Managing Intellectual Property Audits

The first step to management of a portfolio of intellectual property rights to diversify the revenue streams that may be derived from the rights owned by a company is to conduct an intellectual property audit. An audit of a portfolio allows an owner to identify, classify and prioritise assets in an inventory to promote focus on where an how such assets may be exploited by either the company, licensed to others or sold.

An intellectual property audit commences by analysing the property rights vesting in research, development, and other creative work undertaken by the company. Ideally, the rights would be categorised into two baskets. Firstly those owned by the company, and second those used by the company but owned by third parties. The classes of property to be looked for extend beyond the statutory rights that create copyright, patent rights, design rights and registrable trade marks, but also trade secrets, information, know-how and human resources.

After the property rights have been created, it is sensible to make an assessment of the portfolio - where and how the inventory materials are used by the company. This stage of the process allows a company to identify the extent to which IP rights are utilized and exploited; and serves to identify the products and services reliant upon those rights, whether they are owned by the company or whether continuing permissions are required from third parties. Frequently, options are presented where reliance upon third party rights can be reduced, with a view to creating more competitive products and services and increasing profit margins.

Having progressed through the previous steps the relative importance of the property rights which are either owned, used, licensed or not used presents an opportunity to promote awareness as to the priorities . Often, organizations are not aware of the extent of the property rights in their products and services, and more so how they might be better utilised after ensuring the rights are properly secured and enforced. The importance hinges on the product by reference to the turnover that it plays a part in, whether it is a product, service or function in which the intellectual property rights serve, and play a part. The greater the importance of the asset the greater the priority to protect the product, service or function.

Audits also disclose inadvertent infringement of third parties rights. The increasing awareness of the change of position that intellectual property rights bring has lead to an ever increasing frequency of intellectual property rights indemnities in contracts. The audit serves to identify such infringements with a view to taking steps to address unlawful conduct and taking such measures as are available to secure the appropriate rights and licenses to facilitate containing use.

Finally, the inventory process allows identification of value to both the organisation itself but the value to third party companies who may have an interest in acquiring rights to use, or take an interest in owning rights associated with information, products or services. Even rights that do not have intrinsic value to third parties may be candidates for tax deductions.

Assisting in intellectual property audits requires an understanding of the industry within with the company trades and a knowledge of intellectual property and related rights. The objective of audits such as these are to identify rights with a view to securing them to the extent possible at law, and ensure that losses of rights are mitigated on future occasions, when they are developed.