IP Due Diligence, Assignment & Licensing Advisory

IP due diligence verifies who owns, controls, and can enforce a business's intellectual property — trademarks, patents, designs, copyrights, trade secrets, and domain names — and whether that ownership chain is properly documented. It is most commonly requested by investors ahead of a funding round, by an acquirer's legal team ahead of an M&A transaction, or by a licensor before granting an exclusive licence. It goes beyond confirming a registration exists; it traces the chain of title from the original creator through every subsequent transfer.

Yes, and it is one of the most common findings in early-stage IP diligence. If the trademark was filed before incorporation, or the founder registered it personally out of convenience, the company does not legally own the mark it is trading under — even though it may have built substantial goodwill using it. This must be corrected through a formal assignment deed from the founder to the company, executed with adequate stamp duty and recorded with the Trade Marks Registry via Form TM-P. Until this is done, the trademark is a personal asset of the founder, not a company asset — a fact that investors and acquirers specifically check for.

Under Section 17 of the Copyright Act 1957, the default rule is that the author of a work — the contractor, not the commissioning business — owns the copyright, unless there is a contract stating otherwise or the work falls within a specific statutory exception (such as work made in the course of employment under a contract of service, as opposed to a contract for service with an independent contractor). This means code, designs, written content, or other creative work commissioned from a freelancer or agency without an explicit IP assignment clause may legally still belong to that freelancer or agency, not your business.

Assignment permanently transfers ownership — the assignor gives up all rights, and the assignee becomes the new owner, recorded as such with the relevant Registry. Licensing does not transfer ownership; the licensor retains the IP and grants the licensee a contractual right to use it, typically for a defined term, territory, and scope, in exchange for a royalty or fee. A founder assigning a patent to their company is a permanent transfer. A franchisor granting a franchisee the right to use its trademark and business format for 5 years in exchange for a royalty is a licence.

An assignment is legally valid between the parties from the date of execution, but recording it with the relevant Registry is strongly recommended and, in practice, necessary to protect the assignee's position. For trademarks, this means filing Form TM-P with the Trade Marks Registry. For patents, this means recording the assignment under Section 68 of the Patents Act 1970 via Form 16. An unrecorded assignment is valid inter partes but the assignee may face difficulty enforcing the mark or patent against third-party infringers, and the gap will surface as a finding in any future diligence exercise.

Transfer pricing rules under Sections 92 to 92F of the Income-tax Act require that transactions between related parties — including royalty and licence fee payments between a parent company and its Indian subsidiary, or between group companies — be priced as if the parties were unrelated, at arm's length. This applies to both international transactions and specified domestic transactions. If a royalty rate is set arbitrarily rather than benchmarked against comparable third-party licensing arrangements, the tax authorities can make a transfer pricing adjustment, adding back the excess (or shortfall) to taxable income, along with interest and penalties that can reach 200% of the tax on the adjustment in cases of under-reporting.

Yes. Royalty payments to a resident are subject to TDS under Section 194J of the Income-tax Act. Royalty payments to a non-resident are subject to TDS under Section 195, at the rate specified under the Income-tax Act or the applicable Double Taxation Avoidance Agreement (DTAA), whichever is more beneficial to the payee, provided the non-resident furnishes a Tax Residency Certificate and Form 10F to claim the treaty rate. Form 15CA (and Form 15CB, where applicable, certified by a CA) must be filed before remitting the payment abroad. TDS thresholds and rates are periodically revised in the Finance Act — PNPC confirms the exact applicable rate and threshold at the time of each engagement rather than relying on a fixed figure that may have changed.

Yes. Licensing of IP rights is treated as a supply of service under the CGST Act 2017 and attracts GST at the applicable rate under the post-September-2025 rate structure. For a licence from a foreign licensor to an Indian licensee, the transaction is typically treated as an import of service, and GST is payable by the Indian licensee under the reverse-charge mechanism, with input tax credit generally available if the licensed IP is used in the course of a taxable business. The exact classification can depend on whether the transaction is structured as a permanent transfer of IP rights (which can attract different treatment) versus a temporary licence.

For an early-stage company with a modest IP portfolio (a handful of trademarks, no patents, straightforward contractor history), a focused diligence review can typically be completed in 2–3 weeks if documents are made available promptly. Portfolios with patents, multiple licensing arrangements, or cross-border royalty flows take longer — realistically 6–10 weeks for a thorough review. We recommend starting IP diligence the moment a term sheet is signed, in parallel with financial and legal diligence, rather than waiting for investor counsel to raise it first.

It depends on the nature of the gap and how much time remains before closing. A missing assignment from a founder or a departed employee can often be remediated within days if the counterparty cooperates — this is the most common and most fixable gap. A gap involving a departed employee or ex-contractor who is uncooperative, or a disputed inventorship/authorship claim, is harder and can require negotiation, indemnity provisions, or in some cases a purchase price adjustment. Investors and acquirers rarely walk away from an otherwise attractive deal over a fixable IP gap — but they will price the risk into the deal terms if it is not addressed.

Yes, registered IP — trademarks, patents, and copyrights — can be assigned by way of security or mortgaged to a lender as collateral, subject to the lender's internal policies and, for trademarks, recordal of the security interest with the Trade Marks Registry. Banks and NBFCs increasingly recognise IP as bankable collateral for technology and brand-driven businesses, though valuation and enforceability considerations make this a more specialised lending category than conventional asset-backed lending.

A royalty audit right is a clause giving the licensor the contractual right to inspect the licensee's books and records — typically once or twice a year, on reasonable notice — to verify that reported sales or usage (on which the royalty is calculated) are accurate. Without this clause, the licensor has no formal mechanism to verify self-reported royalty figures beyond trusting the licensee's disclosure. We recommend including a royalty audit right in virtually every licence agreement where royalty is calculated as a percentage of sales or usage, since it is the primary safeguard against underreporting.

For a funding round, diligence typically focuses on confirming the company (not the founders personally) owns its core IP, that there are no ownership gaps that would concern a new investor, and that any founder or pre-incorporation IP has been properly assigned. For an M&A transaction, diligence is broader and deeper — it includes the target's entire IP portfolio, any licensing arrangements that will transfer or need renegotiation with the change of control, litigation and opposition history, and often a valuation exercise for the IP as a distinct asset class within the overall purchase price allocation. M&A diligence also checks for 'change of control' clauses in existing licence agreements that could be triggered by the transaction itself.

A representation and warranty (R&W) is a contractual statement by the seller/company that certain facts are true as of a specific date — for example, 'the Company owns all right, title, and interest in the IP listed in Schedule X, free of any lien, encumbrance, or third-party claim.' If this statement later proves false — because, say, a contractor never actually assigned their copyright — the buyer or investor can claim breach of warranty, potentially triggering an indemnity claim against the escrow or the sellers personally. Accurate, diligence-verified IP representations protect both sides: the buyer gets a true picture, and the seller avoids a post-closing breach claim for something that could have been fixed pre-closing.

DPIIT recognition and Udyam (MSME) registration qualify a business for the reduced government fee of ₹4,500 per class (versus ₹9,000 for other applicants) on trademark filings, which is relevant if remediation during diligence includes filing a fresh trademark application. DPIIT/Udyam status does not itself change the substantive diligence process — chain-of-title verification, Registry search, and agreement review are the same regardless of startup recognition status — but it does reduce the cost of any fresh filings identified as part of remediation.

This is treated as an inventorship or authorship dispute and is one of the more difficult findings to remediate, because it usually cannot be resolved by paperwork alone — it requires evidence (dated design files, communications, code commit history, patent disclosure records) to establish who actually created the IP and when. Where both parties are still active in the company and willing to cooperate, this is typically resolved commercially through a joint ownership or licence-back arrangement documented in the Shareholders' Agreement. Where a co-founder has exited on adversarial terms, this can escalate into formal dispute resolution.

Yes — this is precisely what quality-control and brand-standards clauses in a trademark licence agreement are for. The licensor retains the right to approve how the mark is used, inspect the licensee's use for quality compliance, and terminate the licence for breach of brand standards. In fact, including quality-control provisions is not just a commercial preference — the absence of any quality control by the licensor over licensed use of a trademark can be argued as 'naked licensing,' which risks the mark being found abandoned or its distinctiveness diluted, weakening the licensor's own registration.

PNPC's IP due diligence, assignment, and licensing advisory engagement covers the diligence review, chain-of-title remediation (including drafting assignment deeds and coordinating Registry recordal), and licence/royalty agreement drafting. Where remediation requires a fresh trademark, patent, or design filing (for example, a mark discovered to be unregistered, or a class gap identified during diligence), we scope that filing as part of the remediation plan, coordinated through our registered trademark agent network — consistent with how we handle standalone registration engagements.

A licence agreement between an Indian entity and a UAE group company (or vice versa) must address: the royalty rate (benchmarked for transfer pricing purposes given the related-party nature), withholding tax under Section 195 in India (subject to the India-UAE DTAA, TRC, and Form 10F for the UAE entity), the reverse-charge GST treatment on the Indian side if the UAE entity is the licensor, and UAE Corporate Tax and VAT implications on the UAE side for the royalty received. PNPC's Chennai/Bangalore/Hyderabad and Dubai offices coordinate both sides of this arrangement under one engagement, rather than requiring the client to separately brief an Indian tax advisor and a UAE tax advisor.

Naked licensing refers to a trademark owner permitting a licensee to use the mark without exercising any quality control over the nature or quality of goods/services sold under it. Because a trademark functions to signal consistent quality and origin to consumers, licensing it without any oversight undermines that function and can be used by a third party (in litigation or opposition) to argue the mark has lost its distinctiveness or that the owner has effectively abandoned meaningful control. This is why every licence agreement PNPC drafts includes specific quality-control and inspection rights for the licensor, not merely a royalty clause.

Both, depending on the specific condition. A reasonable condition — such as 'IP assigned to the Company prior to closing' — should simply be complied with; it protects the company's own position as much as the investor's. A condition that is disproportionate to the actual risk — for example, requiring a full worldwide patent portfolio audit for a company with one domestic trademark and no patents — is worth negotiating down in scope. PNPC reviews term sheet IP conditions and advises which are standard market practice to simply satisfy versus which are worth pushing back on with your legal counsel.

Trade secrets are not registered anywhere in India — there is no equivalent Registry, and protection arises from maintaining genuine confidentiality plus enforceable contractual obligations (NDAs, confidentiality clauses in employment and vendor contracts) rather than from a filing. Contemporaneous documentation — dated internal memos, restricted-access records, confidentiality agreements signed before disclosure, and a demonstrable practice of treating the information as confidential — is what establishes trade secret status if it is ever challenged or misappropriated. Courts assessing trade secret misappropriation claims in India rely on common law principles (breach of confidence) and contractual remedies, since there is presently no standalone trade secrets statute.

Fees depend on portfolio size (number of trademarks, patents, designs, and licensing arrangements), transaction complexity (funding round versus M&A versus standalone licensing structuring), and how many gaps are found requiring remediation. We provide a fixed-fee quote after an initial portfolio scoping call, distinguishing the diligence/review fee from any subsequent assignment drafting, Registry recordal, or licence agreement drafting fees — each quoted separately so there are no surprises as remediation work is identified.

IP law firms are well-suited to drafting and litigating IP-specific matters in isolation. PNPC's advantage is coordinating the IP diligence and structuring work alongside the tax, transfer pricing, GST, and corporate compliance dimensions that inevitably sit alongside it — royalty withholding tax, transfer pricing benchmarking, GST treatment of licence fees, and how an assignment or licensing arrangement is reflected in the company's annual MCA and tax filings. For clients where the transaction has both an IP dimension and a tax/compliance dimension — which is nearly every funding round, M&A deal, or cross-border licensing arrangement — a single coordinated engagement avoids the gaps that arise when IP counsel and tax advisors work independently of each other.

A buyer-side (or investor-side) due diligence report is commissioned by the party acquiring or investing, to identify risk before committing capital. A vendor due diligence (VDD) report is commissioned by the seller/target company itself, in advance of a sale process, to identify and remediate IP gaps before a buyer's own diligence team finds them — giving the seller control over the narrative and timeline for fixing issues, rather than negotiating from a position of a buyer having found a problem first. PNPC prepares both, and for companies anticipating a future sale or fundraise, we generally recommend a VDD-style internal review well ahead of any live transaction.

Under a scheme of merger or amalgamation sanctioned under Sections 230–232 of the Companies Act 2013 (or approved by the NCLT), all assets and liabilities of the transferor company — including IP — vest in the transferee/surviving company by operation of the sanctioned scheme, without requiring a separate assignment deed for each asset. However, in practice, the Trade Marks Registry and Patent Office still require the sanctioned scheme order (and sometimes a separate application) to be filed to update their records reflecting the new owner — this is an administrative step, not a substantive re-assignment, but skipping it leaves the public Registry record inconsistent with the actual legal owner.

This depends entirely on the specific language of the licence agreement. Many licence agreements include a 'change of control' clause that either requires the licensee's consent before an acquisition, gives the licensee a termination right upon a change of control of the licensor, or is silent (in which case the licence generally continues to bind the successor entity as a matter of general contract law, since a share acquisition does not change the contracting legal entity). This is a key item reviewed in M&A-context IP diligence — an acquirer needs to know whether key licensing revenue or licensing rights will survive the transaction unaffected.

PNPC coordinates IP valuation as part of broader business or transaction valuation work, typically using income-based (discounted royalty or relief-from-royalty), market-based (comparable licensing transactions), or cost-based approaches depending on the nature of the IP and the purpose of the valuation (funding round pricing, M&A purchase price allocation, or a stand-alone IP valuation for a licensing negotiation). This work is generally scoped alongside our broader corporate finance and valuation practice, since IP valuation methodology overlaps significantly with business valuation standards.

Start with an IP inventory — a simple, complete list of every trademark, patent, design, copyright, and domain name the business uses or claims, regardless of whether it is currently registered. From there, PNPC runs a portfolio health-check: current Registry status of each asset, a spot-check of chain-of-title for the highest-value assets, and a review of standard employment/contractor agreement templates for IP assignment language. This is a lighter-touch, lower-cost exercise than a full transaction-driven diligence, and it is the right starting point for a business with no live transaction on the horizon but a general sense that IP hygiene has been neglected.

The cost has two components: the state stamp duty on the assignment deed (which varies by state and by the stated consideration value, and is a statutory cost, not a PNPC fee) and professional fees for drafting the deed, coordinating execution, and filing Form TM-P with the Trade Marks Registry. For a single, uncontested mark with a cooperative assignor (the founder is still involved and willing to sign), this is typically a straightforward, fast-turnaround exercise. Costs escalate meaningfully if the assignor is a departed founder who is uncooperative, requiring negotiation or, in rare cases, legal proceedings to compel execution.