All businesses, without exception, own some form of intellectual property.
Strong Intellectual Property portfolios add tremendous value to a company and understanding how to use, manage, exploit and leverage these important 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.
What are they?
The objective of an IP audit is broadly 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.
The IP lawyer usually starts by pinning down what IP rights a business owns and uses. These are wide and varied and generally subsists in all creative matter, including text, graphics, artwork, photographs, packaging, inventions, videos, audio, websites, databases, software and apps.
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. The auditor will focus on both registered IP (such as patents, trademarks and registered designs), and unregistered IP (such as copyright, unregistered designs, confidential information, know-how and trade secrets).
Part of the process involves getting to the bottom of when the assets were created, by whom, and whether there may be any issues in the chain of title and ownership of IP belonging to the business. Where IP is licensed in from third parties, audits typically also encompass reviewing the licence documentation and ensuring its terms are being complied with.
Assessing whether the business is adequately protecting its IP and adequately monetising it 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, to strengthen its existing IP, and to mitigate the risk of infringement claims.
Why are they important?
General purpose IP audits can be hugely useful in establishing what IP is owned by a business, revealing where any gaps, weaknesses and defects lie, and in identifying how to better protect, maintain, enhance and strengthen the 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.
What do they cost?
There is no one-size-fits-all approach with 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. SMEs don’t always have the resources to carry out full-scale IP audits but LawBite can assist with higher level audits at very competitive prices and within relatively short time frames. We always quote upfront, generally following clients completing an audit questionnaire, and always based on our competitive hourly lawyer rates. Complete the form to receive an initial free 15-minute legal phone consultation.
To speak to the author of this article, Laura Symons, or for expert advice on any business legal matter please do enter an enquiry or call us today on: 020 38088314 and speak to a member of our friendly Client Care Team.
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, infringement disputes and trade mark registration and opposition.