Intellectual property (IP) audits help companies identify and organize their intellectual assets.

There are several reasons for conducting an intellectual property audit. Some are planned, and others are needed to understand organizational intellectual property risks. IP audits can reveal opportunities to save money, create new revenues, increase efficiencies and improve competitiveness.

There is a misconception that a company must be larger and have a portfolio of IP assets before it is time for an audit. However, smaller companies and startups can benefit from a serious and planned approach to ensure that they are following intellectual property best practices.

Even if your company has no formal intellectual property policies or procedures, it may benefit from an intellectual property risk assessment or audit.

With today’s complex IP landscape, it is time to identify and efficiently use your organization’s intellectual assets.

What Is Intellectual Property?

The main types of intellectual property are patents, copyrights and trademarks:

• Patent laws protect inventions that demonstrate technological progress.
• Copyright laws protect various literary and artistic works, including musical compositions, dances, photographs, motion pictures, radio and television programs, sound recordings, paintings, sculptures, poetry, plays, and architectural work.
• Trademark laws protect words and symbols that identify different goods and services brands in the marketplace.

Intellectual property includes specific fields of law, such as trade secrets and the right of publicity. Trade secrets law protects confidential information that belongs to a business and gives that business a competitive advantage. For example, the formula for making certain soft drinks can be a trade secret protected by IP laws. The right of publicity law protects the right to use one’s name or likeness for commercial purposes. For example, a famous athlete may profit by using their name to endorse a product.

What Are Some of the Potential Intellectual Property Risks?

As more patents are issued, companies must know the potential risks associated with intellectual property:

• Availability risk: When it is necessary for a company to make information available, it is also necessary for this information to be protected against potential misuse.
• Compliance risk: Due to the number of legal issues about intellectual property rights, it is important to be aware of their legal implications.
• Brand risk: A company’s brand is part of its intellectual property and can be one of its most significant assets. It is important to protect the company’s image and its brand.
• Access risk: Access risk is a risk that access to information (data or programs) will be inappropriately granted or refused. Access risk also ensures the protection of trade secrets.
• Business value: There is essential business value in intellectual property. Adding specific intellectual property processes can ensure that this value is updated regularly.

What Is an Intellectual Property Audit?

Because of the potential value and risk associated with intellectual property, it is essential to know what intellectual property your business owns and if protections have been put in place.

An intellectual property audit is a way to assess the IP assets of your business, including patents, copyrights and trademarks. This audit should include the following:

• Identifying the intellectual property assets held by the business
• Assessing the current intellectual property policies and procedures to protect your intellectual property
• Understanding the intellectual property processes in place within your business to protect assets you may acquire in the future
• Assessing the current intellectual property held vs. the needs of the business
• Conducting an intellectual property risk assessment

This audit will identify risks to the business and recommend how these risks can be mitigated and/or eliminated. The audit will also enable you to properly recognize opportunities to fund projects or tools to mitigate risk. No matter the size of your business, all relevant stakeholders must be engaged in this effort and be held responsible for this audit’s completeness and correctness. Likewise, these same stakeholders will be responsible for acting on the findings to be sure they are resolved.

Communicating effectively is critical to ensuring that all parts of your business are aligned to avoid future problems.

Steps You Should Take Before an Audit

Knowing you need to identify all IP assets within your company, the main exercise you will need to take to prepare for an IP audit is gathering information and conducting research:

• Create an audit plan and review it with all stakeholders. Make sure everyone agrees on the scope and timeline.
• Gather any intellectual property policies, registers and strategies that may be relevant.
• Obtain any agreements that may have an intellectual property component, like employment and nondisclosure agreements and supplier contracts.
• Determine the employees creating IP assets and those managing IP assets.
• List the individuals to be interviewed. Make sure this is limited to only key employees.
• List IP assets your business owns and any related documentation, including trademarks, copyrights, patents and domain names.
• List intellectual property not yet registered.
• If you are in a dispute with another company or individual over intellectual property, include this in your review and any mitigation underway.

Lastly, prepare a comprehensive audit checklist and questionnaire. This checklist will be based on the information you have found, the employees involved and business needs. The checklist must include a section to add remediation plans, due dates and owners who are to be held accountable.

Reporting Audit Results and Ongoing Review

While some companies may engage an IP specialist outside the organization to conduct the audit, you can choose someone from inside your organization. Ensure that this individual is empowered to review all materials, ask questions and draft all results impartially.

The report should include things like:

• Audit steps, which describe the item under review
• Management/control procedures, which describe any manual or systematic management process
• Issues, which are items of note that might be a risk
• Risks, which include specific risks to the business
• Recommendations, which include recommended risk remediation
• Management action plans, which include specific steps to follow the recommended remediation (Include the owner and due date.)

These can be repeated as often as needed to address all audited items.

Reviews should occur regularly to follow up on any remediation plans. It is best to run the ongoing review like a project where all stakeholders can attend regular meetings.

Our goal at KnowledgeLeader is to make your job easier. That includes preparing for and conducting an intellectual property network audit. Intellectual property is a broad and often complicated area to study and to help you, we have various articles on intellectual property.

When you are ready to conduct your audit, consider our Intellectual Property Network Audit Work Program template. This valuable reference will be useful in documenting the audit report.