All businesses, without exception, own some form of intellectual property (IP). Strong IP portfolios add tremendous value to a company and understanding how to use, manage, exploit and leverage these critical assets can be key to a venture’s bottom line and maintaining its competitive edge.
An increasingly common and logical way to do this, by start-ups and established companies alike, comes in the form of an IP audit. In this article, we discuss what an IP audit is and how to conduct one.
What is an IP audit?
The objective of an IP audit is to:
- Identify and review a company’s current IP portfolio
- Analyse the use made of it (including highlighting any under-utilisation and infringement risks), and
- To make recommendations to further protect and expand those rights
When should an intellectual property audit be conducted?
Below are several events that may trigger an IP audit:
- You have a new IP management programme, or an audit is required as part of an ongoing IP asset management program
- You have the opportunity to enter into a joint venture
- You plan to franchise your business
- Your business is entering into an M&A deal
- You plan to assign existing IP rights
- You are licencing a product that contains significant IP
- Your IP has been infringed
An IP audit should be undertaken by an experienced IP lawyer alongside a senior manager/director, and one person from the marketing, technology, and research and development departments (if these are applicable to your business).
How to conduct an IP audit?
An IP lawyer usually starts by pinning down what IP rights a business owns and uses. These are wide and varied and generally subsist in all creative matters, including:
- Text/copy
- Graphics
- Artwork
- Photographs
- Packaging
- Inventions
- Videos
- Audio
- Websites
- Databases
- Software
- Apps
IP audits generally determine which of those IP rights are material to the business, for example by reason of their value, their contribution to profit made by the business and/or the impact on the business if it had to cease using the asset due to infringement.
Steps involved in conducting an intellectual property audit
During an IP audit, you will need to focus on:
- Registered IP - such as patents, trademarks and registered designs
- Unregistered IP - such as copyright, unregistered designs, confidential information, know-how and trade secrets
You will then need to get to the bottom of:
- When the assets were created
- By whom they were created
- Whether there may be any issues in the chain of title and ownership of IP belonging to the business
Once you have this information you will then need to document it appropriately and assess whether you need to register for any protections or purchase any assets outright.
Third-party ownership due diligence
Where IP is licensed from third parties, audits typically also encompass reviewing the licence documentation and ensuring its terms are being complied with. Assessing whether your business is adequately protecting and monetising its IP is another critical element of an audit.
Businesses should use best practices in relation to the relevant IP right and ensure they do not improperly use third-party IP. Recommended action points will be identified to help the business better use existing IP when applicable, strengthen its existing IP, and mitigate the risk of infringement claims.
Why are IP audits important?
General-purpose IP audits can be hugely useful in establishing what IP is owned by a business. They can also reveal where any gaps, weaknesses, and defects lie. This can then in turn help identify how to better protect, maintain and strengthen your assets. Some businesses may be completely unaware that they are sitting on valuable and often unexploited IP which could lead to enormous economic potential and opportunities once discovered.
If a company doesn’t know what IP it has or how to leverage it, it will be at a significant commercial disadvantage compared to its competitors.
IP audits can even be mandatory in certain situations where specific triggers or events come into play. For example, insurers often require IP audits before offering IP indemnity cover (or cover beyond a certain minimum limit).
The same is often true in investment capital and financing scenarios, as well as for valuation purposes in mergers, acquisitions, joint ventures, and asset/sale purchases.
IP audits can also help to foresee and avoid costly IP disputes in circumstances where they expose potential infringement of third-party rights. Indeed they can be particularly beneficial when launching new products or services or expanding into other lines of business or markets/territories.
How much does an IP audit cost?
There is no one-size-fits-all approach to IP audits and their cost varies significantly depending on many factors. These include the nature of the business itself, the spread and complexity of its IP and technology, the field and scope of the audit, as well as the purpose and desired outcome. In-depth comprehensive and global IP audits typically take a team of lawyers several weeks or sometimes even months to complete, often at significant fees.
Most businesses do not always have the resources to carry out full-scale IP audits. Our expert IP lawyers can assist with higher-level audits at very competitive prices and within a relatively short time frame. We always quote upfront, (generally following clients completing an audit questionnaire), and always based on our competitive hourly lawyer rates.
Get legal assistance from LawBite
To speak to the author of this article, Laura Symons, or for expert advice on any business legal matter please book a free 15 minute consultation or call us on 020 3808 8314. We can help you form your IP strategy so your intellectual property assets are properly protected. Our full range of IP services includes:
- Transactional and contentious IP legal advice
- Registering and protecting that IP, so other people can’t use or steal it
- Advising on whether the launch of a new brand is viable and the name is cleared/free to use
- Making sure you are not at risk of infringing anyone else’s IP
- Helping to protect and maximise the value of confidential information
- Helping you commercialise the value of that IP, including via licensing and assignment
- Negotiating instances of domain name disputes and cybersquatting
- Advising on IP in the context of corporate transactions
Laura Symons is an English-qualified solicitor with experience working in both private practice and in-house. She has advised a wide range of businesses, with a particular focus on start-ups and the media and entertainment sector. Her work involved advising clients on a broad spectrum of commercial matters, as well as brand protection issues such as copyright and infringement disputes.
