Ideas are just as valuable as the physical assets of the company, sometimes even so. If it’s a brand name, product design, patented invention, or proprietary software, these intangible assets are the backbone of businesses, which help to distinguish them from the rest. Therefore, it is important for companies as well as individuals to check whether intellectual property (IP) is properly protected, documented, or even fully identified – if it is not. An IP Audit helps to review all your intellectual property, checks how it is protected, what is being used, and what is potentially at risk of being stolen or used illegally. Whether you are an individual, company, firm, startup, or an established SME, understanding your IP and rights associated with it is crucial.
What is an IP Audit?
An IP audit is the review of your company’s Intellectual Property Assets, such as patents, trademarks, copyrights, designs, trade secrets, and other related agreements, to identify, assess, and manage legal rights and risks associated with them. It helps to:
- Identify what IP you own
- Check how it is protected
- Find gaps or risks
- Make better use of your IP
Importance of IP Audit
- It helps to identify the intellectual property of your business.
- It helps to avoid legal risks and disputes associated with your intellectual property that may compel competitors to claim rights over your brand name, design, or patent.
- An IP audit improves the commercial value of your brand by making sure your trademarks, patents, and copyrights are legally protected and renewed on time. Proper documentation boosts the confidence of buyers and investors and helps in reinforcing your position in licensing deals.
- An IP audit helps in strengthening your defence in the case of infringement or litigation related to breach. Clear documentation from a professional audit serves as strong evidence of ownership and due diligence.
When to Conduct an IP Audit in India?
An IP Audit must be conducted in India during:
- At regular intervals: An IP audit must be conducted every 1-3 years to ensure Intellectual Property is updated and compliant. This is useful for companies engaged in the business of technology, creative agencies, and exporters.
- Before major events: Any time your company is preparing for the following events, your IP value will be scrutinised and checked:
- Mergers and acquisitions
- For raising funds
- IPO (Initial Public Offering)
- Joint ventures
- Partnerships
- Selling or licensing of IP
- When you are launching a new product: When your business entity is launching a new product or service in the market, it is important to check whether your intellectual property is not similar to existing products in the market
- When you suspect IP theft: If you suspect someone is copying your work without your permission or if you have received a legal notice regarding infringement, an audit helps you prepare to understand the status of your intellectual property, prepare an exhaustive legal defence and gather necessary evidence.
How an IP Audit is Conducted in India
Before the audit starts, the first step is to clearly define the scope and objectives of the audit. The auditor will discuss which type of intellectual property to focus on. This can include patents, trademarks, copyrights, designs, trade secrets, domain names, and software. The scope will consider whether to include agreements related to IP, like licenses, assignments, and contracts related to confidentiality with third parties.
Collect and review the following documents:
- Registration certificates (if any)
- Renewal certificates and documents for patents, trademarks, and designs filed in India and/or abroad.
- Licensing agreement(s)
- assignment agreement(s)
- Non-disclosure agreement(s).
- Records of IP-related correspondence with statutory bodies like the Indian Patent Office or the Trademark Registry.
- Software licenses and domain registrations.
The review will verify the documents to verify legal ownership over IP, registration status, and any existing encumbrances or disputes.
In this stage, the auditor identifies all intellectual property assets, whether registered or unregistered. Sometimes, businesses have IP that remains unregistered, like trade secrets, know-how, etc.
The auditor makes sure that the rights are assigned or licensed correctly to the company. This is particularly important in India, where joint development and IP come about during employment. The auditor examines employment agreements, contractor arrangements, and licensing contracts to confirm that the IP created by employees or third parties is legally owned by the company.
Once IP assets are identified and ownership verified, the auditor assesses the commercial relevance of the IP. The audit also analyses the risks associated with infringement, litigation associated with IP, and non-compliance with laws or contracts and prepares a detailed audit report in which the auditor finalises and summarises the findings.
Conclusion
An IP audit is much more than a mere legal formality. It plays an important role in helping businesses protect their most valuable intangible assets. During an audit, a company reviews its intellectual property rights, verifies its ownership, and ensures compliance with the intellectual property rights. For Indian businesses, especially startups and small to medium-sized enterprises (SMEs), regular IP audits are important as they allow companies to retain control over their innovations and creative works. Audits also help identify potential risks early, which reduces the likelihood of legal disputes.
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