Do You Need An IP Audit?

IP audit is an important tool for understanding and valuing your IP assets

Last year we discussed the fact that intellectual property (IP) weaves through many aspects of your business and is an asset that is valuable and worth protecting.

It is not uncommon for businesses to overlook that their IP assets need to be audited, like regular stock taking.

Why do you need to audit your IP?

• To capture, in a time and cost-effective way, the accurate identification of IP assets and scope;
• To identify any gaps in your scope of IP assets and their protection;
• To create/update necessary records to reconcile discrepancies and prove ownership of IP.

When should you undertake an IP due diligence exercise?

It is worth keeping in mind that in the event of a potential sale of part or all of your business, any prospective buyer will undertake a due diligence process, which will include a detailed look at your IP. If you are contemplating any sale of business in the near future, it may be worth going a step beyond an IP audit to actually prepare an IP due diligence report based on your IP audit results.

An IP due diligence report acts as an instant sanity check of the value attributed to the IP assets. Depending on the nature of your business, this could be significant, e.g. if the core business is proprietary software, there could be multiple IP rights attached – copyright, trade marks and perhaps patents.

Why should your IP audit start with your trade marks?

Trade marks, often referred to as the “Crown Jewels”, are usually the most visible of all IP assets. Their healthy function is essential to your business and worthy of vigilant, regular monitoring and special attention. Why is this?

A trade mark is the badge of origin and quality, used in relation to your specific goods or services, in the course of your trade. This badge acts as a shortcut reference to the unique features of your product or service – without the wrapper – and acts to differentiate your product or service from your competitors. When you think of well-known trade marks for the same product type , such as CADBURY, LINDT and HERSHEY’S, an immediate image of each product with its unique texture, quality and taste is conjured in your mind.

This is the magical power of a trade mark.  However a trade mark is also vulnerable:

• It can be forfeited by failure to use or license correctly;
• It can be challenged by a competitor for being misleadingly similar to their trade mark;
• It can be infringed by a competitor wanting to leverage on the goodwill generated by your trade mark;
• It can be used by someone overseas;
• It can be exposed depending on the licences put in place for tax purposes – who owns what and the revenue and capital flows need reconciling;
• It can lapse if you fail to renew its registration.

It is therefore critical to audit your trade marks regularly and maintain a good register of trade marks.

I hope the above is useful to you. Should you need any further information, please do not hesitate to contact me at (0428) 328 452, or email me at [email protected].