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In a very competitive environment, businesses are striving to keep an edge over their competitors and this is often realised through their IP assets.
IP assets come in various forms, including patents which protect inventions, trademarks which protect and identify the source of names and logos, copyright which protects works like literature, computer programmes and architectural designs, and designs which protect the aesthetic features of an object. Trade secrets may be any formula, pattern, device, or compilation of information which is used in a business and which may give the business an advantage over competitors who do not know or use that secret.
Due to the importance of IP to any business, it should be properly managed like any other tangible assets of the business. In order for a business to put in place a proper management strategy for its IP assets and to maximise the value of such assets, it has to first know and understand which IP assets it owns; hence the importance of IP audits. In this article we shall shed light on IP audits, what they mean and why they are important.
What is an IP Audit?
An IP Audit is defined by the World Intellectual Property Organisation as a “systematic review of the IP assets owned, used or acquired by a business. Its purpose is to uncover under-utilised IP assets, to identify any threats to a company’s bottom line, and to enable business planners to devise informed strategies that will maintain and improve the company’s market position” (IP Audit – A “How to” Guide: http://www.wipo.int/sme/en/documents/ip_audit_fulltext.html#).
An IP audit should cover the following: IP owned by the company (to ensure proper protection is in place), IP licensed to others or licensed to the company (to ensure compliance with the company’s policies and contractual obligations), and IP owned by others (to ensure there is no risk of infringement). By conducting the audit, a company will determine, in the light of all the information obtained, what actions are required to be taken, with respect to each IP asset or portfolio, to serve the relevant business goals of the company.
It is very important to identify the purpose of the audit to identify its scope. The scope of an IP audit will differ depending on when it is required and what its purpose is.
IP audits are typically conducted by external IP lawyers. Often, the IP Lawyer, who has a broad range of experience with various types of IP and IP valuation matters, will evaluate and review the company’s portfolio to determine where the appropriate IP lies. The company may appoint a point person for the lawyer to deal with—ideally, someone who knows the IP concepts and technical aspects of the company’s business. When an IP portfolio’s monetary value is being reviewed, the IP auditing team may also include an accountant or economist who has dealt with IP valuation issues.
What an IP audit will achieve?
In addition to reviewing documents, it is essential to conduct interviews with the key personnel in a company, who will be identified based on the company’s industry and nature of the IP involved in its business. The collaboration between an IP lawyer and the business’ personnel is vital to the success of the IP audit.
When is an IP audit required?
Limited purpose audit: this is a very narrow audit that is usually conducted for a certain situation, such as a significant change in the IP Laws which may affect the protection of certain IP assets. Another situation that may require such an audit is when a company makes a plan for IP filing in a foreign country, as it will help the company to understand the other country’s IP laws and processes, which may affect its rights.
An IP audit is very important and should be a focus for each business. An IP audit will help a business to have a full picture of its IP assets and ensure these assets are properly protected and maintained. This, in turn, will assist in managing the IP assets, enhancing their value and minimising any risks associated with their use. Conducting an IP audit should be a regular practice for any business. A first time audit may be painful, but with assets identified and proper strategies are put in place for their management, subsequent audits will become easier. In addition, having a proper IP management policy will facilitate and ease business transactions, saving both time and cost. Regardless of how laborious an IP audit may seem, it is an essential tool for any business and the opportunities and risks it may reveal are invaluable.
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