Elements of An IP Audit – A check list

by Beveridge on January 17, 2014

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The word audit may conjure scary images of tax laws and big government, but the benefits resulting from IP audits can be substantial. Intellectual property is now the most valuable asset of many businesses, yet business managers often do not dedicate the resources necessary to capture and protect intellectual property. Ernest Graf, Principal and Head of Physics, Electronics and Telecommunications Team at Fisher Adams Kelly, provides a checklist of the vital elements of an internal IP audit.

Elements of an IP Audit

To provide management with a comprehensive SWOT analysis of a company’s IP portfolio, an effective IP audit should therefore include, for example, a review of the following elements:

Company policies

  • Is there a written company policy concerning IP ownership? One of the most common but dangerous management misconceptions is the premise that because a business funded particular research or development work, that the business therefore owns all resulting inventions, software and other IP related to the work. That premise generally wrong. Without written agreements stating otherwise, ownership in IP generally resides in the individuals who created the IP.
  • Is there a written policy stating that all employees must formally document and report inventions and ideas to management?
  • Are policy statements widely available to all employees and frequently reviewed?
  • Are all company publications and public disclosures reviewed to avoid premature disclosure of confidential information? Confidentiality Agreements
  • Have all employees and consultants executed written pre-employment or pre-contract agreements concerning the ownership and confidentiality of their work?
  • Are exit interviews conducted when employees leave the company so that employees are reminded of post-employment confidentiality obligations?
  • Are all agreements with contractors, suppliers, manufacturers and distributors regularly reviewed to ensure that confidential information is protected?

Patents, Copyrights, Trade marks, Designs, Trade Secrets and Domain Names

  • Does an effective system exist to ensure that all annuities, maintenance and renewal fees are timely paid?
  • Are appropriate copyright legends included on all software, websites, publications and materials?
  • Are trade marks used appropriately on all products and materials?
  • Have all domain names and trade marks been registered?
  • Has the company considered business method patents?
  • Has the company considered alternative forms of IP protection for its products? For example, some software applications may be protectable using multiple forms of intellectual property including patents, copyrights, trade marks and trade secrets.
  • Are trade secrets adequately protected?

Licenses (company as licensee)

  • Has the company investigated commercial use restrictions related to any freeware or shareware incorporated into the company’s products?
  • Do existing licenses with third party software vendors authorise the company’s intended commercial and geographic uses of the third party software?
  • Do any government or other funding agreements include restrictions on IP?

Licenses (company as licensor)

  • Has the company thoroughly reviewed opportunities for licensing its IP to third parties?
  • Are existing licenses reviewed regularly to ensure that all milestone and minimum payments have been received?

Contracts

  • Is appropriate IP indemnification and disclaimer language included in all company contracts?

Third Party IP

  • Is the company aware of its competitors’ IP?
  • Has a search been conducted to determine whether the company’s products and services might infringe patents, copyrights or trade marks owned by third parties?

Of course, depending on the purpose of the audit, the strategy of “self” auditing has limitations. For example, where IP audits are requested by investors or creditors, an IP audit will need further outside professional involvement in order to obtain the necessary impartiality and objectiveness that is expected in traditional financial audits.

Although it is sometimes under appreciated by management, intellectual property is now a critical asset of all high technology companies. IP audits help companies evaluate strengths, weaknesses, opportunities and threats concerning IP so that maximum profits may be extracted from IP assets. Today’s ICT businesses in particular cannot afford not to conduct intellectual property audits. However, in many circumstances, the costs of IP audits can be decreased through the strategic use of IP “self” audits, and the checklist above should help get the ball rolling.

This article was written by Ernest Graf, Principal and Head of the Physics, Electronics and Telecommunications Team at Fisher Adams Kelly Patent and Trademark Attorneys, a leading choice for Australian innovators.

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