ABSTRACT
Intellectual property (IP) has shifted from the periphery to the centre of deal-making in India’s M&A and fundraising landscape. As the country’s start-up ecosystem matures and cross-border acquisitions of technology, pharmaceutical, and media companies intensify, IP assets have become primary value drivers. This article examines India’s IP due diligence framework , covering patents, trademarks, copyrights, trade secrets, and digital assets, and analyses the substantive and procedural challenges that arise in M&A and fundraising transactions. Drawing on practical case studies including the Walmart–Flipkart acquisition, Sun Pharma–Ranbaxy merger, Zomato–Blinkit deal, and the Natco v. Bayer compulsory licensing decision, the article offers structured guidance for acquirers, investors, and legal practitioners. It also addresses the Indian economic context, regulatory dimensions, and emerging challenges in AI and data IP.
I. INTRODUCTION
India’s M&A market touched approximately USD 100 billion in deal value in 2023, with technology, pharmaceuticals, and media accounting for the dominant share. In the venture and private equity space, fundraising volumes have grown alongside investor expectations and the sustainability of returns increasingly depends on the defensibility of IP positions. Yet IP due diligence in India remains inconsistently practised, varying dramatically across deal type, sector, and counsel. The consequences are well-documented, post-closing disputes, valuation write-downs, and in extreme cases, the unravelling of entire deal rationales.
This article argues that rigorous IP due diligence is not an optional discipline but an indispensable component of responsible transactional practice in India. It sets out the applicable legal framework, a structured methodology, sector-specific nuances, and practical case studies, providing a comprehensive compass for practitioners and investors.
II. THE LEGAL FRAMEWORK
The Patents Act, 1970 , as amended in 2005 and further updated by the Patents (Amendment) Rules, 2024, governs patent protection in India. Section 3(d), which disallows patents on new forms of known substances without demonstrably enhanced efficacy, is among the most litigated provisions in pharmaceutical M&A diligence and has excluded numerous assets from patent protection, materially affecting valuation. Diligence must assess not only granted patents but their quality, residual life, history of oppositions under Sections 25(1) and 25(2), and freedom-to-operate implications.
The Trade Marks Act, 1999 protects registered and unregistered marks. A recurring deficiency in Indian transactions is the disconnect between commercial brand use and formal legal ownership, trademarks filed in founders’ names rather than the company’s or registered in relation to prior corporate entities that have since been restructured.
The Copyright Act, 1957 is particularly material in technology and media deals, where software ownership, open-source licence compliance, and rights in commissioned works must each be scrutinised. Section 17 vests copyright in an employer for works made in the course of employment, but only where a valid employment relationship exists, contractor arrangements are not automatically covered, requiring written assignment agreements.
India lacks a standalone trade secrets statute; confidential information is protected through common law breach of confidence principles and contractual arrangements including NDAs (Non-Disclosure Agreements) and non-compete covenants. The strength of these protections depends entirely on the robustness of the contractual framework and the consistency of its application. Domain names and digital assets, governed for .in disputes by the INRDP (India Domain Name Dispute Resolution Policy) administered by National Internet Exchange of India (NIXI), must also be mapped and verified as part of a comprehensive IP exercise.
III. IP DUE DILIGENCE METHODOLOGY
Effective IP due diligence begins with preparing a comprehensive inventory of intellectual property assets followed by verification against public registries such as the Indian Patent Advanced Search System (IPAIRS) and the Trade Marks Registry database. Given the limitations and occasional incompleteness of Indian public registries, supplementary searches and third party database tools are often essential to ensure a thorough assessment.
Ownership and title verification is the most critical and most frequently problematic aspect of IP diligence in Indian deals. Common defects include patents and trademarks registered in founders’ personal names, copyright in contractor-developed software without written assignment agreements, IP pledged as collateral for debt undisclosed to the acquirer, and jointly developed IP with unclear co-ownership arrangements. Indian courts hold that co-owners of IP, absent contrary agreement, each have independent rights to exploit the IP, a position that can severely disrupt acquirer assumptions of exclusivity.
In India, joint intellectual property is governed by default statutory rules that differ significantly across patents, copyrights, and trademarks, and these defaults can seriously undermine assumed exclusivity in M&A deals unless contractually overridden.
For patents, Section 50 of the Indian Patents Act allows each co-owner to independently manufacture, use, or sell the invention without sharing profits, but prevents any co-owner from licensing or assigning their share without unanimous consent. This means an acquirer cannot stop a co-owner from competing in the market, and the patent cannot be commercialised exclusively through licensing.
For copyrights, Indian law generally requires joint consent for exploitation. A co-owner cannot independently use or modify the work, and unilateral use may amount to infringement. This creates a risk that a dissenting co-owner can block or disrupt the acquirer’s ability to use or develop key assets like software or content.
For trademarks, co-owners are allowed to use the mark independently for their respective businesses, but neither has exclusivity over the other. This can lead to parallel use of the same brand in the market, weakening brand identity and diluting goodwill.
Overall, India’s default co-ownership framework often undermines exclusivity expectations: patents allow independent competition, copyrights can be stalled by consent requirements, and trademarks risk brand dilution. This makes rigorous due diligence and clear IP assignment agreements essential in transactions involving jointly owned IP.
Encumbrances, sub-licences, and change-of-control provisions in key licences require systematic review. If a material licence terminates upon a change of control, the acquirer may be left without rights to critical technology post-closing. Pending or threatened IP disputes, including Trade Marks Registry oppositions, Patent Office post-grant challenges, and infringement claims must be catalogued and assessed for materiality. A “freedom to operate” analysis, assessing whether the company’s products or services infringe any valid third party rights, completes the core methodology.
IV. PRACTICAL CASE STUDIES
Case: Walmart–Flipkart Acquisition (2018) — USD 16 Billion
When Walmart acquired a 77% stake in Flipkart, IP due diligence covered the technology stack, including logistics algorithms, recommendation engines, and payment infrastructure , alongside the Flipkart, Myntra, and PhonePe brand portfolios. A key complexity was PhonePe’s technology, developed partly by a separately incorporated entity, requiring careful unravelling of intercompany IP licences. The process ran over several months, with the final deal structure incorporating IP representations, indemnification provisions, and change-of-control protections for key licence agreements. The transaction demonstrated that in digital economy deals, IP and data assets are not ancillary to valuation, they are the valuation.
Case: Sun Pharma–Ranbaxy Merger (2014) — USD 3.2 Billion
The 2014, USD 4 billion Sun Pharma–Ranbaxy merger highlights the critical intersection of intellectual property value and regulatory compliance, as United States Food and Drug Administration (USFDA) import alerts on manufacturing facilities significantly impacted the deal’s valuation. Sun Pharma acquired Ranbaxy for USD 3.2 billion in stock and assumed USD 800 million in debt, relying on their operational expertise to remediate compliance issues at facilities like Paonta Sahib and Mohali.
Case: Zomato–Blinkit Acquisition (2022) — USD 568 Million
Zomato’s all-stock acquisition of Blinkit, formerly Grofers, raised IP diligence challenges typical of late-stage start-up transactions. The brand transformation from Grofers to Blinkit had to be verified for legal formality: that Blinkit trademarks were properly registered, Grofers marks suitably transitioned, and no third-party claims lingered from the rebrand. Technology IP , dark store management software, delivery algorithms, and the driver application , required ownership verification, particularly for contractor-developed components. Consumer data assets were assessed under India’s evolving data protection framework. The transaction underscored the importance of brand architecture and contractor IP assignment diligence in consumer technology deals.
Case: Natco Pharma v. Bayer Corporation — Compulsory Licensing (2012)
India’s first pharmaceutical compulsory licence granted to Natco Pharma over Bayer’s sorafenib (Nexavar) patent remains the most consequential IP event for pharmaceutical M&A diligence. The Controller found Bayer’s drug unavailable at an affordable price, and the decision was upheld by the IPAB and the Bombay High Court. Any acquirer of an Indian pharmaceutical company holding product patents must now conduct a specific compulsory licensing risk assessment, examining pricing, public availability, and geographic distribution. A patent estate that appears legally robust may carry material compulsory licensing exposure that must be reflected in deal valuation.
V. REGULATORY DIMENSIONS
IP diligence in Indian transactions intersects with several regulatory frameworks. The Competition Act, 2002, as administered by the Competition Comission of India ( CCI), examines whether the acquisition of IP assets creates an appreciable adverse effect on competition, particularly in technology sector deals involving dominant IP portfolios. CCI notification thresholds and the risk of IP-related remedies must be assessed in any transaction involving concentrated IP ownership in a defined market.
Foreign Exchange Management Act, 1999 (FEMA) and RBI regulations govern cross-border IP transactions, including inward and outward IP licences and royalty payments to non-residents. Intercompany IP licences in multinational structures, common in pharmaceuticals and technology must be verified for FEMA compliance, and non-compliant structures must be remediated before closing. The Digital Personal Data Protection Act, 2023 (DPDPA) introduces new requirements for data assets that accompany IP in transactions, with data fiduciary obligations and purpose limitations that can affect the exploitation of consumer data portfolios acquired through M&A.
VI. EMERGING CHALLENGES: AI AND DATA IP
Artificial intelligence has created a new IP diligence frontier in India. The Copyright Act, 1957 requires human authorship for copyright protection, leaving AI-generated works without clear protectability; the Patents Act similarly requires a human inventor. In AI company acquisitions, diligence must assess whether commercially valuable outputs are human-authored, whether training data has been lawfully sourced and licensed, and whether third-party AI platform licences restrict commercial exploitation of model outputs.
Data assets, consumer behavioural data, proprietary datasets, and AI training corpora, are treated as valuable IP despite imperfect protection under Indian law. Unlike in the EU, India has no sui generis database right. Due diligence must assess the contractual protections built around data assets, including confidentiality provisions, terms of service, data licensing agreements, and the robustness of technical safeguards. Under the DPDPA 2023, acquired data portfolios involving personal data must comply with consent, purpose limitation, and data fiduciary obligations, a growing diligence workstream in digital economy transactions.
VII. BEST PRACTICES
IP diligence should commence at the earliest possible stage. In fundraising contexts, companies should undertake an IP health check before initiating investor outreach, identifying and remedying title defects, filing key trademark applications, and executing missing assignment agreements before investor scrutiny begins. The diligence team must reflect the IP composition of the transaction: pharmaceutical deals demand patent specialists with scientific expertise; technology transactions require software copyright and open-source counsel; consumer brand acquisitions need trademark valuation practitioners.
The due diligence report must be a decision-making tool, not a compliance catalogue. It must assign probability and quantum to identified IP risks and recommend concrete mitigation measures, price adjustments, escrow arrangements, specific indemnities, pre-closing remediation conditions, or warranty and indemnity insurance. Warranty and Indemnity (W&I) insurance for Indian deals has grown significantly since 2019, providing buyers with direct insurer recourse for IP representation breaches without protracted litigation against sellers. Post-closing IP integration, including transfers and registration at the Patent Office and Trade Marks Registry, must be planned and resourced at the diligence stage.
VIII. CONCLUSION
IP due diligence in Indian M&A and fundraising has evolved from a residual formality into a central and determinative element of deal practice. The Walmart–Flipkart acquisition, the Sun Pharma–Ranbaxy merger, and the Natco compulsory licensing decision each demonstrate, in different ways, that IP risk is quantifiable, transactional, and frequently decisive. As India’s economy continues to grow and IP-intensive sectors attract increasing capital, the demand for sophisticated, methodologically rigorous IP due diligence will only intensify. Acquirers, investors, and practitioners who invest in thorough IP review are better positioned to protect deal value, allocate risk appropriately, and build transactions that endure.
IX. FREQUENTLY ASKED QUESTIONS
1. Why has IP due diligence become so critical in Indian M&A?
A: IP now constitutes the primary value driver in technology, pharmaceutical, and media transactions, which together dominate India’s deal market. Without rigorous IP diligence, acquirers risk inheriting title defects, infringement liabilities, and encumbrances that materially impair post-closing value. The Flipkart acquisition, where brand, technology, and data assets together drove a USD 16 billion valuation , epitomises this shift.
2. What are the most common IP title defects found in Indian transactions?
A: The most frequent defects include patents and trademarks registered in founders’ personal names rather than the company, software IP developed by contractors without written assignment agreements, undisclosed IP pledged as debt collateral, intercompany licences with deficient change-of-control provisions, and sub-licences executed beyond the scope of the original grant. Many early-stage companies also carry unregistered but commercially significant trademarks, creating vulnerability to third-party appropriation.
3. How does open-source software risk affect technology M&A diligence?
A: Copyleft licences such as the GPL require any software incorporating GPL-licensed code to be made available under the same terms, effectively mandating disclosure of proprietary source code. Discovery of undisclosed copyleft code in a target’s product can materially affect valuation, requiring pre-closing code remediation or specific indemnification provisions to protect the acquirer from the risk of compelled public disclosure of its proprietary technology.
4. What is the significance of the Natco v. Bayer case for pharmaceutical deals?
A: The 2012 compulsory licence over Bayer’s sorafenib established that even a validly granted patent may be overridden if the patented product is unavailable at an affordable price to the Indian public. For pharmaceutical M&A, acquirers must now conduct a specific compulsory licensing risk assessment examining pricing, geographic availability, and manufacturing adequacy of patented products. factors that can significantly affect the net value attributed to a patent estate.
5. How should AI-related IP be handled in modern Indian transactions?
A: AI IP diligence must assess whether the company’s commercially valuable outputs are human-authored and thus protectable under the Copyright Act, the lawfulness of training data sourcing and licensing, compliance with third-party AI platform licence restrictions, and the applicability of the DPDPA 2023 to personal data used in AI training. Given the legal uncertainty around AI-generated works in India, practitioners must take a conservative approach to valuing IP whose protectability depends on AI authorship.
KEY REFERENCES.
Statutes: Patents Act 1970 (amd. 2005, 2024); Trade Marks Act 1999; Copyright Act 1957 (amd. 2012); Competition Act 2002; FEMA 1999; Digital Personal Data Protection Act 2023.
Cases: Natco Pharma v. Bayer Corp., C.L.A. No.1/2011 (IPAB); F. Hoffmann-La Roche v. Cipla, 2008 (37) PTC 71 (Del.); Twentieth Century Fox v. Sohail Maklai Entertainment, 2010 (44) PTC 647 (Bom.).
Sources: WIPO IP & Business Series; NASSCOM IP Framework Reports; Indian Pharmaceutical Alliance Data (2023–25); CCI Annual Reports; DIPP Startup India IP Policy Documents.
