As early-stage life sciences companies prepare for their next financing or partnership, intellectual property due diligence is often the first, and most consequential, checkpoint. Investors and strategic partners want confidence that your patents align with your science, your team, and your business model. But for many growing biotechs, legacy IP issues can quietly undermine that story.
How Do IP Documentation Gaps Arise?
In the rush of early innovation, companies often form around university-licensed technology or informal collaborations between founders, consultants, and institutions. Assignment documentation may not be sufficient to transfer ownership effectively, inventorship may be incomplete or incorrect, or lab notebooks may not have been maintained in a way that supports future ownership claims. These gaps are rarely intentional, but they may become high-stakes issues once diligence begins.
What Are Common IP Red Flags?
IP issues often emerge during due diligence and may raise concerns for potential investors or partners. Ownership chains may be unclear, with missing or misdated assignment documents from founders, contractors, or academic institutions. In some cases, broad license rights held by a university or collaborator may not have been fully recorded, resulting in rights that extend further than the company anticipated. Inventorship can also be inconsistent, with patent filings that omit key contributors or list inventors employed by multiple organizations. Continuation practice may reveal gaps, such as lapsed applications or missed priority claims that diminish the scope and strength of coverage. And overlapping IP rights may create uncertainty, whether due to unresolved distinctions between platform and product-specific filings or competing filings made by third parties.
How Can Companies Rebuild Investor Confidence?
Before approaching investors or partners, consider:
- Auditing your IP portfolio: Confirm ownership, priority, and scope; ensure every asset has a clean chain of title.
- Verifying university agreements: Review license scope, sublicensing rights, and field restrictions.
- Addressing inventorship errors: Correct inventorship with declarations and recordations where appropriate.
- Documenting development history: Maintain lab records, employment agreements, and contractor IP clauses.
- Strengthening disclosure policies: Implement review processes for public disclosures and abstracts to avoid inadvertent loss of rights.
What’s the Payoff?
Cleaning up IP issues before diligence may help avoid deal friction, as well as signaling to investors that your company is disciplined, well-advised, and ready to scale. In competitive financing and M&A environments, that preparation may be the difference between a smooth close and a valuation haircut.