Transcript IP Audit "We're in an object-oriented, outsourced, and open-sourced world, and organizations are anxious to take steps to ensure that the software they build and.

IP Audit
"We're in an object-oriented,
outsourced, and open-sourced
world, and organizations are
anxious to take steps to ensure that
the software they build and sell is
created within a responsible policy
framework for use and protection of
intellectual property."
Mark Tolliver , CEO, PALAMIDA
IP Audit
• The due diligence process associated with mergers &
acquisitions, joint ventures, portfolio assessments, spinoffs, strategic alliances, and OEM procurements are now
including an increased level of sophistication regarding
intellectual property.
• Identifying the origins and value of intellectual property
and assuring compliance with obligations relating to
licensed assets has become a due diligence checklist item.
• With source code becoming increasingly available - for
free - diligence teams today increasingly need to
understand the pedigree of target software intellectual
property.
Key Questions?
Where did the code originate?
What license obligations come
with its use and distribution?
What is proprietary and what is
open source?
How can I get an accurate
assessment within the short
deadlines of this transaction?
IP Audit
• “Audit” is often viewed as a dirty
word.
• But it doesn’t have to be,
especially when it means ensuring
your IT infrastructure is efficient,
cost-effective and compliant.
IP Audit
• Not always are the infringement risks simply in the
form of damages to copyright holders or from liability
to customers for breach of warranty.
• For publicly traded companies, there are perhaps even
larger consequences from negative customer
perception and financial market effects. For instance,
the day after SCO filed suit against AutoZone for
copyright infringement, shares of AutoZone dropped 5
percent on four times the prior day volume. Ignoring
the merits of the SCO complaint, this alone
represented an approximate $300 million loss of
market capitalization for AutoZone.
• http://www.itmanagersjournal.com/feature/6025
Software Audit
• Most companies don’t normally set out to infringe IP
laws, unlawful software usage could spin out of control
without proper management policies and procedures in
place.
• This is why it is imperative that companies perform
regular software audits on all personal computers within
their organizations. Software asset management should
be a standard element of any organization's asset
tracking process and is especially necessary considering
the Internet has made it easier for software to be easily
accessed and downloaded.
Software Audit
• Software audits are not only about protecting a company
from paying penalties for IP infringement, they also
provide companies with additional information to help
them better manage software costs and employee
productivity.
• Software audits make it easier to spot out of date licenses
and standardize all computers to have the most recent
versions.
• They also make it easier for companies to consider
purchasing volume-licensing programs and
simultaneously lower costs and improve employee
productivity if they discover a new type of software that
has become more popular throughout their organization.
Software Audit
• A key feature of the IP Amplifier is CodeRank,
Palamida's patent-pending heuristic analysis technology.
• Like Google's PageRank algorithms, CodeRank
prioritizes code match results, reduces irrelevant
matches, and minimizes time-consuming "falsepositives."
• False positives occur, for example, when commonly used
coding idioms are inappropriately flagged. CodeRank
operates on C, C++, and Java source code files.
• For the person performing the code audit, CodeRank
allows quick assessment of code potentially derived from
third-party software, controlling the match query depth
-- from highly conservative to less stringent assessment.
Software Audit
• A key feature of the IP Amplifier is CodeRank,
Palamida's patent-pending heuristic analysis technology.
• Like Google's PageRank algorithms, CodeRank
prioritizes code match results, reduces irrelevant
matches, and minimizes time-consuming "falsepositives."
• False positives occur, for example, when commonly used
coding idioms are inappropriately flagged. CodeRank
operates on C, C++, and Java source code files.
• For the person performing the code audit, CodeRank
allows quick assessment of code potentially derived from
third-party software, controlling the match query depth
-- from highly conservative to less stringent assessment.
What is IP Audit?
• Black Duck's protexIPTM software compliance management
system can improve the diligence of due diligence and reduce
risks for both buyers and sellers of intellectual property.
• It employs advanced digital Code Print technology and an
online KnowledgeBase of thousands of open source projects
and their associated licenses to quickly and accurately
identify matching open source code within target software.
• It then evaluates associated software licenses and determines
conflicts and constraints on the code's use. The protexIP
system can also be extended to track proprietary and licensed
commercial software.
• With protexIP you can get in-depth, accurate information
fast - within the hectic due diligence timelines - and without
major disruptions to target development teams.
http://www.carahsoft.com/resources/BlackDuck/ProtexIP.pdf
What is IP Audit?
• An IP audit is not just a tool for a company to
understand what intellectual property it owns or holds.
Fundamentally, an IP audit is an inventory of
information relevant to the creation, maintenance and
use of IP rights
• It is also a powerful strategic tool for managing and
maximizing return on its intellectual property
investment.
• Like its financial counterpart, a good IP audit gathers
information useful in understanding what is happening
in the underlying business and market.
What is IP Audit?
• An IP audit is not just a tool for a company to
understand what intellectual property it owns or holds.
Fundamentally, an IP audit is an inventory of
information relevant to the creation, maintenance and
use of IP rights
• It is also a powerful strategic tool for managing and
maximizing return on its intellectual property
investment.
• Like its financial counterpart, a good IP audit gathers
information useful in understanding what is happening
in the underlying business and market.
What is IP Audit?
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IP audit is a systematic review of the IP owned, used or acquired by a
business so as to assess and manage risk, remedy problems and
implement best practices in IP asset management.
It involves undertaking a comprehensive review of a company’s IP
assets, related agreements, relevant policies and compliance
procedures.
An IP audit helps a business to make an inventory of its IP assets or update it and
analyze:
– How the IP assets are being used or not used.
– Whether the IP assets used by it are owned by the company or by
others.
– Whether these IP assets are infringing the rights of others or others
are infringing on these rights, and determine, in the light of all this
information.
– What actions are required to be taken with respect to each IP asset,
or a portfolio of such assets, to serve the relevant business goals of
the company.
Intellectual Property (IP) Audit
• An " IP Audit" has both legal and business
components.
• The legal component covers asset creation
procedures, asset quality evaluations, asset
exploitation processes, and so on.
• The business component is more subtle and is
inherent in the fact that IP pervades all aspects of
the modern technological and marketing entity.
• Despite the increasing importance of IP, IP Audits
are not a common place management activity in
business or government.
IP Audit
It is also useful to become familiar with the
competitive environment for the
corporation. The competitive environment
is one of the driving forces in the creation
and use of IP rights and it is impossible to
properly audit an IP rights program
without taking into account the
fundamental forces which motivate the
behaviors which affect the rights obtained
and how they are used.
Making/Updating the Inventory of IP Assets
• Identification of IP
• Create the Register
 Devise the format and media upon which the register will be
held, whether paper based, database and available on an
intranet.
 Monitor new work.
 Keep proper records of the new work and archive or store it
using a traceable inventory system
• Maintaining the Register
Making/Updating the Inventory of IP Assets
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To maintain currency of the register:
 Obtain statements from those involved in the creative process to state
why or how material developed on the project is original.
 Record the sources and products relied on to create the original work.
 Where third parties' work has been utilized record the documents
authorizing the use and limitations on the use right granted.
Document the copyright clearances.
 Ensure that the persons involved in the development are not subject
to a legal impediment, such as an obligation of confidentiality or
restraint of trade under a previous employment contract.
 Safeguard the secrecy of the new work; shore up employment and
independent contractors’ contracts.
 Monitor new work.
 Keep proper records of the new work and archive or store it using a
traceable inventory system
Making/Updating the Inventory of IP Assets
Properly Manage the Rights vesting in the Assets
 Prohibit if possible the ability to use inventions
prior to application for patent protection, in
circumstances other than absolute secrecy.
 Record use of the product throughout the
organization and third parties through a
licensing register.
Making/Updating the Inventory of IP Assets
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Internal Management
 Ensure renewal fees for registration patent or design rights are paid on
time.
 Implement reporting procedures to track use of the work both in-house
and by contractors and subcontractors where applicable.
 Implement reporting procedures for the passing of confidential
information (and marked as such) and filing for the non-disclosure
agreements.
 Implement procedures informing employees that the business respects
the rights of other IPR holders, and post it on the corporate intranet:
 Post notices not to copy third party code from any source unless it is
known to be in the public domain. A record should be kept of its
source if practical a copy of using a web archiver where possible,
such as Webzip (.com).
 Ensure the statutory and licensing criterion for reverse engineering
are met.
 Document each step.
Making/Updating the Inventory of IP Assets
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Manage Third Parties
 Integrate intellectual property protection:
 Apply trade marks.
 Consider the unregistered design right.
 Apply the UCC copyright symbol the the year of copyright.
 Maintain confidentiality where at all possible.
 Apply digital rights management technologies prior to external distribution.
 Apply tracking technologies to documentary confidential information and
restrict its use. Specific measures for software include:
 Seed databases with redundant entries.
 Add redundant code to source code;
 Configure the compiler to create object code with settings that minimize
the ability to decompile.
 Keep records of alleged infringements and how they were encountered.
Making/Updating the Inventory of IP Assets
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Flexible Application
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Intellectual property is applies flexibly across most assets of any intrinsic value that have been the product
of capital expenditure. and the different intellectual property regimes apply concurrently and independently
of one another. When considering a software product for instance it is quite likely that the product will be
protected by:
 the Database right.
 Traditional copyright law: source code and design documents as literary works; database
tables as a [copyright] tables and compilations; animations as artistic works and
cinematography films.
 Icons may be registrable designs, and perhaps protected by the unregistered design right.
 Patent where the software is used in an industrial process.
 Source code as trade secrets.
 Data used by the program may constitute confidential information.
 Brands, logos and other devices embedded into the source code facilitate trade mark
protection under statute and at common law using the tort of passing off.
Objectives
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An IP audit seeks to uncover unused or under-utilized assets, to identify any
threats to a company’s bottom line, and to enable business managers to
devise informed business and IP strategies that help maintain and improve
its competitive position in the relevant market(s).
Types of IP Audit: Internal Vs External
(1) General purpose IP Audit;
(2) Event driven IP audit;
(3) Limited purpose focused audits
•Before establishing a new company: It is always important for a start-up company to be
aware of intangible assets it owns or needs to protect.
•When a business is considering implementing new policies, standards, or procedures
relating to IP.
•When a business is considering implementing a new marketing approach or direction, or is
planning a major reorganization of the company.
•When a new person becomes responsible for IP management.
Event Driven IP Audit
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An “event driven” IP audit is often called IP due diligence when done on
behalf of a third party to assess, as objectively as possible, the value
and risk of all or a part of a target company’s IP assets.
IP due diligence is a small or significant part of a comprehensive due
diligence audit that is done to assess the financial, commercial and
legal risks linked to a target company’s IP portfolio, typically before it is
bought or invested in.
Before starting the IP due diligence process, a mutual non-disclosure
agreement should be signed between the potential acquirer, investor, or
creditor and the target company.
When done properly, IP due diligence provides detailed information that
may affect the price or other key elements of a proposed transaction or
even aborting the further consideration of the proposed transaction.
IP due diligence generally seeks to
• Identify and locate IP assets, and then assess the
nature and scope of the IP to allocate risks
associated with the ownership or use of the relevant
IP assets.
• Identify problems in and barriers to the transfer,
hypothecation or securitization of the IP assets under
consideration.
• Identify and apportion between the two parties the
expenses incident to the transfer of IP assets under
consideration.
IP due diligence is done in the following types of
contexts:
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An IP audit provides a basis for assessing the risk and value of relevant
IP assets in a proposed acquisition or sale of intellectual property, as
for example, prior to entering into any serious negotiations for a
possible merger or acquisition, divestiture, or entering into a joint
venture arrangement.
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It could lead to a significant increase in the value of the acquired
company or the resulting merged entity.
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It may significantly reduce the acquisition cost or lead to a cancellation
of the acquisition process if the due diligence process reveals major IP
risks or IP problems in the target company, which is proposed to be
acquired.
Financial transactions
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IP due diligence is important before entering into a financial transaction
involving IP, such as before an initial public offering or private
placement of stock, or significant stock purchase, or before taking of a
security interest in IP, as all of these have an impact on the ownership
of IP.
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Through an IP audit, a potential lender will be able to more
meaningfully assess a structured IP portfolio as part of its overall
analysis of the credit worthiness of a target company.
Buying or selling a business division
or IP transfer
• Before a company buys or sells a division or a
product line, a seller will generally make a series
of representations and warranties as to the
ownership, non-infringement and marketability of
the IP assets linked to the transaction in the
ensuing written agreement.
• Before a transfer or assignment of interest in IP, an
IP due diligence should be done separately by
both parties to ensure that the transfer or
assignment meets both their respective business
interests.
Launching a new product or service
• Before a company buys or sells a division or a product
line, a seller will generally make a series of
representations and warranties as to the ownership,
non-infringement and marketability of the IP assets
linked to the transaction in the ensuing written
agreement.
• Before a transfer or assignment of interest in IP, an IP
due diligence should be done separately by both
parties to ensure that the transfer or assignment meets
both their respective business interests.
IP licensing
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A potential licensor has to ensure, for example, that it actually owns the
IP that is sought to be licensed to others, and there are no existing
licenses that would interfere with the proposed new license.
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A potential licensee has to ensure, for example, that the potential
licensor has the necessary rights to the IP in question so as to
legitimately transfer the rights and that scope and extent of the
proposed license will duly serve its intended purpose.
Bankruptcy, Layoff, etc
• An IP audit would also be appropriate
as a planning tool in advance of any
filings for bankruptcy, significant plans
for employee layoffs, business closure,
or elimination of significant lines of
business.
Limited purpose focused audits
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Personnel turnover: Before a major personnel turnover of in-house
R&D or marketing staff, especially if it involves disgruntled
employees.
Foreign IP filings: Before a company takes up an aggressive program
of filing IP applications in other countries for entering a new market
abroad or expanding overseas through off-shoring/outsourcing.
Using the Internet for business purposes:Before having an Internet
presence, doing an IP audit helps it to identify the needs of ecommerce and registration of appropriate domain names, etc.
Significant changes in IP law and practice
Clean room procedures: The clean room procedure seeks to avoid
infringement by ensuring that there is no “access” to copyrighted
expression of unrelated parties during a software development
project. Thus, an audit might be necessary to institute, or to review
the adequacy of, clean room procedures used in the development of
software products so as to reduce the risk of infringing third party
copyright.
Preparing for litigation: When considering or facing litigation, a
company is required to show non-infringement, no access to the
work, to complete or confirm the chain of title of the underlying IP
rights or for otherwise completing the documentation of the relevant
IP rights.
Outsourcing and IP Audit
When conducted in conjunction with an outsourcing
transaction, the IP audit should identify all customer
intellectual property to be used or accessed by the
outsourcer. So, for example, if the outsourcer will have
access to customer-developed and owned software, all
intellectual property in connection with such software
should be identified. This includes software object and
source code, data used or present in connection with the
software, copyrights in the software programs,
inventions and patents in the methods performed by the
software, and trade secrets and other confidential
information embodied therein.
Outsourcing and IP Audit Contd…1
• If the outsourcer will be using or providing goods or
services to employees or clients of the customer using
intellectual property of the customer, trademarks must be
identified as part of the audit. Their use must also be
properly licensed to the outsourcer. Since trademark
activities by the outsourcer inure to the benefit of the
customer, proper controls – importantly, quality controls –
must be set forth in the outsourcing documents.
• If the outsourcer will be using or hosting any websites or
other web-related resources of the customer, such
resources should be examined and identified as part of the
IP audit.
Outsourcing and IP Audit Contd…2
In addition to the customer IP audit, it is also
important for the customer to get a clear
understanding of any outsourcer intellectual
property that will be used during the course of the
outsourcing relationship, and to learn how such
outsourcer intellectual property might impact on,
interact with or otherwise affect use of the
customer intellectual property.
Outsourcing and IP Audit Contd…3
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Consider open source software issues
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Outsourcing transactions, whether of the business process outsourcing or IT
variety, often involve software development, improvement, modification and
maintenance of customer software by service providers and third-party
developers. In an ideal situation, a prohibition against any use of open source
software is most desirable. Nevertheless, the large number (literally thousands)
of readily available open source programs, plug-ins, adapters and libraries often
lead to a programmer’s use of such software.
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While the name ‘open source’ might imply freedom of use and distribution
without consequences, restrictions and obligations are often imposed by the
software licence which accompanies the software. Such provisions generally
require source code access and licensing of the customer’s software programs,
and should give pause even to the most aggressive parties. Open source
software may be free in terms of cost, but it is not free in public domain terms.
Who will do the IP Audit
• For an audit to be effective, it is best done by a
team that includes expertise in IP, the relevant
technical areas, as well from other relevant areas
of the company as may be appropriate for
ensuring maximum effectiveness.
• An IP audit team should have a basic
understanding of the product lines, the relevant
business environment and the future plans of the
company so that the audit remains focused on IP
assets of maximum business relevance.
Preparing for an IP Audit
• Background research for preparing an audit
plan
• Internal and external relations and interactions:
• Who does the company regularly interacts, or
intends to interact, with: such as its employees,
vendors, customers, consultants, independent
contractors, joint venture partners, competitors,
etc and what role(s) do(es) IP actually play, or
would play, in these interactions?
Business strategy
• How does the company do its business?
• Does it have written policies in place concerning
key aspects of the business?
• Does it follow a certain business model?
• Does it, for example, engage in e-commerce
and, if so, how does it fit in its overall business
strategy?
Importance of IP Assets
• The overall importance of IP assets to the business
will have a bearing on the audit.
• Where IP assets are relatively unimportant to the
nature of the business as a whole, it might be
sufficient merely to confirm that registered IP
rights are in good standing and are held in the
name of the company.
• Where the company’s principal assets are IP, it may
be necessary to conduct a more thorough
assessment of the company’s IP portfolio and IP
based activities.
IP disputes
• Has the company been involved in
infringement suits, whether as plaintiffs or
defendants?
• Is the company involved in other types of
disputes or potential disputes that involve IP
rights?
Financing
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Are the IP assets of the company tied to the financing of the company?
Status of IP management
• What is the company’s overall approach to IP
management?
• Does it have an in-house intellectual property
manager or department and/or does it rely on
outside IP expertise?
• Does it have an IP policy or strategy?
• How well informed are its staff on IP matters?
Preparing an IP Audit plan
• The specific area(s) of the business to be covered
• - e.g., divisions, lines of business, affiliated or non-affiliated
agency operations
• The scope of the audit
• - e.g., only registered assets or a broader scope
• The time table for the audit
• The responsible person for each part of the audit
• The form of the final audit report to be produced
Conducting an IP Audit
• Starting with detailed check list
• Modified for:
Type and size of the company’s business
Relevant IP laws of the relevant countries
Desired purposes
Desired outcomes of the audit
• A good checklist minimizes the chances of leaving out one or more
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relevant steps from the process. Each member of the audit team
should be provided the relevant part of the detailed checklist.
To produce a comprehensive, company-wide IP audit report reflecting
the entire development and decision-making process for each of the
company’s products and processes, the audit team should collect,
review, and organize not only the IP information but also all the
agreements that may affect the IP portfolio of the company. It may also
have to do or get done relevant IP searches in all key markets.
Auditing agreements
• Licensing agreements: Review all licensing agreements to
ensure that the company is continually in compliance with the terms of
such licenses and whether they further the current and future business
plans of the company.
• Assignment agreements: Review assignments to determine
whether the company was granted an assignment from every inventor
or author of a work and whether the license was exclusive. Contact all
licensors and assignors to determine whether any security interests or
liens have been granted in the IP assets.
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Employment and independent Contractor agreements:
Employment and independent Contractor
agreements:
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Provisions governing the transfer of the IP rights from employees or
contractors to the company
Terms and conditions under which an independent contractor is
allowed to use any copyrighted materials or rely on trademark
association with the business
The scope of the assignment itself
Provisions regarding a waiver of moral rights in all copyright works
Clauses setting restrictions on the disclosure or use of confidential
information during or after the completion or termination of the
employment/contract
Provisions defining the employees’ continuous obligation to assist
in the protection of the IP rights
The extent, scope and enforceability of non-compete and nonsolicitation provisions
Joint Venture & Collaboration Agreements
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Who owns the IP assets pre-dating or created through the joint
venture or collaboration
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Define a system for identifying protectable intellectual property
resulting from the cooperation
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Identify who pays for any application for registration of IP rights
and any subsequent defense of the IP rights
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Determine the scope of IP contributed to the joint venture
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Determine which IP rights can be used by whom when the joint
venture or collaboration ends.
Grants
• Often government procurement
contracts and government or
foundation funded R&D agreements
provide for ownership of IP rights in
favor of the government or a
government agency, and must
therefore all such contracts should be
closely reviewed for such limitations.
Other Agreements
• Technology transfer, or know how, or technical
assistance agreements
• Design and development agreements
• Settlement agreements
• Franchise agreements
• Royalty agreements
• Marketing agreements
• Distribution/Distributorship agreements
Other Agreements Contd....
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Sales representative agreements
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Consulting or management agreements
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Outsourcing agreements
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Maintenance and repair agreements
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Material transfer agreements
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Programming agreements
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Source code escrow agreements (in connection with software), any
documentation relating to "clean room" development of software,
database licenses listings of computer software used by the
company, including all versions and source and object code, flow
charts, and other software development documents.
Within each of these agreements, close
attention should be paid to:
• IP provisions
• Representations and warranties
• Quality control, where applicable
• Restrictions on use, marketing, geographic area, etc
• Marking, advertising requirements
• Provisions surviving expiration/termination
• Duty to assign, to maintain trade secrets, non-compete
• Encumbrances in security agreements, financing
statements,
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title retention agreements, other documents creating a lien,
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security interest or similar interest
Auditing IP assets
• Identifying and recording of IP assets.
• Determine ownership and legal status of the IP
assets.
• Detecting infringement
• Taking necessary steps for creating and
maintaining IP assets
Determine ownership and legal status of the IP
assets
• It will include assets created by the company
itself, others that are acquired or used with or
without the express license of third parties.
• It will enable the company to see where, if any,
ownership problems exist, why they exist and
what should be done to prevent or solve such
ownership issues.
• It will also reveal whether adequate systems are in
place to protect these assets or, alternatively,
whether and what internal obstacles exist to their
protection, and whether and how these may be
overcome.
Ownership
The nature of the company’s ownership interests and whether the nature
of the interest is in doubt.
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Sole or joint ownership; exclusive or non-exclusive license
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Royalty or other costs associated with the license
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Limitations on use; restrictions on assignment
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Estimated legal duration and period of technological usefulness of the
asset
IP owned or licensed-in by a company may be subject to third-party
claims. (for example, claims of trade secret misappropriation for ideas or
concepts used in development of a software, claims for copyright
infringement of libraries or other modules that may be used in the
software, claims of patent infringement)
Restrictions on the use of the asset
• Product or agency-related
restrictions
• - Territorial restrictions
• - Assignment or Transfer
restrictions
• - Time restrictions
• - Non-compete clauses
Relevance to business
• The relevance of the asset to the core
business of the company (whether the
asset is a critical asset or an ancillary
asset) and any connection with other
key non-IP assets of the company, such
as key staff members
Encumbrances
Whether the asset has
been pledged, or in any
other way legally
encumbered
Infringement
• The potential for a third
party claim of infringement
or damages due to the
company’s use of the
asset
Detecting infringement of IP rights
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Review company’s policies with respect to the enforcement of its IP
rights as well as its own systems for respecting the legal rights of
others.
If the assets are owned by the company then an audit may provide
information as to whether they are infringed by others.
The IP audit may provide information as to assets that the company
thinks it owns but in reality it does not and could give rise to problems
of third party infringement.
Taking necessary steps for creating and
maintaining IP assets
• An IP audit will reveal where there have been
lapses in the administrative, legal and
regulatory procedures necessary for creating
and maintaining IP assets.
• An IP audit will provide the necessary impetus
to take care of such requirements by creating
or improving the relevant in-house policies,
procedures and management practices.
Using the results of an IP Audit:
IP Analysis
• Evaluate and analyze whether IP assets are serving the
strategic objectives of the company and if not what should
be done to change that
• One technique that would help at this stage is to divide the
results of the IP inventory into three groups:
• Group 1 :Techniques, innovations, and ideas that are
essential to your products and services, and to the
markets your company has decided to serve
• Group 2 : Intellectual assets of real potential but not to
your company
• Group 3 :‘Assets’ that seem, on balance, to have no great
value to your company or to anyone else
Evaluating IP Assets
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Properly valuing the benefits that may accrue from any IP asset
requires an assessment of:
Speed with which a particular market values and devalues that
type of asset
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The cost of developing alternative IP assets to fulfill the same or
comparable market needs
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Royalties being paid for similar assets
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Market recognition of the asset
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The cost of developing such recognition if it is deficient
Overall Review of IP Assets and IP Policy
• IP audit will provide the management of the company
with the basic information as to whether its IP assets
are being used to attain the company’s strategic
objectives.
• Management has to check if its business objectives,
business model and its IP management policies are in
alignment with each other.
• This can be identified by evaluating the relevance and
tangible benefits obtained by using or leveraging IP
assets that a company owns or has access to.
Preventing or being prepared for litigation
• A carefully conducted audit may result in a
determination that the company’s use of its IP violates
the rights of a third party.
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It is better to learn of this and have brought it to the
attention of upper management than be sued without
warning.
• Advance warning of infringement allows the company
to cease infringing activities, obtain a license or at the
least, evaluate its liabilities and defenses.
Business strategy formulation
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At this stage of an IP audit the management matches its newly
established inventory of IP assets to its strategic business
objectives.
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The objectives include:
The types of products or services on which the company intends to
focus its resources
•
The markets it intends to serve
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The return on investment it requires in order to satisfy its owners or
shareholders
•
The results of the IP audit may add a new dimension to strategy
discussions and may lead to new business strategies for the
domestic or export markets.
From IP audit to IP asset management
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Formation of IP asset management team IP Asset management
team is charged with managing the knowledge portfolio and overseen
by a senior executive. The team is composed of managers from various
disciplines who collectively understand the firm’s intellectual assets and
have had a hand in developing them.
Creating IP culture For creating an IP culture, provide proper training
on IP best practices to all the staff. Through IP audit, Review all training
programs, to verify if they include anything or enough on IP asset
management.
IP policy monitoring Continuously review and monitor the existence
and adequacy of IP asset management policies, procedures and
practices within a company. And verify that they are effectively
communicated to all the employee.
Dynamic IP asset managers have used IP audits of
company IP assets to build corporate value
in many different ways. Some of the more popular
approaches are discussed below:
• Building value in IP asset creation.
• Building value of existing IP assets.
• Reducing costs of third-party IP claims.
• Building value from product markets using IP assets.
• Creating non-core revenue streams.
• Creating additional revenue through core business licensing.
• Building value in corporate transactions.
Dynamic IP asset managers have used IP audits of
company IP assets to build corporate value
in many different ways. Some of the more popular
approaches are discussed below: Contd..
• Reducing costs of unused IP assets.
• Receiving tax deductions for IP asset donations.
• Reducing new product development costs (product clearance).
• Evaluating the IP assets of an acquisition or investment target
(due diligence).
• Assessing business direction and strength.
• Discovering unclaimed business opportunities.
• Discovering business expansion opportunities.