IP audits: a wise investment in business strategy

By Monika Rani Gadgala, Clairvolex Knowledge Processes
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An intellectual property audit – which is simply a detailed and expert assessment of a company’s IP assets – is a useful tool to align the strategies and goals of the organization with its existing IP assets. The overall business environment is always changing, and it is important for the R&D department to stay informed as to the current value of the company’s IP.

Monika Rani Gadgala Engineer Clairvolex Knowledge Processes
Monika Rani Gadgala
Engineer
Clairvolex Knowledge Processes

Apart from various kinds of IP, a company may also hold information pertaining to existing and potential customers, distribution networks, marketing strategy, manufacturing practices and R&D capabilities. This information is potentially very valuable, but also a source of vulnerability if mishandled. Assessing the status and commercial importance of such a diverse and extensive range of assets and information is therefore an important task; while being painstaking and tedious.

Given the difficulties and potential risks and rewards involved in the management of IP, an IP audit undertaken by a team of experts has many benefits: a) it can provide an immediate picture of the company’s assets; b) it can enable the development of an ongoing IP monitoring system; c) it can enable the formulation of appropriate procedures and guidelines to protect and enhance the commercial value of the IP assets; and d) it can identify improvements that can be made to the company’s IP strategy.

Who does the audit and how?

Engaging a well-credentialled outsourcing vendor to conduct an IP audit is a practical way to achieve these benefits.

An IP audit involves a systematic review and inventory of the IP assets owned, used or acquired by a company, with the goal of developing a coherent business strategy. This can involve specialist knowledge of the technical areas involved in the particular IP. For this reason, it is important that the audit is carried out by an appropriate mix of IP and technology experts, using well-established techniques and processes to provide a clear picture of the current portfolio and identifying the potential for improving its management.

IP audits typically consists of a series of steps: a) forming an in-house IP rights (IPR) department; b) assessing and valuing the current IP stock; c) assessing, consolidating and valuing existing IP-related information; d) performing a “gap analysis” to identify the divergence between the existing management of IP and IP-related data and the goal envisioned for each business process; e) strategy formulation; f) establishing IP-handling procedures and appropriate related in-house educational materials; g) devising a review system for trade secrets and business intelligence information; h) developing procedures for reviewing marketing information related to IP assets; i) forming secure record-keeping procedures and schedules; j) enforcing confidentiality agreements among the technical and management personnel; k) establishing internal administration dealing with third parties; l) educating and involving inventors in the IP audit process, if required; and m) liaising with outside counsel.

An outsourcing vendor normally conducts a “full spectrum” audit of a company’s IP, mining deep into existing assets and carrying out a basic analysis and valuation of both current and potential IP. The findings are then summarized in the gap analysis report.

A thorough gap analysis is central to the audit process. It enables the IP review team to correctly identify the company’s IP management issues, and to recommend and implement measures to adequately secure and exploit the same. These measures can include the adoption of particular IP policies, the leveraging of underused corporate assets and the development of strategies to maintain and strengthen intangible assets.

The later stages of the IP audit are then carried out in phases, according to the recommendations made on the basis of the gap analysis.

Even after the commercialization options identified through the IP audit process are exercised, the IP audit continues to provide guidance as to how best to maximize the value of the company’s IP assets. The auditing exercise may also be followed up with ongoing consultation between the in-house IPR department and the outsourcing vendor’s audit team, when required – a supportive relationship that helps ensure continuous improvement and enhanced output. This arrangement can help meet the company’s goals of minimizing infringement risks and achieving maximum possible protection for its IP assets.

Clearly, an IP audit can be a valuable tool for strategy formulation. For example, it can promote good decision making as to what IP to commercialize immediately, and what to keep dormant until a favourable opportunity arises. An IP audit can also be used to avoid IP infringement, minimize the risk of forfeiture of rights, clarify ownership issues and educate employees on the importance and value of the IP created within the organization. It enhances the likelihood of obtaining the desired results, promptly and without the expense of prolonged legal proceedings.

Monika Rani Gadgala is a patent engineer and leads the engineering team of the patent and analytics department at Clairvolex Knowledge Processes, a Delhi-based legal outsourcing firm.

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