Due diligence

Typical areas

What are the typical areas of due diligence undertaken in your jurisdiction with respect to technology and intellectual property assets in technology M&A transactions? How is due diligence different for mergers or share acquisitions as compared to carveouts or asset purchases?

In the Netherlands, due diligence in technology transactions typically focuses on:

  • title to shares (if a share deal);
  • IP rights owned by the company (eg, trade names, design or model rights, copyrights, neighbouring rights, trademarks, patents, databases, plant breeders’ rights, chip rights), which often includes domain names, know-how and trade secrets, although the latter three do not officially qualify as IP rights;
  • agreements involving the company’s use of third-party IP rights, know-how, or use of IP rights or company know-how (eg, licence agreements and transfer deeds);
  • possible notifications of infringements of third-party IP and vice versa and historic and pending litigation involving IP rights, including know-how;
  • security interests and encumbrances established on, or prejudgment or executory seizure of, IP rights or company know-how;
  • agreements related to the website maintained by the company;
  • agreements involving compliance with, or documents evidencing compliance with, statutory privacy provisions;
  • privacy statements or policies;
  • documentation relating to (adequate) procedures to prevent unauthorised access and the introduction of viruses, worms, Trojan horses, spyware or other disruptive elements into the information technology; and
  • employment and/or (management) services agreements, in particular to confirm transfer of IP rights, confidentiality and security undertakings and restrictive covenants.


In a share deal, merger or demerger, all company assets and liabilities are automatically (ie, by virtue of the law) transferred, following the execution of the notarial deed of transfer of shares or execution of the notarial deed of merger or demerger. Therefore, in a share deal, there will be particular emphasis on titles to shares as well as the review of key agreements to confirm the extent to which change-of-control clauses are triggered.

By contrast, in an asset deal or a carve-out (assuming pre-closing restructuring is involved), all assets and liabilities must be separately transferred, taking into account all applicable transfer requirements. As a result, the due diligence investigations conducted in a share deal differ from the investigations conducted in an asset deal in the sense that there is an increased focus on the individual assets concerned. Moreover, depending on the type of assets being transferred and the identity of the buyer, conducting a ‘Transfer of Undertakings’ (Protection of Employment) Regulations 2006 analysis is paramount. Due diligence must establish whether a transfer of undertaking has taken place, by which certain employees are automatically transferred from the seller to the buyer irrespective of the ‘scope’ of the assets and liabilities that are transferred by virtue of the asset purchase agreement.

Finally, in recent years, an increasingly popular phenomenon in technology transactions has been the ‘acqui-hire’, by which companies acquire the company’s assets or shares for the sole purposes of hiring its key software engineers. Once the new people are on board, the acquired business is liquidated. In an acqui-hire, a thorough assessment of the engineers and their terms of employment, as well as the applicable internal personnel rules and regulations, work habits and priorities, should be part of due diligence.

Customary searches

What types of public searches are customarily performed when conducting technology M&A due diligence? What other types of publicly available information can be collected or reviewed in the conduct of technology M&A due diligence?

Generally, a buyer and its (legal) advisers will review the information included in the trade register of the Dutch Chamber of Commerce. This register contains information on the target’s registered name and address, its directors, annual accounts and other filings, such as past mergers or demergers. Moreover, before the wire transfer of the purchase price to the seller upon completion of the transaction, the central insolvency register is checked to confirm that neither the target company nor its subsidiaries have been declared bankrupt.

In a technology M&A due diligence, it is customary to consult additional registers to confirm, among other things, that all IP rights are owned by the target and to establish what, if any, registered licences are issued. Trademarks and design or model rights – depending on their scope – are registered with the Benelux Office for Intellectual Property, the European Union Intellectual Property Office or the World Intellectual Property Organization, respectively. Each organisation maintains its own register. Patents – depending on their scope – are registered in the Dutch Patent Register or European Patent Register. Finally, domain names – which do not technically qualify as IP rights, but may qualify as trade names – are registered with the Foundation for Internet Domain Registration. Copyright is created by operation of law and is, therefore, not registered in the Netherlands. Therefore, we require an overview of all IP rights and copies of all relevant licence agreements, to verify whether all relevant intellectual property is owned or validly licensed by the target.

Registrable intellectual property

What types of intellectual property are registrable, what types of intellectual property are not, and what due diligence is typically undertaken with respect to each?

In the Netherlands the following types of intellectual property are registrable: trademarks, design or model rights, patents, plant breeder’s rights, and domain names. Due diligence typically consists of a review of the registers.

Other IP rights, such as copyrights, database rights, trade names and trade secrets, are not registrable under Dutch law. These rights arise by operation of law or first usage. For due diligence purposes, it is important to review all relevant agreements and other documentation held by the target related to these rights.


Can liens or security interests be granted on intellectual property or technology assets, and if so, how do acquirers conduct due diligence on them?

Under Dutch law, there is no single legal equivalent to a lien. A lien can refer to an array of Dutch security interests. In practice, the most common security interest vested in respect of IP rights or technology assets is a right of pledge. Under Dutch law, IP rights can be encumbered by a right of pledge, provided that the relevant intellectual property law states that the IP right is transferable. This is the case for copyright, trademarks, design or model rights, patents and plant breeders’ rights. The requirements for the creation of a right of pledge differ per IP right; however, in most cases, a right of pledge is established through the due execution of an authentic or private deed. To the extent that the IP rights are registered, the right of pledge is recorded in the applicable register.

Moreover, most technology assets – such as hardware – can be encumbered by a right of pledge, provided that these assets qualify as movable assets. A right of pledge is created by the due execution of an authentic or registered private deed. In these instances, due diligence typically consists of reviewing the relevant deeds and underlying contracts containing the obligation to create a right of pledge. Depending on the nature and motives for the transaction, seller, buyer and creditor can decide to settle all outstanding debts prior to closing or, alternatively, agree that the acquirer will take over (part of) the existing debt after closing. In the first case, the right of pledge will terminate by operation of law prior to closing. In the second case, the creditor will enter into new (finance) agreements with the acquirer upon closing, waive its existing right of pledge prior to closing and establish a new right of pledge post-closing. If a pledgor (debtor) fails to comply with its obligations under the finance agreement, the pledgee (creditor) can dispose of the IP rights as if he or she were the owner.

Employee IP due diligence

What due diligence is typically undertaken with respect to employee-created and contractor-created intellectual property and technology?

Establishing ownership of IP rights created by employees or independent contractors is particularly relevant when copyright-protected works are involved, as these are not formally registered or recorded. According to the Dutch Copyright Act, copyright is vested in the creator by operation of law. However, if the creator is an employee, the Dutch Copyright Act dictates that all copyrights created by an employee vest in their employer, provided that these activities fall within the employee’s job description. To avoid confusion and prevent copyrights from automatically vesting with the employee, an IP clause is often included in employment agreements. The same rules do not apply if the person creating the intellectual property qualifies as a contractor rather than an employee. All copyrights created by a contractor automatically vest in the contractor as creator. To avoid having to seek the permission of the contractor each time copyright-protected works are used, companies will typically include an IP clause in their agreements. This clause compels contractors to transfer all copyrights created throughout the course of the assignment to the company.

Unfortunately, the distinction between employees and independent contractors is not always clean cut. Even if an agreement is not formally labelled as an employment agreement, it can qualify as an employment agreement if it satisfies the statutory requirements and vice versa. Earlier this year, a Dutch court of appeal confirmed that the relationship between food delivery company Deliveroo and its deliverers qualifies as an employment agreement. In another case against the cleaning service platform Helpling, a Dutch lower court decided in 2019 that the relationship should not be seen as an employment agreement nor as an agency work employment contract with Helpling, but should be perceived as employment intermediation. Therefore, it appears that the jury is still out on how the contractual relationship between workers and online platforms with similar hiring constructions should be qualified. Since June 2021, a case is also pending between the Dutch Trade Union Confederation (FNV) and Uber on this matter and it will be interesting to see whether the decision of the Dutch courts will be similar to the UK Supreme Court's decision of February 2021 on Uber drivers and their employment agreements.

In light of these rules and case law, due diligence related to employee- and contractor-created intellectual property typically focuses on standard and personalised employment agreements; freelance agreements and (standard) management agreements; agreements involving hiring out and hiring in employees; and proceedings, pending proceedings or other employment-related disputes.

If relevant, due diligence should also focus on employees who contributed to patentable inventions, as they may hold certain rights or be entitled to compensation. Finally, if trade secrets are considered valuable company assets, due diligence should also focus on confidentiality and secrecy undertakings with employees and contractors. Under the new Trade Secret Act, if a company does not have adequate non-disclosure agreements in place, this may prevent know-how from qualifying as a trade secret. If due diligence investigations reveal that the agreements with employees or contractors do not sufficiently protect intellectual property, IP rights must be transferred to the target prior to completion by means of a separate deed of transfer.

Transferring licensed intellectual property

Are there any requirements to enable the transfer or assignment of licensed intellectual property and technology? Are exclusive and non-exclusive licences treated differently?

A licence can be granted for all IP rights. A licence is, in essence, an agreement between the owner of the IP rights (licensor) and a third party (licensee), by which the licensor authorises the licensee to use its IP rights. A licence can be limited in, among others, time, scope, territory, type of IP right, exclusivity, sublicences, transferability, royalties, types of goods or services, and duration. Apart from the requirement that consent must be reached between licensor and licensee, no formal requirements exist for the establishment of a licence under Dutch law (except for an exclusive copyright licence that should be done by deed). However, a patent, design or model right or trademark licence does not bind third parties until the licence is registered in the relevant register. In practice, a licence is usually embedded in a written agreement in order to avoid discussions at a later stage. Generally speaking, licence agreements can be transferred. Parties can include a provision in the licence agreement, dictating that the licence cannot be transferred (ie, exclude the right to transfer). Considering that the legal implications of a clause of this nature can be particularly burdensome, this should always be verified during due diligence.

Debate exists on whether the new owner of the IP rights is bound by a pre-existing licence after transfer. The prevailing opinion is that the new owner must respect the licence, provided that the new owner knows or should be aware that a licence agreement exists (eg, by consulting the appropriate register). As not all IP rights are registered in the Netherlands, an essential part of the due diligence investigation is to find out whether the company has entered into licence agreements with third parties.

Software due diligence

What types of software due diligence is typically undertaken in your jurisdiction? Do targets customarily provide code scans for third-party or open source code?

In the Netherlands, due diligence typically focuses on the review of:

  • agreements relating to the sale, purchase, licensing or licence granting of software;
  • agreements relating to IT services;
  • agreements relating to technology in escrow and technology escrow for hardware and software;
  • reseller, distribution and strategic alliance agreements with other IT suppliers;
  • letters of intent with suppliers and customers related to IT;
  • general terms and conditions governing the sale or purchase of IT (hardware, software or IT-related services); and
  • assignment agreements related to rights on hardware or software offered or delivered to customers (ie, IP transfer deeds).

As part of due diligence the target company usually provides information on whether software it uses is licensed through third parties or it is open source. However, since lawyers (in general) are not qualified to comment on the quality of software, we explicitly exclude this from the scope of our due diligence. If the nature of the transaction requires in-depth software due diligence we advise clients to involve third-party experts.

Other due diligence

What are the additional areas of due diligence undertaken or unique legal considerations in your jurisdiction with respect to special or emerging technologies?

In general, most of the aforementioned considerations apply equally to special or emerging technologies, with privacy compliance being a major focus point. Further, depending on the nature of the transaction, specific regulatory requirements may apply, which will constitute part of the due diligence investigation.

In addition, in emerging technologies the decisions regarding an investment are no longer just about returns. The way target companies handle environmental issues, social responsibility and (corporate) governance (ESG) has become an increasingly important item in terms of due diligence. On one side, the due diligence should provide insight into any controversial behaviour of target company, to ensure that sufficient protection can be included in the transaction documentation. On the other hand, however, it becomes equally important to ensure the benefits of positive ESG actions and programs within a target company.