Example of an IP Audit

At the very least an IP Audit should identify just what IP assets are owned by a business and just how important those assets are to the business.

As an example, let’s take the mythical company, Aglaia.  Aglaia is an SME employing 50 staff and has both import and export potential for its patented tea-tree formulations and associated health products.  The company has been reasonably successful but faces stiff competition in the niche “nutraceutical” market.  The company has a house brand and a number of product brands.

The first step in the audit process is to identify the readily identifiable assets.  Falling into this category will be any registered trade marks, copyrights, designs or patents owned by the business, any licenses to third parties and any licenses from third parties, including cross-licenses.  Also included in this category are things such as in-house work manuals, databases, recipes, trade secrets, confidential information, franchise agreements, publications and product/process know-how.  Once identified this intellectual property should then be scrutinized to determine who owns it, whether it is still registered and enforceable and whether it is being used.  Each individual IP component should then be given an importance rating - by looking at factors such as whether or not it is a core technology, the life expectancy of the technology and the exclusivity of the technology.

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

The third step is to estimate the value of the intellectual property.  In trying to estimate the value of any of these items, some good questions to ask are: how much will it cost to replace the item if it were lost? What potential does the IP have to increase revenue? and How is the IP currently being used?

Such an exercise usually highlights the hidden assets that can be found in the company and focuses attention on the importance or otherwise of those assets in maintaining and creating competitive advantage.  Having made assessments in respect of what the most valuable IP assets are, the company can then make decisions to ensure that the IP is being properly managed, is not being infringed, and is being used effectively and appropriately. Understanding which of the company’s IP assets are most important enables their full value to be realized and protected.