Intellectual Property Audits

An intellectual property (IP) audit is a tool for identifying your potential IP assets. Ideally an audit should be carried out by professional IP auditors, but often a preliminary audit can be done in-house, within your company.

Through an IP audit you can make an inventory of your potential IP assets. This helps you to:

  • Uncover unused or under-utilized assets
  • Determine ownership of these assets
  • Identify any related threats, i.e. IP infringement from your side or by others
(Image: Getty Images/vladwel)

Types of IP audit

There are three main types of IP audit:

General-purpose

This is broadest type of IP audit, used by new companies or those considering implementing new IP policies, standards or procedures.

It is also suitable for companies implementing new marketing approaches, directions, or major reorganizations.

Event-driven

This type of IP audit is also known as "IP due diligence". It is used to assess the value and risk of a company's IP assets. The event-driven audit is often utilized:

  • in the context of mergers/acquisitions and joint ventures;
  • before entering into a financial transaction involving IP, such as an initial public offering;
  • when launching a new product or service;
  • when considering IP licensing; and
  • in cases of bankruptcy and layoffs.

Limited-purpose

This is the IP audit with the narrowest scope. It is situational in nature and typically used to justify a legal position or the valuation of a particular IP asset. It can also be applied in the context of:

  • personnel turnover;
  • foreign IP filings;
  • before engaging in e-commerce;
  • changes in IP law and practice;
  • "clean room" procedures (seeking to avoid the infringement of third-party copyright material); and
  • preparing for litigation.

Added value of an audit

Carrying out an IP audit can add value to the following:

  • Cost reduction efforts – A well-managed list of IP assets can help you identify obsolete assets. Decisions can then be taken to stop paying maintenance costs for obsolete assets, resulting in significant cost reductions.
  • Licensing – An IP audit is vital to know which IP assets are core to your business and which are not. Licensing decisions can then be made accordingly. For example, you may decide to license a non-core IP asset in order to create an additional revenue stream.
  • Mergers and acquisitions – IP assets will play an important role in a third party deciding whether to merge with or acquire your business.
  • Anti-infringement actions – Knowing the value of your IP assets makes it easier to take decisions on whether it is cost-effective to take action against infringement and in what way this could be done.

Preparing for an IP audit

Before embarking on the audit process, it is important to have clarity as to the purpose of the audit, the available resources, and the plan to be followed.

Purpose

Research

Plan

Checklist

Contracts

Carrying out an IP audit

After having gone through the necessary preparatory steps, the IP asset audit takes place over four main steps:

Inventory

Ownership

Infrigement check

Protection plan

After an IP audit

Identifying the possible IP that exists in your company through an IP audit is an important first step in managing your IP. The next step is to evaluate the costs and benefits of pursuing IP protection for these assets.

If you want to enter international markets you need to take steps to secure IP rights in those markets. Once you obtain IP rights, you'll need to monitor, maintain and strategically use these assets to support the overall business interests of your company. This should be complemented by constantly keeping yourself informed of the activities of competitors and other players on the market by regularly consulting patent and trademark databases.