A good solid comprehensive IP audit is most probably the first thing that it would be advisable to do, immediately after the market analysis. Let’s understand what that is and what it entails, why you should do it, and when and how you should do it. Please click on the icons below.
An IP Audit is a systematic review of all the intellectual property rights (whether registered or not) that you own, use or that you have acquired from a third party, or perhaps outsourced to a third party. It means taking a fresh look at all your company’s assets that are not tangible (i.e.: you have to exclude your premises, office equipment, machinery, vehicles, etc.) and focus on the outcome of your creative and innovative efforts. This systematic review should cover:
- The name of your business that may or may not be already registered as a trademark (it may well be that it is simply exhibited outside your working premises, offices, or shop).
- The same applies for the name or designation or indication that you use to sell your products or services, and that, hopefully, you have already registered as a trademark - at least in your domestic market. Even if you have done so, you should include these items in your IP audit.
- Any new product or process that you might have invented. Such inventions and inventive practices may already be protected as patents or utility models, or simply applied in practice. In the latter case, they may, however, have a value as Trade Secrets, or Know-How.
- The ornamental shape of your products or of your packaging. Perhaps you have already protected those through Industrial Design, but if not, you may nonetheless enjoy protection under copyright.
- All your written documents, including contracts, memoranda, advertisement campaigns, software programmes, etc. should probably be automatically covered by copyright protection and therefore should be also included in your IP Audit.
- Lists of clients, their contact details and preferences, internal working, quality and compliance procedures, internal policies that proved to be successful - these should all be treated as Trade Secrets.
A good IP Audit will bring you many advantages and it will help you:
- Identify all intangible assets of your company.
- Determine the overall value of your company (beyond merely the tangible assets). This may also help you to use your IP assets as financing collateral to get loans from banks. NB: IP Audit is a fundamental step for IP Valuation (see Handbook on IP Commercialisation, Sections A.3 and A.4).
- Assess potential risks in your current way of doing business.
- Establish corrective measures and create new policies to prevent potential problems.
- Identify best practices and adopt strategies in IP asset management with a view to better managing your intangible assets and increasing your income.
- Monitor compliance of your contractual obligations (e.g.: deriving from licensing agreements).
- Ensure adequate protection of your IPRs by registering and renewing them, or by adopting best practices to protect your unregistered IP rights.
- Monitor possible violation of your IPRs and facilitate their enforcement.
… in short: DO IT!!!
- A good and comprehensive IP Audit should be systematically carried out at least once a year.
- However, sometimes there are specific events that trigger the necessity to do an IP audit. By way of example, if you want to obtain a loan from a bank and you want to use your IPRs as collateral, or you are embarking on a merger or acquisition, or possibly you are disposing of part of your business, or you are about to commence commercialisation in other countries or through e-commerce, and so on.
- First of all, don’t carry out the IP Audit alone (unless your company is really small, and you know exactly how each part of the company works). You should instead involve your colleagues who are familiar with the details of the operations of every single aspect of your company’s work. For example, if your business is based on a very technological product, you may need to involve a technical expert. A business and IP lawyer may also be helpful.
- Scrutinize every aspect of your business in order to determine the actual or potential role of IP: from its final outputs, to the processes to reach those outputs; from the contractual arrangements with employees, to any interaction with other stakeholders such as suppliers, service providers, clients, financiers, and even competitors.
- Start by identifying all trademarks, patents, utility models, domain names and industrial designs already registered in the name of your company and check:
- If you are using them or not (if you don’t use them, perhaps you should avoid renewing them);
- If you are using them in exactly the same form as registered, or you have slightly changed it over time, for example because your logo has undergone some restyling, or because you have new corporate colour (in the latter cases, you might consider filing a new IP application);
- When each IPR has to be renewed;
- If you have in place all the required documentation to prove ownership (e.g.: proper registration certificates, evidence of renewals, etc.)
- Do the same with the IPRs that are not registered under your name, but that you are entitled to use by virtue of a contractual arrangement or written authorization, etc. with a third party. In this case, make sure you have copies of these contracts and of any other relevant documentation (e.g.: copies of the licensing or franchising agreements, copies of the certificates, etc.). You should take this opportunity to also assess whether you are complying with all your contractual obligations as stipulated in the above contracts, or not.
- Then, try to do the same with any unregistered IPRs. For example:
- You might be selling your goods or provide your service under a given name or logo, without having ever protected this name or logo as a trademark. This would be unfortunate, but it happens, and it is never too late to “put your house in order”. The same can be said for the name written on the signpost over your shop or business: check if it is registered as a trademark, and if not, get it protected before your entitlement to it might be compromised by a potential competitor.
- Perhaps your company is innovative in the way in which part of the business is carried out (e.g.: you have a great business model, a creative business method, you found a way to reduce the time of production or to improve the outcome of your production). Ask yourself if these innovative practices may be protected as patents or utility models, or if they may be treated as Trade Secrets through the adoption of a number of well-thought-out confidentiality measures.
- Take stock of all relevant written documents that may give you a competitive advantage and remember that these will more than likely enjoy automatic protection under copyright. This means therefore nobody can copy them. However, make sure you carefully and methodically classify all these written materials.
- Identify any software developed on your behalf or by one of your employees, all types of databases (from the most complex, to simplest including lists of customers with their contact details), sales data and marketing information, prototypes, etc. Also, in this case, the automatic protection of copyright may enhance the value of your assets, and Trade Secrets might help you guarantee their secrecy and therefore your competitive advantage.
- For each identified IP right, whether registered or not, you must verify who is the real owner: at times, it is you; other times it might be a third party, and in that case, you need to have a written authorization to be able to use such IP right. Similarly, if the owner is one of your employees, a supplier, a licensor, or an inventor, etc., you have to make sure that you are entitled to use such right through the appropriate contractual arrangement. Copies of these documents must be scrupulously kept.
- Verify if any of the above IP rights has been or is being violated or infringed by third parties. Should this be the case, assess the best option to enforce your rights. Remember: you can make a lot of money by enforcing your IP rights!
- Do not forget to include in your IP Audit also your web site. Check what is yours and what is not, before you put your new website online. Protect what is your, and obtain permission for what is not. Do not violate others’ IPRs with your website (see Handbook on IP Commercialisation, Section E).
- Finally, you should take a helicopter view of all your registered and unregistered IPRs, and assess whether, in practice, they are serving the strategic interests of your business. Should this not be the case, you could start considering corrective and mitigation measures, such as developing new products, or acquiring them through a license, entering into a partnership, or perhaps shifting your business focus. In this context, you should also assess potential risks linked to employees disclosing IP assets to your competitors, customers breaching licensing terms and conditions, and suchlike.
Numerous enterprises, particularly SMEs, may take the view that they have more to be doing than IP Audits and cataloguing and recording as indeed, the initial undertaking may be somewhat laborious. But, as mentioned, once it has been done for the first time, it will become a fairly straightforward exercise to carry out regular periodic reviews. Make sure that a workable and sensible system for recording and review is put in place, and you will possibly be surprised by the concealed additional and valuable wealth that is underlying your day to day processes and procedures, and have resulted over time from the efforts that you have been putting in. By their nature, entrepreneurs are inclined to look only at the bottom line … that is to say, in-goings and out-goings, profit margins and suchlike. A good IP Audit can be the opportunity to stand back and acquire an appreciation of the intangible value that you have been building up and that is the underlying foundation of that good annual bottom line and, hopefully, many more to come!
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