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Understanding The Importance Of Periodic IP Audits For Your Business
Before the dawn of the internet age, businesses focused more on tangible assets like land, machinery, etc., than their intangible possessions. It was only after the internet boom in the 1990s that IP became a vital component of the company’s bottom line. Patents, Trade Secrets, Copyrights, and Trademarks are the various types of IP that are owned by businesses. A robust IP portfolio adds immense value to a business by making it more competitive and profitable. As companies begin to realize the importance of IP to their commercial success, the demand for IP audits has escalated. The importance of IP audits has been realized by large companies with extensive portfolios as well as startups and small and medium businesses who are commencing their IP journey.
Table of Contents
Below we explore the domain of IP audits along with its meaning, types, costs, and importance for a successful business.
What is an IP Audit?
An Intellectual Property Audit is a procedure carried out by professional auditors to systematically review and analyze the company’s patents. All the IP owned by the business is assessed to manage risks, remedy problems, and implement best practices. To perform an IP audit an inventory of the business’s IP assets is made. It is then scrutinized for used and unused IP, the rightful ownership of the IP, and cases of infringement. Such an assessment helps businesses make informed decisions and formulate effective IP strategies.
Types of IP Audit
- General: New companies or those contemplating new marketing approaches, IP policies, standards, or major reorganizations opt for this type of generalized IP. It has a broad scope and touches on a variety of aspects.
- Event Driven: Also known as IP Due Diligence, an event-driven IP is performed under special circumstances such as mergers & acquisitions, introducing IPOs, launching a new product/service, licensing IP, and in bankruptcy cases. The purpose is to evaluate the value and risks of the company’s IP assets.
- Limited: Limited IP audits have a narrow scope and are confined to the estimation of a particular IP asset. Determining personal turnover, foreign IP filings, litigation prep, etc., are some of the cases where Limited IP is used.
Importance of IP Audits
IP audits can be a treasure trove of information and insights into the company’s IP. There are several benefits of performing a periodic IP audit:
- Identification of IP: Businesses are able to learn about their own as well as licensed IP when an audit is conducted. This helps them take crucial decisions related to selling, licensing, or profiting from their IP by other means. Other IP-related pacts such as licensing agreements, NDAs, tech transfers, employment contracts, etc. are also reviewed to ensure they have not been compromised.
- Discovering profiting opportunities: An adequately performed IP audit does not stop at just reviewing the business’s IP but also performs a market analysis to reveal the strength of the competition and commercial avenues that can be exploited in the national and international markets.
- Averting costly litigation: IP litigation is expensive and can drag on for years. This is a huge dent in the resources of small companies that lack the finances and expertise involved in these long-drawn legal battles. But with the help of an IP audit businesses can foresee potential infringement issues as well as other flaws in their IP. These can then be rectified on time, thus preventing costly legal disputes.
Preparing For An IP Audit
Below are the pre-audit measures that need to be taken in order to ensure that the results of the audit align with the requirements of the company.
- The Purpose of the Audit needs to be clear. An audit can be unlimited in its scope and results. It is therefore vital that the purpose be stated clearly to ensure that all resources are being utilized in the right direction.
- Assessing the role of IP in decision-making. It is important to be aware of how the IP assets of the company influence its external and internal relations as well as a business strategy.
- Planning the areas to be covered. The specific areas of the business to be covered in the audit must be defined in the audit plan. The plan must also include timelines, budgetary allocation, responsibilities of team members, etc.
- Create a checklist. A checklist serves as a handy document to ensure that no areas are overlooked. It is used by each member of the team and customized per the company’s needs.
Cost of IP Audits
IP audits are of various types and the time and effort required by each are different. The exact amount of work and fee can only be calculated after taking into account the company’s size as well as the depth and breadth of work.
Typically, an IP audit is charged at a lawyer’s hourly billing rate or any other fee arrangement that has been mutually decided. Considering the value addition offered by an IP audit it is crucial to hire an experienced team to perform the task.
The effective management of IP resources is instrumental to the success of any business. The importance of IP audits in assessing, preserving, and enhancing the value of IP cannot be ignored. It is important to remember that an IP audit is a tool and not an end in itself. The information garnered from audits can form the foundation of a sound business strategy and help in the structuring and management of assets.
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TT Consultants offers a range of efficient, high-quality solutions for your intellectual property management ranging from
- Patentability Search
- Invalidation Search
- FTO (Freedom to Operate)
- Patent Portfolio Management
- Patent Monitoring
- Patent Infringement Search
- Patent Drafting & Illustrations
and much more. We provide both law firms and corporations in many industries with turnkey solutions.Contact Us