An IP Audit is defined as a systematic review of the IP assets owned, used or acquired by a business. Its purpose is to uncover under-utilized IP assets, to identify any threats to a company’s bottom line, and to enable business planners to devise informed strategies that will maintain and improve the company’s market position. In many cases SME’s do not have the resources to conduct a full audit of all its IP and will find it difficult to put a value to each of the components making up an IP portfolio. FOIPA will help you put aside these difficulties and document and value what is, in many cases, its most important intangible assets.

An Example of an IP Audit

At the very least an IP Audit should identify just what IP assets are owned by a business and just how important those are to the firm. As an example, let us take the mythical Company, Aglaia. Aglaia is an SME employing 50 staff and has both import and export potential for its patented tea-tree formulations and associated health products. The company has been reasonably successful but faces stiff competition in the niche “Natraceutical” market. The Company has a house brand and a number of product brands.

First, we identify the readily identifiable IP Assets  such as registered trademarks, copyrights, designs or patents owned by the business, any licenses to third parties and any licenses from third parties, including cross-licenses. Include in-house work manuals, databases, recipes, franchise agreements, publications and product/process know-how. Once identified the IP’s are then scrutinized to determine who owns them, whether they have not lapsed (remain registered) and enforceable and whether they are being effectively used. The Individual components are also given an importance rating – by looking at factors such as whether or not they are embodied to core technologies, the life expectancy of the underlying IP in the said technology and the potential or actual exclusivity of the technology.

Then we itemize what might be termed external or market influences. These will include the company brand, product brands, company and product get-up, goodwill, product certification, export certifications, regulatory approvals, distribution and raw material networks, client lists, and marketing and advertising programs.

In trying to estimate the value of any of these items, we ask how much will it cost to replace the item if it were lost, what is the expected income, e.g. in the next five years, that can be generated by the underlying IP assets and how is it being used. We apply various IP valuation methods to establish the value of an underlying IP asset depending on the product or service.