Make sure to have those IP Agreements ready prior to a deal!
The key mechanism of IP diligence is the intellectual property and invention assignment agreement (or "IP Agreement").
In the absence of a specific writing, it can be unclear as to who legally owns certain work that is being done on the Company's behalf. The remedy for this is the signed IP Agreement.
When an IP Agreement is signed between a service provider and the Company, it ensures that everything done by the service provider belongs to the Company. This is important because it helps to avoid a dispute down the road as to who owns what.
The classic situation is when founders break up, and they did not sign IP Agreements with the Company. If the Company goes nowhere, this is rarely an issue. But if the Company is successful, it can lead to disputes between early stage founders about who developed parts of the business. This can lead to lawsuits and messy stories in the press.
Another classic example comes out of working with independent contractors. Without the IP Agreement, it may be unclear if the intellectual property was actually ever given to the Company, even if payment was exchanged for services. People commonly hire engineers and other service provides off the Internet, and may never meet them in person. Particularly in those instances, it is critical that an IP Agreement be put in place.
There are countless templates on the Internet for IP Agreements. Whatever you use, have counsel vet the version to ensure compliance with relevant law. An attorney will also ensure that the template is specifically tailored for the business being done by the Company. Investors will want to see all IP Agreements and will frown upon significant issues with the paper trail here. In extreme instances, these may even hold up a deal. Make sure you have your IP Agreements ready to go so your company can make new deals with ease.