PREPARING FOR AN IP AUDIT :
1. Clarity About the Purpose
Before the actual conduct of an IP audit, it is a necessary pre-condition that it is clearly understood by all concerned why the audit is being conducted.
(i) The situations that prompt an audit and the nature and scope of the audit will to some extent depend on why it is being conducted.
(ii) In addition, the amount of time and money available for conducting an audit will have a bearing on the manner in which the audit is conducted and its eventual outcome.
2. Background Research for Preparing an Audit Plan
Once the purpose of the audit and the available resources for its performance are clear, a major preparatory step for conducting the audit is to understand the company, what it does and where it wants to go. It is an essential pre-condition for preparing an audit plan, which will be the basis of the audit.
(i) What is done in a background research?
(a) Gathering as much information as possible on the company and its way of doing business.
(b) Background research will be the basis of the audit and will provide the auditor(s) with the required background information for preparing a plan for conducting an audit that is comprehensive, focused, timely, and cost effective.
(ii) Major issues in a background research
(a) Internal and external relations and interactions:
How does the company regularly interact or intend to interact with: such as its employees, vendors, customers, consultants, independent contractors, joint venture partners, competitors, etc., and what role(s) actually IP assets play or would play in these interactions?
(b) 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 with its overall business strategy?
(iii) Importance of IP Assets
The overall importance of IP assets to the business will have following bearing on the audit:-
(a) 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.
(b) On the other hand, 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.
(iv) Status of IP management
(a) What is the company’s overall approach to IP management?
(b) Does it have an in-house intellectual property manager or department and/or does it rely on outside IP expertise?
(c) Does it have an IP policy or strategy?
(d) How well informed are its staffs on IP matters?
(v) IP disputes
(a) Has the company been involved in infringement suits, whether as plaintiffs or defendants?
(b) Is the company involved in disputes or potential disputes that involve IP rights?
(vi) Financing
Are the IP assets of the company tied to the financing of the company?
3. Preparing an IP Audit Plan
Having done the necessary background research, the next step is to prepare the audit plan.
(i) This will set out the purpose, the scope, how long it is expected to take, the budget, and who will be responsible for which area of the audit plan.
(ii) Generally, it will deal with the following:
(a) The specific area(s) of the business to be covered e.g., divisions, lines of business, affiliated or non-affiliated agency operations;
(b) The scope of the audit e.g., only registered assets or a broader scope;
(c) The time table for the audit;
(d) The responsible person for each part of the audit;
(e) The form of the final audit report to be produced.