The same seven gaps, tested in acquirers' due diligence in nearly every deal — most invisible until it starts.
General information for software and technology companies, not legal advice for your specific facts or jurisdiction — no lawyer-client relationship. See full terms.
Acquirers' due diligence tests the same seven gaps in nearly every software deal — most are invisible until it starts.
The default rule in most jurisdictions — including the US "work made for hire" doctrine, narrower than founders assume — is that the contractor owns what they create unless a written assignment says otherwise.
Copyleft-licensed code folded into proprietary product without tracking can trigger disclosure or redistribution obligations. Diligence runs automated licence scans, and an unflagged copyleft dependency is a red flag on sight.
Employment contracts that don't explicitly assign inventions created during employment — or that use boilerplate written for the wrong jurisdiction — leave "who owns this feature" genuinely unclear, especially for pre-incorporation or moonlighting-adjacent work.
Code or designs a co-founder built personally before incorporation, never formally assigned to the company afterward. Extremely common, and rarely caught until someone goes looking.
Bespoke-feature contracts with enterprise clients sometimes sign away the new work without carving out the core platform underneath it — or the reverse — creating a dispute at renewal or exit.
Code generated or substantially assisted by an AI coding tool, with no policy covering training-data provenance, licence compatibility or attribution risk. An increasingly standard diligence question with no documented answer at most companies.
Several EU member states' moral-rights regimes aren't fully waivable and need explicit contractual handling. Contracts drafted only against a US mental model tend to skip this entirely.
The clause worth reading twice is the assignment language in an outsourced-development agreement — specifically whether it assigns “inventions and works” or only “deliverables.” The second is far narrower than founders assume, and it’s the gap due diligence finds first.
In one mid-market SaaS diligence process, the acquirer's due-diligence team found that roughly a third of the codebase's earliest commits pre-dated the company's incorporation and were never covered by any assignment from either technical co-founder. Closing was delayed while retroactive deeds of assignment were drafted and signed — with less negotiating leverage than either founder had before the buyer found the gap. (Illustrative and anonymised — the pattern recurs often enough to be the rule, not the exception.)
General principles reflected across UK, EU and US intellectual-property and employment law — specific rules on employee-invention assignment, moral rights and work-for-hire vary meaningfully by jurisdiction. England & Wales is this site's anchor jurisdiction for general guidance; see the UK government's IP guidance as a starting reference. This resource flags the pattern — your own cap table and jurisdiction determine the fix. Current as of July 2026.
Want to close these gaps yourself, before diligence finds them?
Yes, and it's cheaper now than later. Fixing an assignment gap when there's no live deal and both parties are cooperative takes a signature. Fixing the same gap during diligence, with leverage on the other side, can cost time, negotiating position, or in the worst case a retroactive consent someone is no longer willing to give.
Often not fully. Many jurisdictions have specific formal requirements for IP-assignment clauses — what counts as "created in the course of employment," or how future inventions must be worded to be validly assigned — and generic HR templates frequently miss them. It needs checking, not assuming.
Even unmodified copyleft dependencies can trigger obligations — attribution, source-availability — depending on how they're linked or distributed into your product. The risk sits in the licence terms, not in whether you edited the code.
20 minutes, free, with the person who does the work — a scoping call, not a sales call.