Technology M&A & IP Due Diligence

Where Technology Transactions Meet M&A — The IP Diligence That Protects the Deal

When a technology company is being acquired, the intellectual property is usually the deal. Not the office furniture, not the lease, not even the revenue — the IP is what the buyer is paying for. And yet IP due diligence is where deals most often uncover surprises that can reduce valuation, restructure terms, or kill the transaction entirely. John Montague sits at the intersection of M&A and technology transactions, which makes IP due diligence a natural center of gravity for his practice. Having spent over fifteen years advising technology companies — starting with M&A and private equity work at Locke Lord LLP (now Troutman Pepper Locke), an AM Law 200 firm — he knows where IP problems hide and how to evaluate their impact on deal value.

Tip from John Montague: The IP diligence question that gets missed most often isn’t about patents — it’s about code. Specifically: can the target company prove that every line of code in its core product was written by someone who properly assigned their rights? Former founders, early contractors, offshore development teams — any gap in the assignment chain is a gap in the buyer’s ownership. I’ve seen this issue surface in more technology acquisitions than I can count.

How We Help

Montague Law’s technology IP due diligence practice supports both acquirers and sellers in M&A transactions where intellectual property is a material component of deal value. John Montague’s work includes conducting comprehensive IP ownership audits tracing the chain of title from original creators through the target company, including employee invention assignments, contractor work-for-hire agreements, and founder IP contributions; analyzing open source software usage and license compliance, including identifying copyleft obligations that could affect the acquirer’s ability to commercialize the technology; evaluating patent portfolios for coverage, freedom-to-operate risks, and pending prosecution matters; reviewing technology licensing arrangements — both inbound and outbound — for change-of-control provisions, exclusivity restrictions, and ongoing royalty obligations; assessing data assets and privacy compliance, including data collection practices, consent mechanisms, and cross-border transfer arrangements; and preparing IP diligence reports that quantify risk and inform purchase price adjustments, escrow requirements, and indemnification provisions.

The Stakes of Getting IP Diligence Wrong

In a traditional acquisition, a diligence miss might mean inheriting an unfavorable contract or an undisclosed liability. In a technology acquisition, a diligence miss can mean discovering that the core asset you purchased isn’t actually owned by the company you bought it from. IP ownership failures in technology M&A include former co-founders who never assigned their contributions, early-stage contractors who retained ownership of key code, open source components with license obligations that are incompatible with the buyer’s commercial plans, and university or prior-employer IP claims based on the circumstances under which the technology was originally developed.

Each of these issues is discoverable during diligence — if counsel knows where to look. John Montague’s dual expertise in M&A deal mechanics and technology transactions means he conducts IP diligence with an understanding of both the legal frameworks and the practical realities of how software is actually built. His accounting background from Stetson University also enables him to connect IP findings to their financial implications, helping buyers translate diligence discoveries into purchase price adjustments and deal protections.

Frequently Asked Questions

What does IP due diligence cover in a technology acquisition?

IP due diligence in a tech deal typically covers ownership verification for all material intellectual property (patents, copyrights, trade secrets, trademarks), review of all IP assignment and license agreements, open source software audit and license compliance review, third-party IP infringement risk assessment, data asset evaluation and privacy compliance review, and analysis of any pending or threatened IP disputes.

How long does technology IP due diligence take?

The timeline depends on the target company’s size, the complexity of its technology stack, and the quality of its IP records. For a typical early-to-mid-stage technology company, comprehensive IP diligence generally requires two to four weeks of focused review. Companies with clean IP records and well-maintained documentation move faster; those with gaps in their assignment chains or undocumented open source usage require more investigation.

Can IP diligence findings affect the purchase price?

Frequently. Material IP issues discovered during diligence can result in purchase price reductions, increased escrow holdbacks, specific indemnification provisions for identified IP risks, or restructured deal terms. In some cases, significant IP ownership failures can lead to deal termination. John Montague’s approach is to quantify IP risk in terms that both business principals and deal counsel can use to inform negotiation.

Related Practice Areas: Technology Transactions | Mergers & Acquisitions | M&A Due Diligence

Need IP due diligence for a deal? Call 904-234-5653 or schedule a consultation.