IP Audit

An audit is a key mechanism for establishing the scope of an intellectual property portfolio. The portfolio can either belong to a client or to a third party into which due diligence is being conducted. The key steps to an audit are:

Identification: identifies, describes and defines the intellectual property which is already registered or could potentially be registered such as inventions, trade marks, designs, plant variety rights and the like. It also identifies other rights such as copyright, trade secrets and staff know-how.

Ownership: establishes who owns the intellectual property.

Legal Protection: develops a plan for unregistered intellectual property outlining optimal methods of protection and the types of applications to be sought in order to achieve and maintain a competitive advantage for the business. An analysis will usually provide indications on how to protect trade secrets and in-house know-how.

Liability Assessment: looks at liabilities or risks associated with the intellectual property identified, such as:
› What, if any, ownership risks and liabilities exist?
› What are the documentation/record keeping standards?
› What risks are associated with trade secrets/know how?
› Key personnel liabilities?
› Potential or existing litigation/opposition issues.
› Are there any obligations or encumbrances on the intellectual property?

Valuation of Intellectual Property: though audits do not involve putting a dollar figure on a piece of intellectual property, the relative value of intellectual property assets can be estimated by assessing whether each piece of intellectual property is revolutionary in its field or whether it is a link in the chain to achieving an end result. Another issue to consider is the freedom to operate in terms of competitors’ positions. This valuation stage may also lead to rationalisation of the portfolio, in cases where resources are expended on intellectual property assets that are no longer aligned with the current and/or future commercial direction of a business.

Recording: Audit findings should be recorded and stored. They should serve as references and analyses for subsequent regular audits, as background information for due diligence exercises, as well as guide portfolio development and eventual commercialisation activities.