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By: Harley Blosser and Donald Hageman, Sandberg Phoenix

Intellectual property is brain power behind many of today’s successful businesses, ranging from start-ups to well established enterprises, and it is hardly limited only to technology companies these days. Although not every type of intellectual property will be important to every business, there is no question that some type of intellectual property is important to almost every business. That’s why, increasingly, a business’s counsel should recognize the importance of IP audits as essential tools for their intellectual property management. They can be critical, e.g., to spotting risks and opportunities, and for showing the true value of their business. That is why if you are looking to maximize your businesses ongoing health and growth potential, IP audits may be one of the more important tools in your tool box.

What is an IP Audit exactly?

Intellectual property can include everything ranging from patents, trademarks, trade secrets, copyrights, and design patents. Licenses and other contracts related to such IP can also be critical aspects of IP.

An IP audit is a systematic review of the intellectual properties owned, used, or acquired by your business so as to assess and manage risk, remedy problems, and implement best practices in IP asset management. IP audits can be indispensable tools for successfully managing knowledge‐driven businesses (or knowledge-based assets of any business) by aiding the process of creating, double-checking or revising its IP strategy.

A comprehensive IP audit looks at not just your business’s IP assets, but also your IP-related polices, agreements, procedures, and even your competitors IP. A minor, but important, example of what they can help uncover are chain of title issues (similar to a real estate title examination), as IP is “property” to be owned like any other property. Another example is taking a harder look at what your patent portfolio and trade secret program may truly cover. If you are blessed with only a few “skinny” patents in terms of scope, you likely need to take that into account from a commercial, forward-looking perspective. And if you are thinking in terms of buying, selling or merging a “business asset” or commercial line of product(s), you definitely need to kick the tires first with an IP audit to understand your negotiating position.

Why are IP Audits crucial for ANY size of business?

IP audits help companies in a variety of ways:

Identifying all the businesses IP assets
Preserving and enhancing the value of any already existing IP the business may have or should develop
Helping identify and maximally preserve any existing or new profit potential from your IP
Helping identify roadblocks, avoid costly (even sometimes ruinous) disputes, or potential infringement concerns

All these can lead to improved business health for your company!

What does the typical IP audit Procedure look like?

Generally, the IP auditor will attempt to find out as much as they can about your company, including your business plan and any features that are important and distinctive in comparison to your competition. This information is gathered in a variety of ways and differs from business to business, but can involve reviews of products, site visits, reviews of license agreements, manuals and marketing material, competitor analysis, or searches of electronic databases such as patent and trademark registries. Unregistered rights can also be highly important and should be investigated using an IP audit. These can include trade secret protection programs, unregistered trademark rights, including domain names, trade names and branding, and unregistered design rights.

As with any important undertaking, to have an IP audit performed you should look to a reputable intellectual property attorney in your area.

When should a business look to have an IP audit performed?

The answer to this would be ANYTIME! A general-purpose IP audit helps start-ups and recognized companies document, discover, and further protect their IP, in addition to identifying new potential risks and opportunities.

Companies and start-ups should additionally look to have an IP audit performed if they are needing to:

Assess the impact and potential value of licensing or obtaining IP
Identify risks of adopting a new product claims and warranties or a new trademark
Assess a third party’s infringement claims and the possible risks
Demonstrate company value in preparation for a joint venture, merger, or sale of the business
Display a company’s value to provide or obtain financing or investment capital
Assess the impact on IP rights and value when a key partner or employee is departing from the company

Like a medical physical for an individual, a thorough audit of your IP assets and processes, and further, a comparison with any competitors, should help you to decide whether you have any gaps in protection to close and are making the best possible use of your existing IP assets. An IP Audit can identify strengths and weaknesses to maximize business opportunities and mitigate risks and help you to decide whether your current IP assets strategy is satisfactory with your overall business strategy.

Also, analogous to addressing one’s medical issues, don’t delay in reaching out for an IP professional to provide you with a comprehensive IP audit. Conditions “caught early” are much more likely to be successfully addressed. Your small investment in preventative medicine could reap large rewards in successfully maintaining the long-term health of your company’s IP and your overall business health and growth.