Historically, a company’s strength was derived from its tangible assets, such as land, buildings, machinery, and equipment. Today, however, an increasing number of organisations rely on intangible assets for competitive advantage, particularly patents, trademarks, trade secrets, copyright, designs, and the like.
An intellectual property audit is a systematic evaluation of a company’s intellectual properties that it owns, uses, or acquires in order to assess and manage risk, solve problems, and adopt best practices in intellectual property asset management. An intellectual property audit is now an essential tool for successfully managing knowledge-driven businesses by assisting in creating or revising their intellectual property strategy.
Furthermore, a rigorous and systematic intellectual property audit examines a business’s essential intellectual property assets and its intellectual property-related policies, procedures, agreements, and competitors’ intellectual property.
Because intellectual property rights are specified and designed by law, intellectual property audits are typically performed by an intellectual property law firm. Such firms have extensive experience dealing with many types of intellectual property and intellectual property value matters. Suppose the monetary value of a company’s intellectual property portfolio is the primary concern. In that case, the team may look forward to hiring an economist or accountant with prior experience dealing with intellectual property valuation matters.
Businesses with advanced intellectual property understanding can begin discussions by surveying their intellectual property portfolio and competitive position in the business environment, followed by a more focused analysis of intellectual property challenges and concerns. The most comprehensive intellectual property audits include estimations of the monetary value of intellectual property assets, as well as specific suggestions and protocols for dealing with intellectual property assets. Intellectual property audits can be broad in scope or specific to a single event or kind of intellectual property. General-purpose intellectual property audits are extremely beneficial to both startups and established businesses in terms of not just evaluating and maintaining their intellectual property assets but also identifying opportunities, development needs, and risks.
Importance of Intellectual Property Audits
Intellectual property audits can help business companies and organizations lead toward the ultimate path of success in the following ways:
- Intellectual Property Audits help in identifying what IP is owned: One can never deny that every successful business is well-managed in every way. Intellectual property is undeniably a critical component of all businesses, which necessitates proper management. If a corporation is unaware of its intellectual property assets, it will never be able to manage them efficiently or safeguard them from loss or damage. That is where an intellectual property audit comes in handy, as it educates a business about the intellectual property assets it has, allowing the company to make informed decisions on Intellectual Property Protection, development, licencing, and exploitation. Furthermore, an intellectual property audit may discover flaws in title chains and detail procedures to resolve them.
- Intellectual Property Audits help in identifying new profit opportunities: Intellectual property audits have the potential to open up new commercial opportunities for brands and enterprises in both domestic and international markets through intellectual property licences. They also provide beneficial results in monitoring competitors’ intellectual property in the market. An additional advantage of doing an intellectual property audit is that it allows inventors, decision-makers, and marketers to secure intellectual property prospects before they are lost.
- Intellectual Property Audits help in preventing costly disputes: Without a doubt, intellectual property litigation is both difficult and expensive, and the unfortunate reality is that startups and small businesses must sometimes forego litigation, even having winnable and meritorious claims. An intellectual property audit can successfully assist businesses in anticipating potential issues and implementing effective avoidance actions. It can also highlight flaws in the audited company’s Intellectual Property Rights (IPRs), which can subsequently be rectified efficiently and promptly.
- Intellectual Property Audits help in facilitating and optimizing business transactions: Intellectual Property audits have become more prominent in corporate transactions in the digital age. An intellectual property audit prepares business owners to cope with opportunities that may come at some point, such as a new sales or expansion opportunity requiring funding or a third party offer to buy the company, by providing a thorough grasp of its intellectual property assets and their estimated value.
How Much Does an Intellectual Property Audit Cost?
Intellectual Property audits occur in many forms and sizes, and the time necessary to complete one varies accordingly. Intellectual property audits are often charged at a lawyer’s hourly rate or under alternative fee arrangements. The company should budget for an experienced intellectual property lawyer who is educated about various types of intellectual property and has expertise in determining the market worth of various types of intellectual property, such as by negotiating intellectual property licencing and other intellectual property-related commercial transactions and settlements.
A general intellectual property audit, in its most basic form, consists of educating company management about the various types of intellectual property that are available, surveying the types of intellectual property that the company currently owns, and answering questions about how the company’s intellectual property position can be preserved and enhanced. If no significant technological issues arise, the audit may conclude with certification that important intellectual property is adequately protected and correctly titled. Assuming the lawyer spends four to eight hours preparing for and conducting the audit, and the law firm bills by the hour, the audit costs four to eight hours of an experienced attorney’s work, plus expenses, if any.
An intellectual property audit for a company that relies on the development or application of new technology or that has somewhat complicated or numerous intellectual property issues will be more involved and time-consuming. The corporation may request that the audit include a determination of whether specific technological advancements are likely to be patentable and worth patenting.
The company may be aware of an issue or challenge involving its intellectual property and want for the audit to address potential outcomes and make suggestions. The cost of this work cannot be estimated until the number and complexity of the issues are identified. Still, the fees will be based on a multiple of an experienced attorney’s hourly rate or perhaps another fee arrangement. After discussing the issues, the lawyer can make estimates.
Conclusion: Management and enhancement of intellectual property assets may appear to be a difficult chore for firms who have never done it before or whose intellectual property is in disarray. However, good intellectual property management is vital to corporate success. An intellectual property audit is the best place to start.
Disclaimer: The present article intends to provide general guidance on the subject, and you can also consult us in your specific case.