Intellectual Property Audits – don’t wait until it’s too late
Intellectual property (IP) is one of the most important assets a business will have, particularly those with a technology focus and/or creative element. The term IP covers a wide variety of rights including copyright, trade marks, design rights and patents, to name a few. Understanding comprehensively what IP an organisation owns should therefore be a key consideration for any business to enable enforcement of those rights, and to protect its market and profits.
Any business interested in talking to prospective buyers or investors will be in a much better position if they understand the value of their IP and are able to deal with any imperfections. Prospective buyers and investors will be keen to know the IP is owned correctly and/or that the business has all relevant permissions from third party rights holders to use it. In addition, their confidence will be bolstered if the business can show there are policies and procedures in place to ensure IP is captured, maintained and understood.
An Intellectual Property audit is a systematic review of the assets owned, used or acquired by a business. It allows a business to gain a clear picture of their IP portfolio and associated risks (if any), and may uncover under-utilised IP which can then be used and capitalised on by the business going forward. An audit also enables a business to devise and/or improve policies and procedures to ensure key IP is maintained and improved.
An IP audit will involve a number of steps which will result in a tailored report for the business.
The first step is often the most crucial as, in our experience, not all IP audits are the same. At this stage the key initial considerations of scope, cost and key contacts should be made. It is important to establish which organisations or business units should be covered by the audit, whether one particular product and/or service offered by the business should be focused on, and whether all or only some areas of IP should be covered. The cost will vary depending on the size of the organisation and the amount of IP to be reviewed.
The second step is to identify the IP rights owned and used by the business. In our experience this is best accomplished by working through a questionnaire geared towards understanding how IP is generated and/or used by the business, flagging up any possible IP ownership issues, and clarifying what IP policies and procedures have been put in place by the business (if any). The aim of this is to capture all readily identifiable IP such as registered and unregistered rights, review any relevant licences used or granted by the business and identify whether there are any problems that need addressing or disputes that need resolving. Any relevant contractual arrangements that are mentioned should be reviewed carefully to see how the IP under that contract is dealt with.
A common example of where issues over IP may arise is when a business has commissioned a third party to do some work e.g. design of a website or logo. In this scenario it is wrong to assume the business will own the IP in the commissioned work as, unless contractually provided for, it will belong to the designer.
The final step is to produce a written report, tailored to the business, setting out key findings and recommendations. In particular the report should list clearly what IP rights are owned, the strengths and weaknesses of each and include recommendations on how the business can improve its position. It will make suggestions as to what remedial actions are required (if any) to fix any imperfections in the IP. The report should also suggest any policies and procedures to be created and/or improved upon.
IP audits should be performed regularly and periodically. A business which understands its IP is often in a far better position to attract buyers and investors since it can answer more capably the inevitable questions concerning what IP rights it owns.