Making Patent Due Diligence Easier for Australian Startups
For Australian startups and mid‑sized companies, a strong patent portfolio is a major driver of valuation and investor confidence. At MBIP, we’ve worked closely with clients as investors conduct patent due diligence—often in preparation for fundraising, licensing discussions, mergers and acquisitions, or even stock‑market listings.
Broad statements like “patent pending” or “we have patents” no longer satisfy sophisticated investors. They expect evidence of a clear, well‑considered IP strategy. Below are the key issues that repeatedly arise in patent due diligence reviews.
1. Granted Patents Carry More Weight Than Pending Ones
Investors value certainty. Pending applications don’t always provide the confidence they need. Fast‑tracking patent grants in critical markets helps reduce uncertainty. Several jurisdictions operate programs to achieve this reduced wait time, such as:
- USA Track One Program – Can produce a final outcome within 5–6 months, compared to the typical 30‑month timeline.
- EPO PACE Program – Allows applicants to accelerate prosecution before the European Patent Office.
Fast grants are especially useful when protecting rapidly moving technologies—such as AI innovations or medical devices—where timing can determine competitive advantage.
That said, accelerating every application can signal a lack of strategic focus. Investors generally prefer to see selectively fast‑tracked key patents clearly tied to the company’s core products and commercial story.
2. Leverage and Longevity Matter
A single granted patent without a broader strategy can limit flexibility. Investors typically look for:
• Divisional and Continuation Filings
These keep options open during litigation or as commercial needs evolve. They allow a company to pursue broader or altered claims in the future.
• A Global Filing Strategy
PCT applications help secure protection in multiple jurisdictions, but poor planning can weaken valuation. For instance, not entering key markets like Europe—especially if competitors have—raises red flags.
• Filing Cadence
A healthy pipeline of patents shows technological progress and long‑term innovation, not just one-off ideas. Investors often look for a narrative that reflects growth over time.
3. Freedom to Operate (FTO) Is Critical
FTO determines whether a company can make, use, or sell its product without infringing others’ IP rights. An FTO analysis:
- Reduces legal and commercial risk
- Helps guide product strategy
- Signals maturity and preparedness to investors
Many early-stage companies delay FTO work until it’s too late—often right before due diligence. By then, there’s rarely enough time to adjust product features or pursue alternative approaches. Investors will almost always assess the FTO strategy during their review.
4. Clear Ownership and Assignment Documentation
Ownership issues are a major cause of failed due diligence. Common problems include:
• Incorrectly Named Inventors
Inventorship is factual—errors can invalidate a patent. Companies must maintain documentation that clearly supports each inventor’s contribution.
• Missing or Unrecorded Assignments
Startups often use external consultants or university researchers. If these contributors become inventors, every patent must be formally assigned to the company and recorded with patent offices. Delayed paperwork—especially when employees have left—creates uncertainty investors dislike.
5. Aligning Patents With Commercial Strategy
Investors don’t just want to see that patents exist—they want to understand how the IP supports the business model.
A strong investor‑ready summary should:
- Link key patents directly to products or revenue drivers
- Show how the patent claims align with commercial strategy
- Demonstrate that patent attorneys were involved in shaping the IP direction
Patents should enhance the company’s narrative, not appear as an afterthought on a pitch deck.
Patent Due Diligence: Final Thoughts
A well‑structured patent portfolio, supported by documentation, strategy, and thoughtful filing decisions, signals discipline and readiness. Investors want to see:
- Early grants where they matter
- A rational global and divisional strategy
- Clear ownership records
- FTO work done early
- Alignment between IP and commercial strategy
When executed well, your patent portfolio becomes a powerful asset—not just a legal formality.
At MBIP, we pride ourselves on being experts on IP Strategy. In the last three years, we have assisted various early and mid-stage companies as they have gone public on the Australian Stock Exchange (ASX) and NASDAQ. We have also helped Australian companies leverage their IP portfolios to leverage lucrative licensing deals and achieve successful merger and acquisition outcomes. We regularly work with Venture Capital (VC) firms and Consultancy firms, assisting with due diligence. If you have any questions on patent due diligence, please reach out to one of our experts.
