No one can deny that intellectual property is a valuable asset. However, businesses consistently tend to underestimate the value of their intellectual property (IP) and often have an unclear view of the content of their IP portfolio.
An IP audit is an efficient and effective way of helping businesses improve the management of, and more accurately value, their IP rights.
Below we have listed some key issues to keep in mind when auditing a company's IP portfolio. These comments apply mainly to "classic" intellectual assets. However, other valuable intangible assets (such as know-how, brands and goodwill) should not be overlooked.
Securing ownership of IP rights
Employees or external consultants hired by a company are often responsible for developing creations (e.g. patented inventions, copyrighted works or registered designs). Consequently, the company should first ensure that it is the actual owner of all rights pertaining to or arising from such creations.
Clear contractual provisions are the safest way of ensuring the transfer of title, if necessary, and avoiding lengthy and costly discussions.
In the absence of such clauses, statutory provisions will apply. For instance, copyright is, as a general rule, vested in the creator of the work, i.e. the employee or external consultant. However, title to software developed by an employee is, in principle, granted to the employer.
One striking exception is the Patent Act, which does not contain any provisions on the ownership of inventions developed by employees or external consultants. Due to this dearth of statutory provisions, the courts have developed rather complex and uncertain case law, assigning ownership rights on the basis of whether the invention was totally or partially developed using the company's resources.
Timely registration and payment of maintenance or renewal fees
Intellectual property is protected on a “first come, first served” basis. It is thus important for businesses to register their intellectual assets in a timely manner, when applicable (e.g. patents, trade marks and designs).
If an IP right is subject to registration, it will also be necessary to pay a regular maintenance fee (e.g. for patents) or renewal fee (e.g. for trade marks and designs). It is indeed essential to keep the applicable deadlines in mind and make the required payments on time in order to avoid forfeiting these valuable rights.
Notification of assignment/licences to the competent IP offices
It is common practice for business to use assigned or licensed patents, trade marks or designs. However, an assignment or licence of such a right will only be enforceable against third parties if it has been notified to the intellectual property office of the place where the right is registered. This is very important, for example, as only registered licenses are effective against the assignee of a trade mark or patent.
Valuation of IP rights
Various methods can be used to value intellectual assets. For instance, a valuation is often made on the basis of the hypothetical royalty the business would have to pay if it did not own the asset. Alternatively, the value of an intellectual asset can be assessed by comparing the profits of the business that owns the asset with those of similar businesses that do not own such an asset. A similar method is used to value brands, i.e. comparing the profit generated by a branded product compared to those generated by unbranded equivalents, if available of course.