You built the product. But do you own it? This question seems straightforward until acquirers start asking for documentation. Then gaps emerge. Contractors who never signed IP agreements. Open source licenses nobody tracked. Code from previous jobs. Third-party components with unclear terms.

IP issues can delay acquisitions, reduce valuations, or kill deals entirely. Here's what you need to clean up before due diligence.

Why IP Matters in Acquisitions

When acquirers buy your company, they're buying assets. The most valuable asset is usually your software. If you don't clearly own that software, acquirers face:

Legal Uncertainty: They might be buying a lawsuit. Previous contributors could claim ownership. License violations could trigger liability.

Operational Risk: If ownership is challenged, they might lose the right to use, modify, or distribute the software.

Integration Barriers: Unclear IP complicates integration with their existing products and processes.

Due Diligence Failure: Many deals die in due diligence when IP issues emerge that can't be quickly resolved.

Employee IP Assignments

What's Required

Every employee who contributed to your codebase should have signed an agreement assigning their IP to the company.

Key Elements:

• Assignment of all work product to the company
• Confirmation that work is "work for hire"
• Waiver of moral rights where applicable
• Agreement covering future as well as past contributions

Common Problems

No Agreements: Early employees (or founders) never signed anything formal.

Incomplete Agreements: Agreements exist but don't cover all work or all rights.

Jurisdictional Issues: International employees may have different IP rules that weren't addressed.

Prior Work: Employees brought code from previous jobs or personal projects.

How to Address

Audit:

• List all current and former employees
• Identify what each contributed
• Review all existing agreements
• Flag gaps and issues

Remediate:

• Obtain retroactive assignments where possible
• Negotiate with former employees if needed
• Replace code where assignments can't be obtained
• Document all efforts and outcomes

Contractor IP Assignments

What's Required

Contractor IP is trickier than employee IP. In many jurisdictions, contractors own their work by default unless they explicitly assign it.

Key Elements:

• Explicit IP assignment (work for hire isn't enough)
• Assignment of all rights, including source code
• No retained licenses or rights
• Written agreement signed before or during the work

Common Problems

Default Ownership: Without explicit assignment, contractors may own what they built.

Unclear Terms: Agreements may be ambiguous about what was assigned.

Missing Agreements: Contractors engaged informally without written contracts.

Retained Rights: Some agreements let contractors retain rights to reuse code.

How to Address

Audit:

• List all contractors who contributed code
• Review all contractor agreements
• Identify contributions from each
• Flag missing or incomplete assignments

Remediate:

• Obtain retroactive assignments (may require payment)
• Replace code where assignments can't be obtained
• Document attempts to obtain assignments
• Consider legal review of ambiguous agreements

Open Source Compliance

What's Required

Open source software comes with licenses. Those licenses have requirements. Violating them creates legal risk.

License Categories:

Permissive (MIT, Apache, BSD):

• Generally safe for commercial use
• Require attribution
• Allow proprietary use

Copyleft (GPL, LGPL, AGPL):

• May require you to open source your code
• Complex rules about linking and distribution
• AGPL extends to network use

Commercial Open Source:

• May have restrictions on commercial use
• May require paid licenses for certain uses
• Terms vary significantly

Common Problems

Unknown Usage: Nobody tracked what open source is actually in the codebase.

License Violations: GPL code in proprietary products without compliance.

Transitive Dependencies: Dependencies have their own dependencies with their own licenses.

Attribution Missing: Required attribution not provided.

How to Address

Audit:

• Use automated tools to scan for open source
• Review all direct dependencies
• Check transitive dependencies
• Identify all licenses in use

Assess:

• Evaluate each license against your use case
• Identify violations or problematic uses
• Determine compliance requirements
• Flag items needing replacement

Remediate:

• Add required attributions
• Replace problematic dependencies
• Ensure compliance with copyleft requirements
• Document compliance status

Third-Party Components

What's Required

Beyond open source, you may use commercial components, APIs, SDKs, and services. Each has its own terms.

Key Considerations:

• License transferability in acquisition
• Usage restrictions that might affect buyer
• Revenue or usage limits
• Termination clauses

Common Problems

Non-Transferable Licenses: Some licenses don't transfer in acquisitions.

Personal Licenses: Components licensed to individuals rather than company.

Restrictive Terms: Terms that limit how the buyer can use the product.

Vendor Lock-In: Critical dependencies on vendors with unfavorable terms.

How to Address

Audit:

• List all third-party commercial components
• Review license terms for each
• Identify transferability issues
• Flag restrictive terms

Remediate:

• Contact vendors about acquisition scenarios
• Upgrade licenses where needed
• Replace components with problematic terms
• Document all vendor relationships

Code Origin Issues

What's Required

All code in your product should have a clear, clean origin with proper rights to use.

Common Problems

Previous Employment: Code brought from previous jobs.

Academic Origins: Code from university or research settings.

Collaborative Development: Code developed with other companies.

Acquisitions: Code from companies you acquired with unclear history.

How to Address

Audit:

• Identify any code with unclear origin
• Review origins of major components
• Check for any code from previous employment
• Assess acquisition-related code

Remediate:

• Replace code with unclear origins
• Obtain releases from previous employers if needed
• Document clean room development where applicable
• Ensure acquisition IP was properly transferred

The IP Due Diligence Process

What Acquirers Ask For

Documentation:

• All employee IP agreements
• All contractor agreements
• Open source audit results
• Third-party license inventory
• IP assignment chain

Representations:

• Company owns all IP free and clear
• No third-party claims or disputes
• Compliance with all licenses
• No infringement of others' IP

Warranties:

• IP ownership will not be challenged
• Licenses will transfer appropriately
• No undisclosed encumbrances

What Triggers Deeper Investigation

Red Flags:

• Missing or incomplete agreements
• Known or potential disputes
• GPL or other copyleft concerns
• Contractor-heavy development history
• International development

The Cleanup Checklist

Employee Agreements:

• [ ] All current employees have signed IP agreements
• [ ] All former employees who contributed have agreements
• [ ] Agreements cover all relevant work
• [ ] International employees properly addressed

Contractor Agreements:

• [ ] All contractors have explicit IP assignments
• [ ] Assignments cover all contributions
• [ ] No retained rights or licenses
• [ ] Missing assignments addressed (obtained or code replaced)

Open Source:

• [ ] Complete audit performed
• [ ] All licenses identified and reviewed
• [ ] Compliance with all license requirements
• [ ] Problematic licenses addressed

Third-Party Components:

• [ ] All commercial components inventoried
• [ ] License terms reviewed for transferability
• [ ] Vendor relationships documented
• [ ] Any issues addressed with vendors

Code Origins:

• [ ] No code from previous employment
• [ ] No code with unclear origins
• [ ] All acquisitions properly transferred IP
• [ ] Clean room development documented where applicable

Getting Legal Help

IP cleanup often requires legal expertise.

When to Engage Counsel:

• Missing agreements that need negotiation
• Open source license compliance questions
• International IP considerations
• Any existing disputes or claims
• Complex third-party arrangements

What to Look For:

• Experience with technology M&A
• Understanding of open source licensing
• Practical approach to remediation
• Experience with your jurisdiction

At Topcode, we help founders identify IP issues before they become deal problems. When you work with us on exit planning, we audit your codebase, flag ownership and licensing concerns, and help you create a remediation plan that prepares you for due diligence.

Because IP issues discovered during due diligence delay and damage deals. IP issues addressed beforehand don't.