some cases, the IP may be properly assigned but not properly recorded.
The patent still lists the inventor instead of the company. The trademark is in a founder’s name, not the business’s.
While this can usually be fixed, it creates friction.
Buyers want clean records — and when the documents don’t match the story, it raises doubts.
A mismatch between internal ownership and public filings slows things down and often leads to more scrutiny.
Weak Patent or Trademark Rights
Overstated Claims in Pitch Materials
Sometimes sellers describe their IP in ways that sound stronger than it is.
They may say they have “patented technology” when in fact they only filed a provisional application. Or claim a brand is “protected worldwide” when the trademark is only registered in one country.
Buyers dig into those claims during diligence. And when the truth doesn’t match the pitch, confidence drops.
This isn’t always intentional. Founders may not know the difference between an issued patent and a pending one, or between common law rights and registered trademarks.
But in a deal, these differences matter — and overstating them can derail trust quickly.
Narrow or Unenforceable Coverage
Even when a patent or trademark is real, it may not offer strong protection.
Some patents cover only a small feature, not the full product. Some trademarks are registered for a limited class of goods and miss key markets.
If the buyer is acquiring the company for its IP — but that IP doesn’t offer true exclusivity — the deal loses its edge.
Buyers often bring in their own IP counsel to review the scope. And if the analysis shows weak or unenforceable rights, the offer may be adjusted or withdrawn.
This is especially common in tech, health, and consumer brand deals where IP drives the value.
Expired or Abandoned Rights
One more issue that often pops up: rights that were granted but later lapsed.
The company may have missed a renewal deadline, failed to respond to a notice, or simply forgot to pay a maintenance fee.
These lapses can make patents or trademarks unenforceable — even if they’re still listed on the company’s website or pitch deck.
Buyers will check filing histories, not just current status. If rights were abandoned, the buyer may not want to pay full value, especially if competitors have entered the space since the lapse.
Third-Party IP in the Mix
Reliance on Licensed Technology
Many companies rely on third-party IP to operate. This could be software, datasets, algorithms, or branded content.
In a stock sale, those licenses usually remain valid. But in an asset sale, they often require new approval or re-licensing.
The buyer may discover that key parts of the product can’t be transferred. Or that license terms are too narrow to support growth plans.
If those issues come up late, they’re deal blockers.
Sellers need to know what’s licensed, what’s assignable, and what might require renegotiation before a buyer can move forward.
Use of Open Source Without Compliance
Startups often build products using open-source components. That’s not a problem — unless they fail to follow the license rules.
Some open-source licenses require that any changes be shared. Others prohibit commercial use without attribution. Some even require that the full product be open-sourced if certain conditions are met.
If these terms were ignored, it may put the entire codebase at risk.
Buyers don’t want to inherit that liability. And if the seller can’t prove compliance — or can’t isolate what’s original and what’s licensed — the deal may be delayed or restructured.
Joint Ownership That Limits Control
Sometimes IP is created with partners — like co-developed software, shared patents, or branded collaborations.
If the company doesn’t fully own that IP, or if another party holds rights, it limits how the buyer can use or expand it.
Joint ownership often includes restrictions on licensing, enforcement, and transfer. That creates uncertainty.
Buyers want clean control. Shared IP without clear boundaries creates friction and often leads to legal negotiations just to understand what’s being bought.
Trade Secrets That Aren’t Protected Properly
The Illusion of Confidentiality
Many companies describe internal tools, processes, or data as trade secrets. But calling something a trade secret doesn’t make it one — not legally.
To qualify for legal protection, a trade secret must be actively kept secret. That means real steps must be taken to prevent leaks or misuse.
This includes limited access, documented policies, and signed confidentiality agreements with employees and contractors.
If these controls aren’t in place, the information might not be protected by law. And a buyer may not be able to enforce those rights post-acquisition.
When buyers ask how trade secrets are managed and the answer is vague, that’s a problem.
No NDAs or Invention Agreements
The most common sign that trade secrets may not be safe is the absence of proper agreements.
Startups sometimes skip NDAs during hiring. Or they bring on interns and freelancers without signed contracts that assign inventions and protect confidential information.
In a small team, that might not feel risky. But in a deal, every missing agreement becomes a point of concern.
Buyers want assurance that key knowledge and proprietary methods won’t walk out the door — especially if the seller’s team doesn’t stay on after closing.
If those safeguards are missing, the buyer may demand replacements before signing. Or they may reduce their offer to reflect the added risk.
Unclear Boundaries Around What’s “Secret”
Even if there are NDAs and agreements, a deal can stall when the company doesn’t have a clear sense of what qualifies as a trade secret.
Buyers will ask: What exactly are you protecting? What processes, formulas, or systems are unique to your company? How do you make sure they stay internal?
If the seller can’t answer that clearly — or points to public-facing materials — the buyer starts questioning how much real value exists.
Clarity is crucial. Without it, the term “trade secret” becomes just a marketing phrase. And that won’t hold up in a real diligence process.
Inconsistent IP Records and Filings
Internal Claims Don’t Match Public Filings
Another issue that delays deals is a mismatch between what the company says it owns and what public records show.
The company may claim ownership of a trademark, but the registry lists someone else. They may say a patent is pending, but no application is on file.
These gaps raise red flags quickly.
Sometimes the issue is minor — like a filing submitted under an old company name that was never updated. But buyers still view those as risks.
The deal can’t move forward until everything lines up — because title and rights must be clearly established before money changes hands.
IP Filings Are Disorganized or Incomplete
Even when filings exist, poor documentation can slow down or stall progress.
If there’s no record of renewal fees, missing approval notices, or unclear status on filings in key regions, the buyer may hit pause.
This is especially true in international deals, where IP must be filed and maintained in every country where protection is needed.
Buyers don’t want to inherit administrative messes. They want proof that the IP portfolio is well-managed, current, and enforceable.
If a seller can’t produce a clean, updated record, the buyer may lose confidence — or ask for extra time, discounts, or legal protections.
Delays in Post-Signing Assignments
In some deals, IP is technically transferred after signing — through post-closing assignments and filings.
But if those tasks aren’t planned carefully, they cause friction.
Buyers want to hit the ground running. Delays in transferring domain names, filing patent ownership updates, or getting license consents can slow integration and stall rollout plans.
The more IP assets there are, the more risk there is that something will be overlooked.
Sellers should prepare a post-closing checklist in advance. That shows professionalism — and reduces the risk that small details turn into big delays.
Problematic IP Licensing Structures
Overly Broad or Exclusive Licenses
When a company gives someone else a broad license to use its IP, that may help with short-term revenue — but it can hurt in a sale.
If the buyer finds out that a third party has an exclusive right to use a core piece of technology, that limits how the buyer can grow or monetize the IP post-acquisition.
These licensing deals may have been negotiated years ago under different circumstances. But now they affect how valuable the IP really is.
Buyers want flexibility. A license that restricts future use — or locks the IP into a narrow use case — can lead to renegotiations, restructuring, or discounts.
Restrictions Hidden in Revenue Share Agreements
Some companies monetize their IP through partnerships that include revenue sharing.
That’s fine, as long as the terms are clear and flexible. But if the agreement gives the partner unusual rights — like final say over pricing, sublicensing, or region exclusivity — that limits the buyer’s control.
These restrictions often show up in affiliate deals, joint ventures, or long-term distribution contracts.
If the buyer isn’t prepared to inherit those terms, they may walk away or demand major changes before closing.
These agreements must be reviewed early. Waiting until diligence to explain their terms often leads to friction and price adjustments.
Transfer Limitations in Licensing Terms
In both asset and stock deals, license agreements often include clauses that prevent or complicate assignment.
Some require written consent from the licensor before rights can transfer. Others automatically terminate if the company is sold.
These anti-assignment clauses are serious roadblocks. If the buyer doesn’t secure the right to continue using key IP, the deal loses value.
Fixing this requires either renegotiating with the licensor or restructuring the deal entirely.
In large M&A deals, that level of complication can kill momentum — or lead the buyer to walk away altogether.
Disputes and Litigation Tied to IP
Active Lawsuits Raise Red Flags
If a company is currently involved in an IP lawsuit, it sends up an immediate signal during due diligence.
Even if the company believes it will win, buyers worry about exposure. Lawsuits are expensive, unpredictable, and time-consuming.
They slow down integration. They create legal risk. And they cast doubt on how solid the IP actually is.
Buyers will ask for details — who filed, what’s at stake, how long it’s expected to last. They may ask the seller to cover all costs through indemnity or to reduce the purchase price.
Even minor disputes can complicate the path to closing.
Past Conflicts That Weren’t Disclosed
Some companies settle IP disputes quietly. A cease-and-desist gets sent, a payment is made, and both sides move on.
But if those settlements include limitations — like no future use of a design, name, or method — they must be disclosed in a deal.
If a buyer finds out after closing that the IP is restricted because of an old agreement, that can trigger a legal mess.
Trust is key during diligence. When past conflicts are hidden or misrepresented, buyers may pause everything to reassess the full risk picture.
Threats That Never Reached Court
Sometimes there’s no formal dispute — just threats or letters from competitors claiming infringement.
These are easy to ignore in the moment. But they still count as material risk in a deal.
Buyers want to know: is anyone claiming you’ve copied their product, their brand, or their tech?
Even a single letter from a big competitor can make a buyer nervous. It suggests potential for future problems — especially if the product is already in market.
Sellers should be upfront about any past notices, letters, or warnings. It’s better to explain the situation early than to let the buyer discover it late.
Employee and Founder IP Problems
Founders Who Didn’t Assign Rights
One of the most common IP issues in early-stage companies involves founders who built the product but never assigned their rights to the company.
They may still be involved. Or they may have left years ago.
Either way, if they never signed an IP assignment agreement, then the company might not fully own the core asset.
Buyers are very sensitive to this. If the product or brand is tied to someone who never legally transferred it, the deal could fall apart.
Fixing this requires tracking down the individual and getting their signature on a clean assignment document — ideally with counsel involved.
Former Employees Who Contributed to IP
Even if an employee was paid, that doesn’t guarantee the company owns what they created.
If their employment agreement didn’t include an IP assignment clause, the default law might give them ownership over their work — especially in jurisdictions outside the U.S.
This becomes a major concern in technical teams. A few lines of code, an algorithm, or a database schema can carry huge value.
Buyers will ask for proof that all employee-created IP is properly assigned. If the answer is vague, they’ll slow the deal down or demand a discount.
Contractors Without Proper Agreements
Freelancers and outside vendors are a bigger risk than most companies realize.
If a contractor created something — a logo, a prototype, marketing materials — but there’s no IP assignment in the contract, they probably still own it.
This is true even if they were paid in full. Payment alone does not transfer ownership.
This issue often surfaces in branding and product design. The logo may look great, but if it’s not fully assigned, the buyer can’t protect or control it.
During diligence, buyers will ask for every vendor agreement tied to product or brand creation. If they’re missing, that slows everything down.
Timing and Pressure in Deal Cycles
When IP Issues Surface Late
Most deals follow a fast timeline. Once there’s a term sheet, everyone rushes to hit the closing date.
If IP problems come up near the end, it throws everything off.
Now the legal team needs time. The seller needs to fix documents. The buyer needs to reassess the deal terms. And the momentum shifts.
Sometimes the delay is only days. Other times, it leads to restructuring or pulling out entirely.
Late surprises are the most frustrating. They make both sides nervous — and they give the other party room to renegotiate.
That’s why smart sellers run a pre-deal audit before even starting discussions.
Pressure to Close Doesn’t Fix Gaps
In some cases, both sides know there’s an IP issue — but they want to close the deal anyway and “fix it later.”
This is risky. The deal terms may shift after signing. The missing party may refuse to cooperate. The fix may not be legally clean.
Buyers often agree to close with conditions, like escrow or holdbacks, until the problem is resolved. But that reduces the seller’s payout and increases liability.
IP issues rarely fix themselves. They must be handled with structure and clarity — not speed.
The best time to solve them is always before money moves.
Integration Depends on Clean IP
After a deal closes, the buyer needs to integrate the business. That means launching products, enforcing trademarks, updating systems.
If the IP isn’t clean, those steps slow down.
Marketing can’t launch until the trademark is secure. Engineering can’t reuse code until ownership is confirmed. Legal can’t license or enforce anything until chain of title is clear.
That delay has real costs — lost time, lost revenue, and sometimes lost opportunities.
Buyers want to move fast after the deal. If the IP isn’t ready, it creates frustration right at the moment things should be accelerating.
Fixing IP Issues Before They Become Deal Killers
Run an Internal IP Audit Early
The best time to find problems is before someone else does. Running an internal IP audit early — well before M&A talks begin — is one of the smartest moves a company can make.
That means checking ownership on every asset. Reviewing employment agreements, vendor contracts, trademark filings, and patent records. Confirming that what you think you own, you actually do.
It’s not just about fixing mistakes. It’s about showing buyers that you’re serious — and ready.
A company that hands over a clean, organized IP portfolio during diligence creates instant trust. And trust shortens the path to close.
Repair Gaps With Clean Assignments
When issues are found, the next step is getting the right documents in place.
That means going back to early employees, founders, or contractors and asking them to sign assignment agreements. In many cases, this can be done quickly and without conflict — especially if handled respectfully and professionally.
The key is to act early. Don’t wait until the buyer finds the gap and forces the issue.
The longer an assignment is delayed, the more leverage the other party may have — and the more risk the buyer sees in the deal.
A signed document today can be worth far more than a negotiation tomorrow.
Clean Up Public Filings and Registries
Even when ownership is correct on paper, it must be reflected in public records.
That means updating patent offices, trademark databases, copyright registries, and domain records.
Outdated information slows down diligence and weakens IP rights.
Buyers want to enforce and license IP without doubt. If the public record doesn’t reflect current ownership, they can’t move quickly — and may ask for discounts or holdbacks until it’s fixed.
Public filings are often seen as a signal. If they’re well-maintained, the buyer assumes other parts of the business are too.
If they’re a mess, it invites more questions.
Structuring the Deal to Reduce IP Risk
When Asset Deals Require Extra Attention
In a stock deal, the company — and its IP — move as a whole. Ownership remains intact, so many issues stay hidden.
But in asset deals, every IP item must be listed, assigned, and transferred explicitly. There’s no room for assumptions.
This structure adds pressure. It also raises the stakes. A missed item might not transfer. A missing signature could block enforcement. A failed consent might end a license.
That’s why asset deals demand extra care. Every contract, registration, and assignment must be in place, fully reviewed, and aligned with the new ownership structure.
Using Escrow or Holdbacks to Cover IP Issues
If a deal is ready to close but IP issues still linger, the buyer may ask to hold back part of the purchase price.
That money sits in escrow until the issues are fixed — whether it’s a missing assignment, a pending consent, or a registration update.
This gives the buyer protection without stopping the deal.
But it also puts pressure on the seller. If the fix takes too long — or if the issue can’t be resolved — they may lose access to part of their payment.
Escrow is a helpful tool when used right. But it’s still a consequence of delay. It’s always better to clear the issue than to compensate for it.
Representations and Warranties Matter
In the purchase agreement, sellers often make representations about their IP — confirming they own it, that it’s enforceable, and that there are no undisclosed claims.
If these statements turn out to be wrong, the buyer may have legal recourse.
These clauses are standard in M&A, but they carry real weight. That’s why sellers must be certain about what they’re signing.
If you’re unsure about ownership or enforcement, say so. Buyers may accept the risk — or may help resolve it.
What matters most is honesty and clarity. Representing something as clean when it isn’t will always lead to a bigger problem down the line.
Turning IP Into a Selling Point
Build a Clear IP Narrative
When IP is clean and well-managed, it becomes a competitive advantage.
In M&A, that clarity can add to your valuation. It tells the buyer that you’ve protected what matters — and that they’re buying something defensible.
Use that to your advantage. Show how your IP supports your product. Explain how it blocks competitors. Outline how it can be licensed or scaled.
Make your IP part of the value story, not just a legal section in the appendix.
The more integrated your IP is with your business model, the more powerful it becomes in negotiation.
Showcase Discipline and Preparedness
Buyers know that IP issues are common. What impresses them is how you’ve handled them.
Did you audit early? Did you fix gaps before they were pointed out? Can you produce a full chain of title on short notice?
These are the signs of a well-run company. And in M&A, that’s what buyers are really buying.
Strong IP management reflects strong leadership. It reduces surprises, lowers costs, and increases deal confidence.
That confidence is what moves deals forward — and gets them closed on your terms.
Make Integration Easy
Buyers want to hit the ground running. If your IP is already structured for transition — with clean records, current filings, and centralized control — it makes their job easier.
They can enforce rights, continue product development, and launch updates without delays.
That kind of readiness creates momentum. It also positions your company as low-risk, high-potential — exactly what acquirers and investors are looking for.
Integration isn’t just a post-deal phase. It starts with how you present your IP.
Final Thoughts: Clean IP Closes Deals Faster
M&A is all about speed, clarity, and confidence. The faster you can prove that your intellectual property is real, owned, and protected, the faster your deal will move.
When IP is messy — when ownership is unclear, filings are outdated, or rights are disputed — the deal slows down. Sometimes it stops completely.
But when everything is clean, your IP becomes an asset that drives trust, not questions.
It’s not just about legal compliance. It’s about showing the other side that you’ve built something worth buying — and that you’re ready to hand it over, no strings attached.
Because in the end, it’s not just the product they’re buying. It’s the certainty that comes with it.
