Intellectual Property
Due Diligence Playbook
for Bangladesh
Strategic IP Portfolio Audit & Compliance Guide for M&A, IPOs, and VC Fundraising
Overview: IP Due Diligence in Bangladesh
In modern corporate transactions—whether a strategic acquisition (M&A), an Initial Public Offering (IPO), or early-stage Fundraising (Series A/B)—conducting a thorough IP Due Diligence and intellectual property compliance audit is rarely just a line item; it is often the underlying driver of valuation.
As a leading law firm in Bangladesh, LegalSeba LLP has pioneered this rigorous IP audit framework tailored for both local entities and cross-border transactions. We leverage deep knowledge of local regulatory bodies, such as the Department of Patents, Designs and Trademarks (DPDT) and the Registrar of Joint Stock Companies and Firms (RJSC), alongside international IP protocols, to help deal teams, investors, and founders uncover hidden liabilities, verify core asset ownership, and structure remediation prior to closing.
Why is an IP Portfolio Audit Required?
In today's knowledge-based economy, a company's valuation is heavily tied to its intangible assets. Routine IP Audits and transactional IP Due Diligence are critical commercial necessities required to:
- 1. Validate Deal Valuation Ensure the core technology, brand, or content driving the purchase price is actually owned by the target and adequately protected from competitors.
- 2. Uncover Deal-Killing Liabilities Identify hidden infringement claims, open-source software (OSS) violations, or restrictive licenses that could halt operations or drain resources post-acquisition.
- 3. Structure Remediation Provide the buyer or investor with leverage to demand pre-closing fixes (e.g., securing missing assignments) or adjust the purchase price through indemnities and escrows.
- 4. Ensure IPO & Fundraising Readiness For companies raising capital or going public, a rigorous intellectual property compliance audit is mandated by underwriters and VC funds (especially concerning foreign investment and fund repatriation under Bangladesh Bank regulations) to prevent regulatory scrutiny, investor lawsuits, and disastrous reputational damage. LegalSeba LLP regularly readies Bangladeshi startups for institutional investment through preemptive audits.
Objectives of an IP Audit
- ✓ Verification: Confirm target actually owns the IP they claim.
- ✓ Valuation: Assess the strength, scope, and remaining life of core patents/trademarks.
- ✓ Liability: Identify potential infringement claims against the target.
- ✓ Encumbrances: Uncover restrictive licenses or liens that limit IP usage post-deal.
Context: M&A vs. Fundraising
🏢 M&A & Private Equity Focus
Aggressive risk identification. Focus on "Change of Control" clauses in licenses that could terminate crucial software upon acquisition. Remediation is demanded before closing.
📈 IPO & VC Fundraising Focus
Disclosure and house-cleaning. Focus is on perfecting title (ensuring all founders assigned rights) and preparing defensible public statements about the IP portfolio. Key for passing early-stage IP Audits.
IP Asset Profiling & Audit Focus
The focus of an IP portfolio audit in Bangladesh shifts dramatically based on the nature of the target company. A 'cookie-cutter' approach fails. Select a target profile below to see how LegalSeba LLP allocates resources to evaluate the materiality of different IP asset classes during the review process.
Comprehensive IP Audit Checklist
This is the core execution framework for any intellectual property compliance audit or due diligence process. The following represents the comprehensive document production required from the target company to conduct a thorough IP risk assessment for M&A or Fundraising. As a leading law firm, LegalSeba LLP utilizes this checklist to seamlessly guide clients through complex data room reviews.
Objective: Prove that the entity being acquired actually holds clean legal title to the IP assets driving its valuation, free from claims by founders (often mitigated by a solid Founders Agreement), former employees, or third-party contractors.
Required Document Production:
- Schedules of Registered IP: Complete lists of all issued patents, pending patent applications, registered trademarks, pending trademark applications, domain names, and registered copyrights across all global jurisdictions.
- Founder Assignment Agreements: Executed documents transferring IP created prior to formal corporate incorporation from individual founders into the newly formed entity.
- Standard PIIAs: Form Proprietary Information and Inventions Assignment Agreements (PIIAs) or equivalent employment agreements used historically and currently.
- Executed Employee Agreements: Copies of signed PIIAs for all current and former employees, particularly those involved in R&D, engineering, or product development.
- Independent Contractor Agreements: Executed agreements for all third-party developers, consultants, or agencies showing explicit "work made for hire" language.
- Chain of Title Documentation: Copies of recorded assignments at relevant IP offices (e.g., USPTO, EPO) proving transfer of rights.
Objective: Identify how the IP is monetized, reliant on third parties, or restricted. Determine if the transaction will trigger termination of vital rights or accelerate liabilities.
Required Document Production:
- Inbound Licenses (Critical): Agreements where the target relies on third-party IP to operate (e.g., core software components, patented manufacturing processes).
- Outbound Licenses (Revenue): Top customer agreements, channel partner agreements, and reseller agreements.
- Cross-Licenses & Settlement Agreements: Any agreements resolving past disputes that allow competitors to use the target's IP.
- Joint Venture & Co-Development Agreements: Contracts showing shared ownership or complex rights allocations.
- Security Agreements: UCC financing statements or bank loan agreements where the IP portfolio has been pledged as collateral.
Objective: Specifically for tech targets, verify that the software architecture is legally sound and that the use of open source code does not compromise the proprietary nature of the core product.
Required Document Production:
- OSS Scans: Recent reports from automated code scanning tools (e.g., Black Duck, Flexera) detailing all Open Source Software libraries.
- OSS Policy & Logs: The company's internal manual governing how developers are permitted to integrate open source code.
- List of "Copyleft" Usage: Specific identification of how "viral" licenses (e.g., GPL, AGPL) are utilized.
- Source Code Escrow Agreements: Contracts where the target has deposited its source code with a third party.
Objective: Quantify known legal liabilities and assess the strength of the target's IP enforcement strategy against competitors.
Required Document Production:
- Litigation Files: Pleadings, judgments, and settlement agreements for any past or currently active IP litigation.
- Cease & Desist Communications: All formal demand letters sent or received by the company alleging IP infringement.
- Administrative Proceedings: Documentation regarding actions at the PTAB or TTAB.
- Threatened Litigation: Internal memos regarding potential disputes that have not yet formalized into lawsuits.
- Freedom to Operate (FTO) Opinions: Legal opinions assessing whether the target's products infringe on third-party patents.
Objective: Evaluate the strength, scope, and enforceability of the patent portfolio, ensuring core products are covered and all maintenance fees are current.
Required Document Production:
- Patent Mapping: Documents linking specific granted patents to the target's actual commercialized products or revenue streams.
- Prosecution Histories: File wrappers for key patents to assess arguments made to the patent office (which may limit the scope of the patent).
- Maintenance Fee Records: Proof that all annuities and maintenance fees have been paid globally to prevent patent lapse.
- Invention Disclosures: Internal logs of new inventions that have not yet been filed as patent applications.
- Prior Art Searches: Any internal or third-party searches regarding patentability of core technologies.
Objective: Secure the target's brand identity, ensuring freedom to operate in expansion markets and verifying corporate control over digital assets. For targets operating locally, this includes verification with the Bangladesh DPDT.
Required Document Production:
- Evidence of Use: Documentation proving that registered trademarks are actively being used in commerce in their respective jurisdictions.
- Domain Name Registries: Complete list of domains (.bd, .com, etc.) and login credentials, confirming they are registered in the company's name, not a founder's personal name.
- Social Media Credentials: Ownership verification for all corporate handles (LinkedIn, Twitter, Instagram, TikTok).
- Co-Existence Agreements: Contracts allowing the target and a third party to use similar marks in different markets.
- Brand Guidelines: Internal policies detailing how third parties may use the company's logos and marks.
Objective: Confirm that the target has taken "reasonable steps" to protect its highly valuable, non-public information (algorithms, customer lists, recipes) so it legally qualifies as a trade secret.
Required Document Production:
- Trade Secret Register: A documented list of the company's "crown jewel" trade secrets.
- Non-Disclosure Agreements (NDAs): Executed NDAs with all vendors, suppliers, partners, and prospects who had access to confidential data.
- IT Security Policies: Documentation on access controls, encryption, and physical security measures used to protect servers and facilities.
- Employee Exit Procedures: Checklists showing that departing employees return all data and are reminded of their ongoing confidentiality obligations.
Objective: Assess liability exposure under global privacy frameworks (GDPR, CCPA, local data laws) and verify the target actually owns or has rights to monetize the user data it collects.
Required Document Production:
- Privacy Policies: Historical and current privacy policies to ensure data wasn't collected under deceptive terms.
- Data Processing Agreements (DPAs): Contracts with cloud providers, analytics tools, and third parties processing user data.
- Data Mapping / RoPA: Records of Processing Activities showing where data lives, cross-border transfers, and retention schedules.
- Breach Incident Logs: Internal reports of any past data breaches, ransomware attacks, or unauthorized access, including regulatory notification records.
- Consents & Opt-Outs: Mechanisms proving users actively consented to marketing or data monetization (e.g., selling data to brokers).
Objective: Specifically for modern tech transactions, audit the provenance of AI training data and determine the ownership status of AI-generated assets or code.
Required Document Production:
- Training Data Licenses: Proof of rights, licenses, or terms of service agreements permitting the scraping and use of third-party data to train proprietary models.
- Employee AI Policies: Internal rules regarding the use of generative AI (e.g., GitHub Copilot, ChatGPT) in writing company source code or generating marketing materials.
- Vendor AI Agreements: Enterprise agreements with LLM providers (e.g., OpenAI, Anthropic) showing the target's data is not being used to train the vendor's models.
- Model Weights & Architecture: Documentation detailing what is proprietary versus what relies on open-source foundation models.
Risk Materiality Matrix
Not all IP issues are deal-killers. The matrix below conceptualizes how legal findings are evaluated based on their likelihood of materializing into a problem vs. their potential financial impact on the transaction valuation. LegalSeba LLP assists acquirers and investors in translating these technical findings into actionable pre-close covenants, alongside our comprehensive Tax Due Diligence (ensuring NBR compliance), Legal Due Diligence, and Financial Due Diligence services.
