An Overview of How an Intellectual Property Audit WorksThe first step in performing an intellectual property audit is to develop a plan for the audit. An audit committee (usually consisting of an intellectual property attorney, a representative from management, marketing, and technology or research and development) defines the areas of inquiry and establishes the time schedule which the audit will follow. They outline the responsibilities of each member of the audit team. They then define the preliminary documents for review and decide which members of the organization — present and past — to interview.
The attorney develops an intellectual property database which contains, at a minimum, “...owner of the intellectual property asset, class of asset, the inventors or authors, when the asset was created or acquired, the asset's status (e.g., pending or issued patent, registered copyright, trademarks, domain names), on-going maintenance issues (e.g., payment of maintenance fees for patents, collection or payment of licensing fees), and the expiration or renewal date of the asset.” This database enables the organization to determine exactly what its intellectual property assets are and also to determine the status of each asset.
After the database has been developed, the attorney and the audit committee within the organization analyze the intellectual property and determine what action to take as to each piece of intellectual property. The committee and the attorney also identify mechanisms that the organization should use to identify and protect each new piece of intellectual property that the organization develops or otherwise acquires.
The audit team then documents the audit results and presents them to the organization, with recommendations as to where, if at all, intellectual property protection is inappropriately thin and where, if at all, protection can be reduced.
Benefits of an Intellectual Property AuditAn intellectual property audit benefits intellectual property buyers, owners and investors.
Intellectual Property OwnersIntellectual property owners benefit from an intellectual property audit when they depend on that property as a component of the organization’s value (the greater the dependency, the greater the value of the intellectual property audit), when they license the property out, when there is a question that may involve litigation over the property, when they sell their stock or corporate assets, or when they engage in commerce involving the property.
Intellectual Property BuyersIf an intellectual property buyer is acquiring the stock or assets of a company, she should insist that an intellectual property audit be performed to determine the scope and level of protection in place and needed to make the investment worthwhile. This buyer should look at any licensing or distribution rights that are already in place in the company, and those that the company may be contemplating putting in place. The buyer is interested in determining what protections are available for the property, whether the property is adequately protected against any potential third-party claims to ownership (such as if it was developed by consultants, whether the consultant has properly assigned the property to the organization), whether the property is security guaranteeing a debt, whether needed federal and state registrations are in place and properly maintained, and, if any part was licensed or purchased from third parties, what rights to the third-party intellectual property the organization has purchased.
An intellectual property buyer may also be interested in simply acquiring rights to the intellectual property itself, without acquiring any part of the stock or assets of the organization that developed it.This buyer should look at what licenses exist already, whether trade secrets are available to increase the value of the property, whether any third party has any rights in the intellectual property that comprises any part of the property of interest, and, if so, what rights does the organization own, whether the property is in any way related to a government-sponsored activity.
Intellectual Property InvestorsAn intellectual property investor should demand an intellectual property audit when they consider funding a start-up company or financing an existing business. Often, the intellectual property is the sole asset of a start-up company, and it often forms a major part of the value of an existing company. Due diligence requires that the investor ensure that the property is fully protected. Investors also would find the information gleaned through an audit to be useful in a debtor/creditor situation where the investor accepts an intangible asset as security on a loan.
Conclusion
The intellectual property audit is a necessary and important management tool in today’s knowledge economy. Indeed, it is the only way to assess the true value of an organization, and it is the only way for an organization to maintain and grow its intangible assets. Gone are the days when the corporation was valued at the price of its real and personal property. Today, managers and investors need to have a good understanding of the intangible side of the business as well as the tangible side. The intellectual property audit is the way for them to get a grip on reality.
This article was originally written for The Germeshausen Center Newsletter and published in the Winter 2003 edition. It was later expanded into its present form and appeared in Les Nouvelles, Vol. 38 No. 4 (December 2003) at page 193. That article has been updated for this presentation.
Copyright 2003, 2007, Nancy Baum Delain. All rights reserved.
Nancy Baum Delain, a registered patent attorney, is the managing member of Delain Law Office, PLLC, an intellectual property and business law firm located in Clifton Park, NY. Nancy's expertise lies in patent, trademark and copyright prosecution, contract, licensing, and general business matters. She answers her own phone. Find out more at http://www.ipattorneyfirm.com
Article Source: http://EzineArticles.com/?expert=Nancy_Delain
Thursday, July 12, 2007
Five Key Questions About IP Help Increase Market Value and Improve Bottom Line Results
Intellectual assets are critical to business success in today's global market.
If you are a CEO, CFO, GC or other business leader, asking questions about these assets will help you to bring added value to your company.
Failure to consider these issues yields adverse business consequences, including unrealized value, unnecessary expense and legal risk.
Routine attention to intellectual asset management can avoid these consequences, yet many businesses miss this opportunity simply for lack of knowledge and attention.
Intellectual Assets
What are intellectual assets? Essentially these encompass all of the intangible assets of an enterprise.
From the business point of view, we're talking about brands, logos, packaging, corporate identity, ideas, business methods, marketing information, published content, secrets and inventions.
From the legal point of view, they are trademarks, copyrights, trade secrets and patents.
Five Key Questions
1. Maximize IP Assets.
"Have you established a clear claim to your IP rights through registration?"
Brands, packaging, ideas, inventions and content have greater value toinvestors and purchasers if they are secured by registrations.Companies with strong portfolios of registered rights are worth more. For example, the S&P 500 traded at a market-to-book ratio of 4.7 in 2003. At that rate, tangible assets amount to less than 24% of market value, with intangible assets such as brand and goodwill accounting for more than 75% of market value. This fact presents an significant opportunity for companies with low valuations to create market value.
2. Domain Name Registrations.
"Do you have domain names properly registered to avoid inadvertent expiration or improper transfer by former employees or ISPs?"
In our practice, we routinely deal with companies that have lost domain names because they failed to maintain registrations in their own names or lacked a sound system for managing renewals. It can happen to anyone, large and small, as illustrated by Microsoft's well-publicized loss of the domain name hotmail.co.uk. The cost of prevention is small, while the expense of recovering lost domain names can be high.
3. Content Protection.
"Is the content of your website, manuals, publications and other materials adequately protected?"
Copyright registration and notice is not a prerequisite to protection, but early registration is required to benefit fully from the remedies provided under copyright law. The failure to register copyrights before infringement occurs results in the loss of the right to recover statutory damages and attorneys fees. Many small clients find that enforcement is an unrealistic expense without the benefit of those remedies, yet registration of copyrights is simple and inexpensive.
4. Enforcement.
"Have you allowed third parties to steal or erode your intellectual assets?"
The failure to take action against infringers results in loss of revenue and rights. Haphazard enforcement efforts can be expensive and ineffective. Companies that practice effective intellectual asset management will work with counsel to create a strategic enforcement plan that reduces overall legal expense while maximizing IP rights and avoiding the loss of rights through inaction.
5. Insurance coverage.
"Do you have insurance coverage for IP claims against the company?"
Many companies have coverage for IP claims and don't realize. Many companies do not, and should. Coverage is often hidden away in an "advertising injury" clause. Courts have often read these clauses more broadly than they appear on their face. As a result, coverage can easily be overlooked. When a prominent New York law firm famously failed to advise its client about coverage and tender a timely claim, defense coverage was later denied, costing the company millions in legal fees.
Added Value
Asking questions about intellectual capital issues can increase company value and avoid risk. Effective management of these rights is the key to success in the information age.
Author, speaker and attorney Mark V.B. Partridge is an internationally recognized expert in intellectual property with over 25 years of experience helping major corporations, entrepreneurs and creative professionals protect their IP rights. As a professional speaker, he offers seminars, workshops and keynotes to help business leaders use IP to turn intellectual capital into incredible value. His book, "Guiding Rights: Trademarks, Copyright and the Internet" is available at Amazon.com and other online bookstores. For more information, visit http://www.GuidingRights.com
Article Source: http://EzineArticles.com/?expert=Mark_Partridge
If you are a CEO, CFO, GC or other business leader, asking questions about these assets will help you to bring added value to your company.
Failure to consider these issues yields adverse business consequences, including unrealized value, unnecessary expense and legal risk.
Routine attention to intellectual asset management can avoid these consequences, yet many businesses miss this opportunity simply for lack of knowledge and attention.
Intellectual Assets
What are intellectual assets? Essentially these encompass all of the intangible assets of an enterprise.
From the business point of view, we're talking about brands, logos, packaging, corporate identity, ideas, business methods, marketing information, published content, secrets and inventions.
From the legal point of view, they are trademarks, copyrights, trade secrets and patents.
Five Key Questions
1. Maximize IP Assets.
"Have you established a clear claim to your IP rights through registration?"
Brands, packaging, ideas, inventions and content have greater value toinvestors and purchasers if they are secured by registrations.Companies with strong portfolios of registered rights are worth more. For example, the S&P 500 traded at a market-to-book ratio of 4.7 in 2003. At that rate, tangible assets amount to less than 24% of market value, with intangible assets such as brand and goodwill accounting for more than 75% of market value. This fact presents an significant opportunity for companies with low valuations to create market value.
2. Domain Name Registrations.
"Do you have domain names properly registered to avoid inadvertent expiration or improper transfer by former employees or ISPs?"
In our practice, we routinely deal with companies that have lost domain names because they failed to maintain registrations in their own names or lacked a sound system for managing renewals. It can happen to anyone, large and small, as illustrated by Microsoft's well-publicized loss of the domain name hotmail.co.uk. The cost of prevention is small, while the expense of recovering lost domain names can be high.
3. Content Protection.
"Is the content of your website, manuals, publications and other materials adequately protected?"
Copyright registration and notice is not a prerequisite to protection, but early registration is required to benefit fully from the remedies provided under copyright law. The failure to register copyrights before infringement occurs results in the loss of the right to recover statutory damages and attorneys fees. Many small clients find that enforcement is an unrealistic expense without the benefit of those remedies, yet registration of copyrights is simple and inexpensive.
4. Enforcement.
"Have you allowed third parties to steal or erode your intellectual assets?"
The failure to take action against infringers results in loss of revenue and rights. Haphazard enforcement efforts can be expensive and ineffective. Companies that practice effective intellectual asset management will work with counsel to create a strategic enforcement plan that reduces overall legal expense while maximizing IP rights and avoiding the loss of rights through inaction.
5. Insurance coverage.
"Do you have insurance coverage for IP claims against the company?"
Many companies have coverage for IP claims and don't realize. Many companies do not, and should. Coverage is often hidden away in an "advertising injury" clause. Courts have often read these clauses more broadly than they appear on their face. As a result, coverage can easily be overlooked. When a prominent New York law firm famously failed to advise its client about coverage and tender a timely claim, defense coverage was later denied, costing the company millions in legal fees.
Added Value
Asking questions about intellectual capital issues can increase company value and avoid risk. Effective management of these rights is the key to success in the information age.
Author, speaker and attorney Mark V.B. Partridge is an internationally recognized expert in intellectual property with over 25 years of experience helping major corporations, entrepreneurs and creative professionals protect their IP rights. As a professional speaker, he offers seminars, workshops and keynotes to help business leaders use IP to turn intellectual capital into incredible value. His book, "Guiding Rights: Trademarks, Copyright and the Internet" is available at Amazon.com and other online bookstores. For more information, visit http://www.GuidingRights.com
Article Source: http://EzineArticles.com/?expert=Mark_Partridge
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