1. WIPO Asia Sub-Regional on the Use of IP by SME Support Institutions for the Promotion of Competitiveness of SMEs in the Food Processing Sector Lahore, Pakistan, June 5 and 6, Guriqbal Singh Jaiya Director SMEs Division, WIPO

2. Intellectual Property Audits
What is an IP audit
Why do an IP audit
When should an IP audit be done
Who should do an IP audit
How should an IP audit be done
After an IP audit

3. 1. Intellectual Property Rights
Innovative products/processes
Cultural, artistic and literary works
Creative designs
Distinctive signs
Microchips
Goods of a given quality due to its geographical origin
Confidential business information
Patents or utility models
Copyright and related designs
Industrial design rights
Trademark, Collective mark
Layout-designs or topographies of integrated circuits.
Geographical indications
Trade secrets

4. Knowledge Economy intangible Assets 20% tangible Assets 20%

6. 2. What is IP Audit?
In the knowledge economy intangibles have taken center stage
Like tangible assets IP has to be identified, protected and maintained to
maximize their value and
minimize the potential for third party abuse
prevent inadvertent loss
ensure freedom to operate
IP audit is a review involving the identification of the IP owned, used or acquired by a business, its management, maintenance, exploitation and enforcement

7. 3. Why do an IP audit Enables a company to identify its IP assets
Make decisions with respect to those assets;
whether rights have been or should be acquired for them,
whether they are or should be maintained,
how best they could be exploited,
are there any redundancies,
threats to those rights, infringements of others rights etc..
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.
Identify, organize, and review existing IP portfolio
Quantify the value of IP assets
Resolve current issues in IP management practices
Establish procedures to ensure protection of assets in the future
Better guarding of trade secrets
Docketing system for payment of fees and renewal filings
Assignments of IP in employment and consulting agreements
Better marking of products
Add value the company

8. 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.

9. 4. When to do an IP audit General purpose IP Audit;
Event driven IP audit;
Limited purpose focused audits

10. General Purpose IP Audit
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

11. Event Driven IP Audit
An “event driven” IP audit is often called IP due diligence when done to assess the value and risk of a target company’s IP assets.
IP due diligence is a 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.
It can provide 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.
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.
It could lead to a significant increase in the value of the acquired company or the resulting merged entity.
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.

12. Event driven IP Audit
Before entering into a financial transaction involving IP
Buying or selling a division, product line
Licensing
Bankruptcy
IP disputes
Outsourcing

13. Limited purpose focused audits
Personnel turnover
Before a major personnel turnover of in-house R&D or marketing staff, especially if they are 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.
Before having an Internet presence
helps it to identify the needs of e-commerce 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.

14. 5. Who should perform an IP Audit?
Company personnel (in-house counsel, management)
Outside counsel who have experience with such audits in the particular industry, in IP management issues

15. 6. How to do an IP Audit? Define an audit plan
Define a schedule for the audit
Define responsibilities among the audit team
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?

16. An Audit Plan
Prepare a check list modified for the type and size of the company’s business, IP laws, purpose and desired outcome of the audit
Include a list of the documents to be reviewed
license agreements, distribution agreements, government contracts, employee and consultant agreements, journal articles, published papers, competitive analysis documents, marketing files, patents, lab notebooks, assignments…
The specific areas of the business to be covered
Define the personnel to be interviewed
Attorneys, Brand managers/marketing, those responsible for websites, R & D Personnel (employment agreements and policies), Graphic designers
Prepare questionnaire
A good checklist minimizes the chances of leaving out one or more 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

17. Auditing agreements Licensing agreements: Assignment agreements:.
Employment and independent Contractor agreements
Joint venture agreements:
Government contracts
Technology transfer, or know how, or technical assistance agreements
Design and development agreements
Settlement agreements
Franchise agreements
Royalty agreements
Marketing agreements
Distribution/Distributorship 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.
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
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 non-solicitation provisions
Who owns the IP assets pre-dating or created through the joint venture or collaboration
Define a system for identifying protectable intellectual property resulting from the cooperation
Identify who pays for any application for registration of IP rights and any subsequent defense of the IP rights
Determine the scope of IP contributed to the joint venture
Determine which IP rights can be used by whom when the joint venture or collaboration ends.
Within each agreement close attention should be paid to:
Duty to assign, to maintain trade secrets, non-compete
Encumbrances in security agreements, financing statements,
title retention agreements, other documents creating a lien,
security interest or similar interest

18. Intellectual Property Rights
Innovative products/processes
Cultural, artistic and literary works
Creative designs
Distinctive signs
Microchips
Goods of a given quality due to its geographical origin
Confidential business information
Patents or utility models
Copyright and related designs
Industrial design rights
Trademark, Collective mark
Layout-designs
Geographical indications
Trade secrets

19. 7. After an IP audit Catalog of IP assets
Have rights been acquired, if not should they be (cost benefit analysis), if they have been acquired are they been properly maintained
Ownership issues; does the company own these assets? Are there infringement issues (license/design around)? has title not been properly assigned by employees/consultants
Strategic issues; are these assets being properly managed and exploited within the strategic objectives of the company. Are there restrictions to their use
Report on patentable technologies currently not protected, Copyright, trademark registration applications to be filed, Affidavits of continued use of trademarks, Maintenance fees to keep patents in force

20. Strategic issues
After an IP audit, the management matches its newly established inventory of IP assets to its strategic business objectives.
A possible technique is to divide:
Techniques, innovations, and ideas that are essential to your products and services, and to the markets your company has decided to serve
Intellectual assets of real potential but not to your company
Assets’ that seem, on balance, to have no great value to your company or to anyone else

21. Business strategy formulation
How would the assets that have been identified as essential to the business of the company be better utilized in marketing its goods and services in the relevant markets
How would the assets with potential be used
What would one do with the other `assets’
The results of the IP audit may add a new dimension to its strategy discussions and may lead to new business strategies

22. From IP audit to IP asset management
The audit team could evolve into a permanent IP asset management team overseen by a senior executive and charged with managing the knowledge portfolio. The team could be composed of managers from various disciplines who understand the firm’s intellectual assets.

23. Create an IP culture – Respect for IP
Create an IP culture – Respect for IP. Training on IP best practices for all staff. Training programs to include content on IP asset management.
Review 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 employees.

24. Building value through IP management
IP asset creation.
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.
Reducing costs of unused IP assets.
Receiving tax deductions for IP asset donations.

25. Reducing new product development costs
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

27. Consequences of not managing IP assets
Failing to protect assets
Infringing others assets
duplication of efforts to redevelop existing needs
loss of potential benefits (revenue, reputation, industry development) from failing to commercialize
low moral and stifle innovation