What are the types of IP Audit?

An intellectual property audit (IP Audit) in simple words refers to the systematic collection, collation, and analysis of all the IP assets owned, acquired, licensed, assigned, used, or unused. It can thus be compared to a comprehensive inventory, which allows an enterprise to review and keep track of its assets. An IP audit helps in identifying threats to the IP assets and helps businesses in developing strategies to foster their growth and competitive standing in the market. Since an IP Audit reviews all the Ip assets and the policies associated with the same, it helps in identifying and analyzing an IP infringement. Generally, there are three types of IP audits: General purpose IP audit, Event driven IP audit and Limited purpose focussed 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. It helps significantly to both the startups and established companies in not only evaluating and safeguarding their IP assets but also identifying opportunities, development needs, and risks. 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. Such audits scrutinise the IP portfolio as a whole to review the businesses' IP management approach, if there is one. If not, general IP audit is a core and fundamental step to develop an IP management approach and an IP-intensive culture within the 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 performed in the following contexts: Merger and acquisition or joint ventures: aiming to provide a basis for assessing the risk and value of relevant IP assets in a proposed acquisition or sale of IP. Financial transactions: aiming to determine the impact of IP assets on IP related financial transactions such as stock purchasing, security interests, initial public offerings, etc. IP assignments and IP licensing: aiming to provide information to the potential assignee or licensor about the IP portfolio, concentrating on verification of the ownership and possible restrictions affecting the use of the IP. Launching of a new product or service: aiming to evaluate any possible infringement risks or freedom-to-operate issues linked to the new product or service. Bankruptcy and layoffs, etc.: aiming to secure the IP rights in case of bankruptcy, employee layoffs, etc. (3) Limited Purpose Focussed audit (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. A limited purpose focused audit is done in the following types of contexts: 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. 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. 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: 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. 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. 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.