Why Should I Conduct An Intellectual Property Audit?
Just as a business would conduct regular inventory checks, an intellectual property audit is equally important for a business managing its intellectual property (IP). IP audits have quickly become an essential part of a business’ IP strategy and conducting an IP audit can not only facilitate IP protection but also generate income for your business through the sale or licence of your IP. This article outlines:
- what an IP audit is;
- three benefits of conducting an IP audit; and
- how to conduct an IP audit.
What Is an Intellectual Property Audit?
Essentially, an IP audit is a systematic review of the intellectual property your business owns or uses. An audit aims to identify:
- what IP exists within the business;
- the owner of the IP;
- what the IP is worth;
- the legal status of the IP; and
- how you should use the IP.
You will usually conduct an IP audit when:
- there is an assignment or transfer of IP from your business to another;
- significant changes occur to the corporate structure of your business;
- a financial transaction takes place involving IP; or
- there are significant changes in the law.
Why Are IP Audits Valuable?
Unlike a business’ tangible assets, IP is intangible. Therefore, it is easy for a business to lose track of the IP it owns. An IP audit will help identify any IP the business owns or has acquired. As a result of this, a business is likely to ensure that its IP is adequately protected. Depending on the type of IP you identify in the audit, these protections vary.
For example, if you identify a business trade mark, you may take steps to:
- register the trade mark with IP Australia; or
- ensure that you are using the mark, to avoid losing your trade mark.
Identifying the IP your business owns will also determine whether you can enforce your IP rights against a potential infringement. Once you have formulated a database of the IP assets you own, you can search journals and databases to identify any possible infringements of your IP rights. In this sense, an IP audit will help clarify the strength of your protection. For this reason, it is an important step in deciding whether to enforce your IP rights.
Generating an Income for Your Business
Once you have identified the IP your business owns, you might consider selling or licencing your IP as a way of generating income for your business. Selling your IP can:
- generate instant income for your business; and
- assist cash flow within the business, depending on the value of the IP.
A company’s IP assets are usually valued at the amount that a purchaser would pay for that asset at market value. However, selling IP results in a loss of your intellectual property rights over the property.
On the other hand, licencing can ensure that you remain as the owner of the IP but agree to let another person use and exploit the IP. The terms of the licensing agreement set out the ways that the IP can use and also the costs involved in using the IP. In this sense, licensing has the potential to generate multiple payouts over the licencing period for your business.
IP litigation can be complex and expensive. To avoid litigation, an IP audit can help businesses anticipate any possible disputes that may arise as a result of infringing another person’s IP rights.
For example, if a trade mark your business owns is registered and is similar to another registered trade mark, there could be potential issues with trade mark infringement. As a result of the IP audit, avoidance and resolution strategies can be put in place in order to avoid litigation.
Conducting an IP Audit
IP audits are usually conducted by a team consisting of a specialised IP lawyer and representatives from the management of a business. The cost of conducting an audit largely depends on the:
- legal fees involved; and
- amount of IP your business owns, uses or has obtained.
Usually, a plan for the audit will be arranged, detailing the:
- area of inquiry within the business;
- responsibilities of each member in the audit; and
- time schedule.
Then, a database or register is typically drafted to note the IP assets identified in the business. This database is useful to determine any actions required to protect the IP assets identified and to keep note of all the IP the business deals with.
An IP audit is an essential way to manage the IP your business owns and uses. An IP audit identifies any IP assets within a business and determines the ownership and legal status of the IP. Conducting an IP audit can not only help businesses protect their IP but also generate an income by selling or licencing IP and avoid costly disputes with potential infringements of IP. If you require trade mark legal assistance with your IP audit, contact our experienced trade mark lawyers on 1300 657 423 or fill out the form on this page.
Frequently Asked Questions
Whilst this depends on the size and activity of your business, IP audits are usually conducted yearly so that your IP information remains up to date.
Although there are no strict requirements that an IP audit be conducted by any person in particular, IP audits are usually conducted by lawyers who are familiar with identifying IP and the legal status of these assets.
Without an IP audit, your business runs the risk of losing valuable rights in relation to its IP or infringing on another person’s intellectual property rights.