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					             IP Audit
"We're in an object-oriented,
outsourced, and open-sourced
world, and organizations are
anxious to take steps to ensure that
the software they build and sell is
created within a responsible policy
framework for use and protection of
intellectual property."
 Mark Tolliver , CEO, PALAMIDA
                       IP Audit
• The due diligence process associated with mergers &
  acquisitions, joint ventures, portfolio assessments, spin-
  offs, strategic alliances, and OEM procurements are now
  including an increased level of sophistication regarding
  intellectual property.
• Identifying the origins and value of intellectual property
  and assuring compliance with obligations relating to
  licensed assets has become a due diligence checklist item.
• With source code becoming increasingly available - for
  free - diligence teams today increasingly need to
  understand the pedigree of target software intellectual
  property.
    Key Questions?

Where did the code originate?
What license obligations come
 with its use and distribution?
What is proprietary and what is
 open source?
How can I get an accurate
 assessment within the short
 deadlines of this transaction?
              IP Audit

• “Audit” is often viewed as a dirty
  word.
• But it doesn’t have to be,
  especially when it means ensuring
  your IT infrastructure is efficient,
  cost-effective and compliant.
                      IP Audit
• Not always are the infringement risks simply in the
  form of damages to copyright holders or from liability
  to customers for breach of warranty.
• For publicly traded companies, there are perhaps even
  larger consequences from negative customer
  perception and financial market effects. For instance,
  the day after SCO filed suit against AutoZone for
  copyright infringement, shares of AutoZone dropped 5
  percent on four times the prior day volume. Ignoring
  the merits of the SCO complaint, this alone
  represented an approximate $300 million loss of
  market capitalization for AutoZone.
• http://www.itmanagersjournal.com/feature/6025
                 Software Audit
• Most companies don’t normally set out to infringe IP
  laws, unlawful software usage could spin out of control
  without proper management policies and procedures in
  place.
• This is why it is imperative that companies perform
  regular software audits on all personal computers within
  their organizations. Software asset management should
  be a standard element of any organization's asset
  tracking process and is especially necessary considering
  the Internet has made it easier for software to be easily
  accessed and downloaded.
                  Software Audit
• Software audits are not only about protecting a company
  from paying penalties for IP infringement, they also
  provide companies with additional information to help
  them better manage software costs and employee
  productivity.
• Software audits make it easier to spot out of date licenses
  and standardize all computers to have the most recent
  versions.
• They also make it easier for companies to consider
  purchasing volume-licensing programs and
  simultaneously lower costs and improve employee
  productivity if they discover a new type of software that
  has become more popular throughout their organization.
                 Software Audit
• A key feature of the IP Amplifier is CodeRank,
  Palamida's patent-pending heuristic analysis technology.
• Like Google's PageRank algorithms, CodeRank
  prioritizes code match results, reduces irrelevant
  matches, and minimizes time-consuming "false-
  positives."
• False positives occur, for example, when commonly used
  coding idioms are inappropriately flagged. CodeRank
  operates on C, C++, and Java source code files.
• For the person performing the code audit, CodeRank
  allows quick assessment of code potentially derived from
  third-party software, controlling the match query depth
  -- from highly conservative to less stringent assessment.
                 Software Audit
• A key feature of the IP Amplifier is CodeRank,
  Palamida's patent-pending heuristic analysis technology.
• Like Google's PageRank algorithms, CodeRank
  prioritizes code match results, reduces irrelevant
  matches, and minimizes time-consuming "false-
  positives."
• False positives occur, for example, when commonly used
  coding idioms are inappropriately flagged. CodeRank
  operates on C, C++, and Java source code files.
• For the person performing the code audit, CodeRank
  allows quick assessment of code potentially derived from
  third-party software, controlling the match query depth
  -- from highly conservative to less stringent assessment.
                  What is IP Audit?
• Black Duck's protexIPTM software compliance management
  system can improve the diligence of due diligence and reduce
  risks for both buyers and sellers of intellectual property.
• It employs advanced digital Code Print technology and an
  online KnowledgeBase of thousands of open source projects
  and their associated licenses to quickly and accurately
  identify matching open source code within target software.
• It then evaluates associated software licenses and determines
  conflicts and constraints on the code's use. The protexIP
  system can also be extended to track proprietary and licensed
  commercial software.
• With protexIP you can get in-depth, accurate information
  fast - within the hectic due diligence timelines - and without
  major disruptions to target development teams.
  http://www.carahsoft.com/resources/BlackDuck/ProtexIP.pdf
              What is IP Audit?
• An IP audit is not just a tool for a company to
  understand what intellectual property it owns or holds.
  Fundamentally, an IP audit is an inventory of
  information relevant to the creation, maintenance and
  use of IP rights
• It is also a powerful strategic tool for managing and
  maximizing return on its intellectual property
  investment.
• Like its financial counterpart, a good IP audit gathers
  information useful in understanding what is happening
  in the underlying business and market.
              What is IP Audit?
• An IP audit is not just a tool for a company to
  understand what intellectual property it owns or holds.
  Fundamentally, an IP audit is an inventory of
  information relevant to the creation, maintenance and
  use of IP rights
• It is also a powerful strategic tool for managing and
  maximizing return on its intellectual property
  investment.
• Like its financial counterpart, a good IP audit gathers
  information useful in understanding what is happening
  in the underlying business and market.
                      What is IP Audit?
•   IP audit is a systematic review of the IP owned, used or acquired by a
    business so as to assess and manage risk, remedy problems and
    implement best practices in IP asset management.
•    It involves undertaking a comprehensive review of a company‟s IP
    assets, related agreements, relevant policies and compliance
    procedures.
•   An IP audit helps a business to make an inventory of its IP assets or update it and
    analyze:
      – How the IP assets are being used or not used.
      – Whether the IP assets used by it are owned by the company or by
          others.
      – Whether these IP assets are infringing the rights of others or others
          are infringing on these rights, and determine, in the light of all this
          information.
      – What actions are required to be taken with respect to each IP asset,
          or a portfolio of such assets, to serve the relevant business goals of
          the company.
  Intellectual Property (IP) Audit
• An " IP Audit" has both legal and business
  components.
• The legal component covers asset creation
  procedures, asset quality evaluations, asset
  exploitation processes, and so on.
• The business component is more subtle and is
  inherent in the fact that IP pervades all aspects of
  the modern technological and marketing entity.
• Despite the increasing importance of IP, IP Audits
  are not a common place management activity in
  business or government.
                IP Audit
It is also useful to become familiar with the
competitive environment for the
corporation. The competitive environment
is one of the driving forces in the creation
and use of IP rights and it is impossible to
properly audit an IP rights program
without taking into account the
fundamental forces which motivate the
behaviors which affect the rights obtained
and how they are used.
    Making/Updating the Inventory of IP Assets



• Identification of IP
• Create the Register
         Devise the format and media upon which the register will be
          held, whether paper based, database and available on an
          intranet.
         Monitor new work.
         Keep proper records of the new work and archive or store it
          using a traceable inventory system

• Maintaining the Register
             Making/Updating the Inventory of IP Assets
•   To maintain currency of the register:
               Obtain statements from those involved in the creative process to state
                why or how material developed on the project is original.
               Record the sources and products relied on to create the original work.
               Where third parties' work has been utilized record the documents
                authorizing the use and limitations on the use right granted.
                Document the copyright clearances.
               Ensure that the persons involved in the development are not subject
                to a legal impediment, such as an obligation of confidentiality or
                restraint of trade under a previous employment contract.
               Safeguard the secrecy of the new work; shore up employment and
                independent contractors’ contracts.
               Monitor new work.
               Keep proper records of the new work and archive or store it using a
                traceable inventory system
      Making/Updating the Inventory of IP Assets


  Properly Manage the Rights vesting in the Assets
 Prohibit if possible the ability to use inventions
  prior to application for patent protection, in
  circumstances other than absolute secrecy.
 Record use of the product throughout the
  organization and third parties through a
  licensing register.
           Making/Updating the Inventory of IP Assets
•   Internal Management
              Ensure renewal fees for registration patent or design rights are paid on
               time.
              Implement reporting procedures to track use of the work both in-house
               and by contractors and subcontractors where applicable.
              Implement reporting procedures for the passing of confidential
               information (and marked as such) and filing for the non-disclosure
               agreements.
              Implement procedures informing employees that the business respects
               the rights of other IPR holders, and post it on the corporate intranet:
                   Post notices not to copy third party code from any source unless it is
                    known to be in the public domain. A record should be kept of its
                    source if practical a copy of using a web archiver where possible,
                    such as Webzip (.com).
                   Ensure the statutory and licensing criterion for reverse engineering
                    are met.
                   Document each step.
            Making/Updating the Inventory of IP Assets


•   Manage Third Parties
               Integrate intellectual property protection:
                    Apply trade marks.
                    Consider the unregistered design right.
                    Apply the UCC copyright symbol the the year of copyright.
                    Maintain confidentiality where at all possible.
               Apply digital rights management technologies prior to external distribution.
               Apply tracking technologies to documentary confidential information and
                restrict its use. Specific measures for software include:
                    Seed databases with redundant entries.
                    Add redundant code to source code;
                    Configure the compiler to create object code with settings that minimize
                     the ability to decompile.
               Keep records of alleged infringements and how they were encountered.
             Making/Updating the Inventory of IP Assets

•   Flexible Application
•   Intellectual property is applies flexibly across most assets of any intrinsic value that have been the product
    of capital expenditure. and the different intellectual property regimes apply concurrently and independently
    of one another. When considering a software product for instance it is quite likely that the product will be
    protected by:
                   the Database right.
                   Traditional copyright law: source code and design documents as literary works; database
                    tables as a [copyright] tables and compilations; animations as artistic works and
                    cinematography films.
                   Icons may be registrable designs, and perhaps protected by the unregistered design right.
                   Patent where the software is used in an industrial process.
                   Source code as trade secrets.
                   Data used by the program may constitute confidential information.
                   Brands, logos and other devices embedded into the source code facilitate trade mark
                    protection under statute and at common law using the tort of passing off.
                              Objectives
•   An IP audit seeks to uncover unused or under-utilized assets, to identify any
    threats to a company’s bottom line, and to enable business managers to
    devise informed business and IP strategies that help maintain and improve
    its competitive position in the relevant market(s).
•   Types of IP Audit: Internal Vs External
•   (1) General purpose IP Audit;
•   (2) Event driven IP audit;
•   (3) Limited purpose focused audits

•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.
             Event Driven IP Audit
•   An “event driven” IP audit is often called IP due diligence when done on
    behalf of a third party to assess, as objectively as possible, the value
    and risk of all or a part of a target company’s IP assets.
•   IP due diligence is a small or significant 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.
•   Before starting the IP due diligence process, a mutual non-disclosure
    agreement should be signed between the potential acquirer, investor,
    or creditor and the target company.
•   When done properly, IP due diligence provides 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.
IP due diligence generally seeks to

• Identify and locate IP assets, and then assess the
   nature and scope of the IP to allocate risks
   associated with the ownership or use of the relevant
   IP assets.
• Identify problems in and barriers to the transfer,
   hypothecation or securitization of the IP assets under
   consideration.
  • Identify and apportion between the two parties the
    expenses incident to the transfer of IP assets under
                       consideration.
IP due diligence is done in the following types of
                    contexts:

•   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.
                 Financial transactions

•   IP due diligence is important before entering into a financial transaction
    involving IP, such as before an initial public offering or private
    placement of stock, or significant stock purchase, or before taking of a
    security interest in IP, as all of these have an impact on the ownership
    of IP.

•   Through an IP audit, a potential lender will be able to more
    meaningfully assess a structured IP portfolio as part of its overall
    analysis of the credit worthiness of a target company.
      Buying or selling a business division
                 or IP transfer

• Before a company buys or sells a division or a
  product line, a seller will generally make a series
  of representations and warranties as to the
  ownership, non-infringement and marketability of
  the IP assets linked to the transaction in the
  ensuing written agreement.

• Before a transfer or assignment of interest in IP,
  an IP due diligence should be done separately by
  both parties to ensure that the transfer or
  assignment meets both their respective business
  interests.
     Launching a new product or service

• Before a company buys or sells a division or a product
  line, a seller will generally make a series of
  representations and warranties as to the ownership,
  non-infringement and marketability of the IP assets
  linked to the transaction in the ensuing written
  agreement.

• Before a transfer or assignment of interest in IP, an IP
  due diligence should be done separately by both
  parties to ensure that the transfer or assignment meets
  both their respective business interests.
                           IP licensing

•   A potential licensor has to ensure, for example, that it actually owns the
    IP that is sought to be licensed to others, and there are no existing
    licenses that would interfere with the proposed new license.

•   A potential licensee has to ensure, for example, that the potential
    licensor has the necessary rights to the IP in question so as to
    legitimately transfer the rights and that scope and extent of the
    proposed license will duly serve its intended purpose.
       Bankruptcy, Layoff, etc
• An IP audit would also be appropriate
  as a planning tool in advance of any
  filings for bankruptcy, significant plans
  for employee layoffs, business closure,
  or elimination of significant lines of
  business.
              Limited purpose focused audits

•   Personnel turnover: Before a major personnel turnover of in-house
    R&D or marketing staff, especially if it involves 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.
•   Using the Internet for business purposes:Before having an Internet
    presence, doing an IP audit 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.
•   Preparing for litigation: When considering or facing litigation, a
    company is required to show non-infringement, no access to the
    work, to complete or confirm the chain of title of the underlying IP
    rights or for otherwise completing the documentation of the relevant
    IP rights.
        Outsourcing and IP Audit

When conducted in conjunction with an outsourcing
transaction, the IP audit should identify all customer
intellectual property to be used or accessed by the
outsourcer. So, for example, if the outsourcer will have
access to customer-developed and owned software, all
intellectual property in connection with such software
should be identified. This includes software object and
source code, data used or present in connection with the
software, copyrights in the software programs,
inventions and patents in the methods performed by the
software, and trade secrets and other confidential
information embodied therein.
   Outsourcing and IP Audit Contd…1

• If the outsourcer will be using or providing goods or
  services to employees or clients of the customer using
  intellectual property of the customer, trademarks must be
  identified as part of the audit. Their use must also be
  properly licensed to the outsourcer. Since trademark
  activities by the outsourcer inure to the benefit of the
  customer, proper controls – importantly, quality controls
  – must be set forth in the outsourcing documents.
• If the outsourcer will be using or hosting any websites or
  other web-related resources of the customer, such
  resources should be examined and identified as part of the
  IP audit.
Outsourcing and IP Audit Contd…2

In addition to the customer IP audit, it is also
important for the customer to get a clear
understanding of any outsourcer intellectual
property that will be used during the course of the
outsourcing relationship, and to learn how such
outsourcer intellectual property might impact on,
interact with or otherwise affect use of the
customer intellectual property.
    Outsourcing and IP Audit Contd…3

•   Consider open source software issues
•   Outsourcing transactions, whether of the business process outsourcing or IT
    variety, often involve software development, improvement, modification and
    maintenance of customer software by service providers and third-party
    developers. In an ideal situation, a prohibition against any use of open source
    software is most desirable. Nevertheless, the large number (literally thousands)
    of readily available open source programs, plug-ins, adapters and libraries often
    lead to a programmer’s use of such software.
•   While the name ‘open source’ might imply freedom of use and distribution
    without consequences, restrictions and obligations are often imposed by the
    software licence which accompanies the software. Such provisions generally
    require source code access and licensing of the customer’s software programs,
    and should give pause even to the most aggressive parties. Open source
    software may be free in terms of cost, but it is not free in public domain terms.
       Who will do the IP Audit
• For an audit to be effective, it is best done by a
  team that includes expertise in IP, the relevant
  technical areas, as well from other relevant areas
  of the company as may be appropriate for
  ensuring maximum effectiveness.

• An IP audit team should have a basic
  understanding of the product lines, the relevant
  business environment and the future plans of the
  company so that the audit remains focused on IP
  assets of maximum business relevance.
        Preparing for an IP Audit

• 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?
               Business strategy

• How does the company do its business?

• Does it have written policies in place concerning
  key aspects of the business?

• Does it follow a certain business model?

• Does it, for example, engage in e-commerce
  and, if so, how does it fit in its overall business
  strategy?
          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.
                  IP disputes

• Has the company been involved in
  infringement suits, whether as plaintiffs or
  defendants?

• Is the company involved in other types of
  disputes or potential disputes that involve IP
  rights?
                           Financing

•   Are the IP assets of the company tied to the financing of the company?
         Status of IP management

• What is the company‟s overall approach to IP
  management?

• Does it have an in-house intellectual property
  manager or department and/or does it rely on
  outside IP expertise?

• Does it have an IP policy or strategy?

• How well informed are its staff on IP matters?
            Preparing an IP Audit plan

• The specific area(s) of the business to be covered
• - e.g., divisions, lines of business, affiliated or non-affiliated
  agency operations

• The scope of the audit
• - e.g., only registered assets or a broader scope

• The time table for the audit

• The responsible person for each part of the audit

• The form of the final audit report to be produced
                Conducting an IP Audit
• Starting with detailed check list
• Modified for:
Type and size of the company‟s business
Relevant IP laws of the relevant countries
Desired purposes
Desired outcomes of the audit
• 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 relevant IP searches in all key markets.
                   Auditing agreements

• Licensing 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.

• Assignment agreements: 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.
•   Employment and independent Contractor agreements:
     Employment and independent Contractor
                 agreements:

•   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
     Joint Venture & Collaboration Agreements

•   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.
               Grants
• Often government procurement
  contracts and government or
  foundation funded R&D agreements
  provide for ownership of IP rights in
  favor of the government or a
  government agency, and must
  therefore all such contracts should be
  closely reviewed for such limitations.
          Other Agreements
• Technology transfer, or know how, or technical
  assistance agreements
• Design and development agreements

• Settlement agreements

• Franchise agreements

• Royalty agreements

• Marketing agreements

• Distribution/Distributorship agreements
      Other Agreements Contd....
•   Sales representative agreements
•   Consulting or management agreements

•   Outsourcing agreements

•   Maintenance and repair agreements

•   Material transfer agreements

•   Programming agreements

•   Source code escrow agreements (in connection with software), any
    documentation relating to "clean room" development of software,
    database licenses listings of computer software used by the
    company, including all versions and source and object code, flow
    charts, and other software development documents.
      Within each of these agreements, close
            attention should be paid to:

• IP provisions
• Representations and warranties
• Quality control, where applicable
• Restrictions on use, marketing, geographic area, etc
• Marking, advertising requirements
• Provisions surviving expiration/termination
• 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
               Auditing IP assets

• Identifying and recording of IP assets.

• Determine ownership and legal status of the IP
  assets.

• Detecting infringement

• Taking necessary steps for creating and
  maintaining IP assets
Determine ownership and legal status of the IP
                  assets
• 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.
                          Ownership
    The nature of the company’s ownership interests and whether the nature
    of the interest is in doubt.

•   Sole or joint ownership; exclusive or non-exclusive license
•   Royalty or other costs associated with the license
•   Limitations on use; restrictions on assignment
•   Estimated legal duration and period of technological usefulness of the
    asset
    IP owned or licensed-in by a company may be subject to third-party
    claims. (for example, claims of trade secret misappropriation for ideas or
    concepts used in development of a software, claims for copyright
    infringement of libraries or other modules that may be used in the
    software, claims of patent infringement)
Restrictions on the use of the asset

• Product or agency-related
  restrictions
• - Territorial restrictions
• - Assignment or Transfer
  restrictions
• - Time restrictions
• - Non-compete clauses
           Relevance to business


• The relevance of the asset to the core
  business of the company (whether the
  asset is a critical asset or an ancillary
  asset) and any connection with other
  key non-IP assets of the company, such
  as key staff members
       Encumbrances

Whether the asset has
 been pledged, or in any
 other way legally
 encumbered
          Infringement


• The potential for a third
  party claim of infringement
  or damages due to the
  company’s use of the
  asset
            Detecting infringement of IP rights


•   Review company’s policies with respect to the enforcement of its IP
    rights as well as its own systems for respecting the legal rights of
    others.
•   If the assets are owned by the company then an audit may provide
    information as to whether they are infringed by others.

•   The IP audit may provide information as to assets that the company
    thinks it owns but in reality it does not and could give rise to problems
    of third party infringement.
    Taking necessary steps for creating and
             maintaining IP assets

• An IP audit will reveal where there have been
  lapses in the administrative, legal and
  regulatory procedures necessary for creating
  and maintaining IP assets.

• An IP audit will provide the necessary impetus
  to take care of such requirements by creating
  or improving the relevant in-house policies,
  procedures and management practices.
       Using the results of an IP Audit:
                  IP Analysis
• Evaluate and analyze whether IP assets are serving the
  strategic objectives of the company and if not what should
  be done to change that
• One technique that would help at this stage is to divide the
  results of the IP inventory into three groups:
• Group 1 :Techniques, innovations, and ideas that are
  essential to your products and services, and to the
  markets your company has decided to serve
• Group 2 : Intellectual assets of real potential but not to
  your company
• Group 3 :„Assets‟ that seem, on balance, to have no great
  value to your company or to anyone else
                  Evaluating IP Assets

•   Properly valuing the benefits that may accrue from any IP asset
    requires an assessment of:
•   Speed with which a particular market values and devalues that
    type of asset

•   The cost of developing alternative IP assets to fulfill the same or
    comparable market needs

•   Royalties being paid for similar assets

•   Market recognition of the asset

•   The cost of developing such recognition if it is deficient
      Overall Review of IP Assets and IP Policy

• IP audit will provide the management of the company
  with the basic information as to whether its IP assets
  are being used to attain the company‟s strategic
  objectives.

• Management has to check if its business objectives,
  business model and its IP management policies are in
  alignment with each other.

• This can be identified by evaluating the relevance and
  tangible benefits obtained by using or leveraging IP
  assets that a company owns or has access to.
    Preventing or being prepared for litigation


• A carefully conducted audit may result in a
  determination that the company‟s use of its IP violates
  the rights of a third party.

•   It is better to learn of this and have brought it to the
    attention of upper management than be sued without
    warning.

• Advance warning of infringement allows the company
  to cease infringing activities, obtain a license or at the
  least, evaluate its liabilities and defenses.
         Business strategy formulation
•   At this stage of an IP audit the management matches its newly
    established inventory of IP assets to its strategic business
    objectives.

•   The objectives include:
•   The types of products or services on which the company intends to
    focus its resources

•   The markets it intends to serve

•   The return on investment it requires in order to satisfy its owners or
    shareholders

•   The results of the IP audit may add a new dimension to strategy
    discussions and may lead to new business strategies for the
    domestic or export markets.
    From IP audit to IP asset management

•   Formation of IP asset management team IP Asset management
    team is charged with managing the knowledge portfolio and overseen
    by a senior executive. The team is composed of managers from various
    disciplines who collectively understand the firm’s intellectual assets and
    have had a hand in developing them.
•   Creating IP culture For creating an IP culture, provide proper training
    on IP best practices to all the staff. Through IP audit, Review all training
    programs, to verify if they include anything or enough on IP asset
    management.

•   IP policy monitoring Continuously review and monitor 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 employee.
 Dynamic IP asset managers have used IP audits of
 company IP assets to build corporate value
 in many different ways. Some of the more popular
 approaches are discussed below:


• Building value in IP asset creation.

• Building value of existing IP assets.

• 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.

• Building value in corporate transactions.
Dynamic IP asset managers have used IP audits of
company IP assets to build corporate value
in many different ways. Some of the more popular
approaches are discussed below: Contd..

• Reducing costs of unused IP assets.

• Receiving tax deductions for IP asset donations.

• Reducing new product development costs (product clearance).

• 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.

				
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