Investment decisions, like all business decisions, can be informed or uninformed. The purpose of collecting information, of course, is to gauge the possibilities of success and failure, and to estimate the expected profit from an investment.

Due diligence entails, in part, investigation of intellectual property assets and expected performance of a target investment vehicle. Due diligence generally includes asking and getting answers to such questions as:

• Is the product or service protected by a patent or a pending application?

• Has a search been performed?

• What are others doing that are close to the claimed technology?

• What is the likelihood of foreign patent protection? Is it needed? Are there substantial foreign markets?

• Is further development work to be done? Is this work subject to a patent process?

• What information is not in any patent application and is it vital to the commercial venture? Can it be maintained as proprietary -- a trade secret? What is being done to maintain secrecy?

• What trademark rights have been reserved? How strong is the mark? How much advertising expenditure will be required to push the goods or services and the trademark?

• Is proper trademark notice being applied?

Answers to such questions provide a basis for determining IP capital assets, i.e., the value of the IP and the costs of maintaining a market hegemony or niche in the near and foreseen future.

IP assets, especially patents, are particularly important in the early valuation of Internet companies. Patents or prospective patents stake out a claim to a future market, presumably the very time that Internet companies will be earning their profits. If an Internet company fails to obtain patent protection, the promise of expected future profits will dissipate and the apparent present value of the Internet company will be diminished.