An intellectual property audit enables organisations to know what intellectual property or IP assets they own. We actually prefer the term intangible assets to the term IP assets. Intangible assets include both legal intangibles (typical IP) and competitive intangibles (such as knowledge and know-how). The tangible assets (like buildings, vehicles, or stock) that an organisation owns are usually known and therefore well managed. But the intangibles are often neglected and often an organisation does not know what it owns. It sounds crazy I know, but it is true. In today’s knowledge economy where many organisations have far more intangible assets than tangible assets and the intangible assets are often much more valuable then the tangible assets, this is a big problem.
If you don’t know it exists you cannot exploit it to create value for shareholders
There are many reasons why an organisation might not know about all of their intangible assets. It could be that the organisation has acquired a new business recently – the due diligence that should have taken place before acquiring it may not have been conducted adequately. Sometimes the intangible assets exist only within the head of a key individual and the knowledge or know-how has not yet been documented.
So, what should an organisation be doing? Conducting an IP audit (or intangible asset audit) is the best method to find out what intangible assets are owned and to document them. Find out how we can help you with your IP Audit.
An intellectual property audit (or intangible asset audit) can be described as a systematic review of the intellectual property (or intangible assets) owned, used, or acquired by an organisation.
The Benefits of doing an Intellectual Property Audit
- Create value for stakeholders – both through the identifying of new IP and facilitating the effective exploitation of both old and new IP. Increase revenue and gain a competitive advantage over competitors.
- Manage IP – an organisation can determine how best to manage its IP.
- Protect your IP – through knowing your IP you can decide whether to protect or share it. It will also increase your chances of successfully taking action against infringement.
- Enable strategy development – implement an effective IP strategy.
- Increase the value of the organisation – significantly increase the value of your organisation by knowing what IP assets it owns. Investors value an organisation on the basis of the expectation of future profits – future profits are often to a considerable extent based on the effective exploitation of IP assets.
- Save money – an organisation might be able to save money by not maintaining obsolete IP assets. Knowing what IP assets exist may assist an organisation not to infringe the IP rights of other parties.
- Reduce new product development costs – if the IP already exists, it does not need to be recreated.
- Effectively acquire new IP assets – if an organisation knows what IP assets it currently has, it will not acquire new duplicate and therefore unnecessary IP assets. For example, if an organisation does not know about custom software that may have been developed by an employee, it might go and licence third-party proprietary software unnecessarily. It may also acquire IP assets that conflict rather than compliment with current IP assets.
- Increased borrowing power – a well managed IP portfolio may, in certain circumstances, be used as collateral that will improve creditworthiness and increase the borrowing power of the organisation.
- Raise additional capital – possibly through a listing on a stock exchange.
An IP audit answers the question “where are we?” to help answer the question “where we want to be?”.
The purpose of doing an intellectual property audit
- Identify the IP assets – identified both old and new IP that exists in the organisation and determine whether the IP rights are registered or not.
- Uncover underutilised assets – there are usually many IP assets that are not used to their full potential.
- Evaluate the assets – determine whether they are important or not.
- Establish ownership – establish whether the organisation or a third party owns the IP assets. For example, it could be the employee rather than the organisation that actually owns the copyright in a work. Identify any conditions that apply to the use of IP – for example licensing arrangements.
- Record the IP assets – Create detailed records of the IP assets (in the form of an IP asset register) and a report setting out the findings of the IP audit. These documents should be meaningful and easy to refer to.
- Educate staff regards IP – by conducting an IP audit the awareness relating to IP will be increased and the need for further education might be identified.
Find out how to conduct an intellectual property audit.