TYPES OF IP AUDIT :

Generally, there are three types of IP audits: General purpose IP audit, Event driven IP audit and Limited purpose focused IP audit.

(1) General purpose IP Audit

(a) A general or broad IP audit is done in the following types of contexts:

− 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.

(b) Once a comprehensive IP audit has been undertaken, a smaller effort and expense is needed at regular intervals, such as on an annual basis, so that IP assets are reviewed and appropriate decisions taken, depending on the current and emerging needs of a company.

(2) Event driven IP Audit

Event driven IP Audit is generally much narrower in scope than a broad or general purpose IP audit. Further, the nature and scope of such an audit is determined by the event in question, and the time and resources available for doing it. Event driven IP audit is often called “IP due diligence” when done 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 discussed later in the lesson.

(3) Limited Purpose Focused Audits

(a) A limited purpose audit is typically much narrower in scope than the other two types and is performed under much constrained time schedules. These audits tend to be situational in nature. They are typically used to justify a certain legal position or the valuation of a particular IP.

(b) A limited purpose focused audit is done in the following types of contexts:

(i) Personnel turnover:

Before a major personnel turnover of in-house research and develop mentor marketing, especially if it involves disgruntled employees, an IP audit should be done to secure the status of a company’s IP assets.

(ii) Foreign IP filings:

Before a company takes up an aggressive program of filing IP applications in other countries, that is, before entering a new market abroad (by way of, say, exporting, or expanding overseas through offshoring/ outsourcing some of its activities, or by licensing, franchising or merchandising) an IP audit helps to sensitize the company to market specific IP laws, rules, customs and practices affecting IP rights.

(iii) 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.

(iv) Significant changes in IP law and practice:

Where there is a significant change or development in IP case law or statutory law in a relevant market it may necessitate review of existing products for possible infringement of the IP rights of others.

(v) Clean room procedures:

The clean room procedure seeks to avoid infringement by ensuring that there is no “access” to copyrighted material of unrelated parties during 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.

(iv) Preparing for litigation:

When considering or facing litigation, a company is required to show non-infringement and no access to the work, complete or confirm the chain of title of the underlying IP rights or otherwise complete the documentation of the relevant IP rights.