Intellectual Property (IP) Audit: An Overview

IP audits are conducted in order to identify, protect and value these vital assets of any business. A need to conduct IP audits typically arise as a part of a larger due diligence investigation initiated in order to evaluate the state of the business prior to a merger or acquisition. At the very least, an IP audit should be conducted every so often in order to identify just what IP assets are owned by a business and just how important those are to the firm.

The first step in the audit process is to identify the readily identifiable IP. Assets falling into this category will include any registred trademarks, copyrights, designs, or patents owned by the business, any license to thrid parties and any licenses from third parties, including cross-licenses. Also included in this category are things such as in-house work manuals, database, recipes, franchise agreements, publications and product/process know-how. Once identified, the IPs are then scrutinised to determine the state of ownership, whether they have lapsed or not (in the case of registrable IP) and whether they are being effectively used

The second step is to itemise what might be termed external or market influences. These include the company brand, product brands, company and product get-up, goodwill, product certification, export certifications, regulatory approvals, distribution and raw materials networks, client lists and marketing and advertising programs.

IP Audit of Trademarks:

As part of the IP audit, it is necessary to scrutinise important labels in order to ascertain whether or not it would be prudent to file separate trade mark applications in respect of individual elements of the get-up of the label. Unfortunately, most businesses focus only on the actual word mark of a lable or a trade mark based on the misconception that it is only the actual word mark which can form the subject of a trade mark registration. The foregoing makes it possible for unscrupulous traders to copy the get-up on their label but exchanging the word mark which forms part of the label.

A trade mark is usually registered at the time of a new product launch under a freshly devised trade mark. Accordingly, it is possible for the goods and/or services originally marketed under a particular trade mark to change over a period of time. As a result, such goods and services initially covered by an existing trade mark registration often do not adequately cover the goods and services presently used and marketed under the trade mark. Thus, it is important to scrutinise very carefully the particular goods and/or services set out in there registration and compare these with the goods and services which are presently marketed and used by the company under the trade mark.

Also as a part of the IP audit, one must ensure that the trade mark has been registered in all the relevant classes of goods and/or services in respect of which the brand relates or has been extended, as the case may be.

IP audits are a convenient time for considering other forms of exploitation of IP as the entire IP portfolio is fresh in the minds of the decision makers. For instance licensing opportunities, selling certain IP assets or purchasing IP registrations of other companies if they are commercially viable.
This convenient time presented by IP audits should not be restricted to existing products. Careful consideration should also be given to future product launches and new trade mark registrations.

In conclusion, IP audits make sound business sense. Not only can an audit identify company strengths and weaknesses, it also is an extremely useful tool that can be used to make important decisions on IP assets.