Yes, investors (or rather, their lawyers) do legal due diligence. Even so the company investing may have overlooked this and then there is still the duty of the company to inform their investors prior to investing of any legal issues.<p>It&#x27;s complex, especially when there are multiple jurisdictions involved, the laws on these subjects tend to vary from place to place. Another complication is that (like many things during dd) this straddles the line between technology on the one side and legal on the other.<p>If I were to come across it during a dd I&#x27;d flag legal to take an in-depth look. (Regardless of it being un-ethical.)<p>Don&#x27;t be surprised if to the parties investing this was not a red flag and they invested anyway, also don&#x27;t be surprised if they simply were ignorant of the matter due to time pressure or unfamiliarity with the territory. Not all investments are done after a full process dd.