IP Audit

An intellectual property audit is a systematic and efficient review of a company’s IP assets, including risks and opportunities.

The goals of the audit are to help the company:

• Assess, preserve, and enhance its existing IP assets;
• ​​​​​Correct any defects in its IP rights;
• ​Identify risks, especially that its products or services might infringe upon the IP rights of someone else; and
• Implement best practices for management and protection of its IP assets.

Here are four reasons:

Identification

• Just like business equipment, inventory, and accounts receivable, an enterprise’s intellectual property requires effective management. But you can’t manage (and protect) what you don’t realize you own. Indeed, most businesspeople and most non-IP lawyers cannot explain the difference between a copyright and a trademark or a design patent and trade dress, much less whether their enterprise owns any of those assets. Thus, an IP audit will identify the company’s IP so that it can better manage it, i.e., make informed decisions how to protect, develop, and perhaps license that property.

Preservation

• A corpus of laws—federal and state—exist for the sole purpose of protecting intellectual property, yet many companies fail to take advantage of these laws. Once upon a time, the nouns aspirin, escalator, laundromat and trampoline were valuable registered trademarks of companies that failed to protect their rights; now those former trademarks are generic terms, free for anyone to use. Thus, another advantage of an IP audit is to teach the company how to proactively protect its assets before they are lost.

Avoidance

• IP litigation is both complex and expensive—indeed, so expensive that many smaller enterprises are forced to surrender even if they have a strong case. An IP audit can help a company identify risks and take steps to mitigate them.

Optimization

• In the 21st Century, a company’s intellectual property has been a prominent element of all types of business deals, from acquisitions to licensing to opportunities to expand. The more an enterprise knows about the economic value of its IP, the more that enterprise can optimize its deals.

Sure. Let’s take trade secrets—which typically are among your enterprise’s most valuable IP assets. Indeed, they are often more important than a company’s other forms of intellectual property.

As the name suggests, a trade secret is a piece of confidential information that provides an enterprise with a competitive edge. Trade secrets include everything from marketing plans and customer lists to financial information (pricing, overhead, profit margins) and manufacturing processes. Think of the third base coach making all those mysterious hand signals to the batter and the runner on first base. Those hand signals are the team’s trade secrets. And, of course, there’s the formula for Coca-Cola, regarded as one of the world’s most valuable trade secrets. If you visit the company’s headquarters in Atlanta, you can even see the vault where the legendary formula is secured.

But as the name indicates, for a trade secret to be deemed a trade secret, it must be secret. And the burden of maintaining that secrecy is placed upon the company that owns it. Once publicly disclosed, a trade secret is—quite literally—no longer a trade secret.

And thus, the trade secrets portion of the IP audit seeks to:

• (a) identify the enterprise’s trade secrets,
• (b) review the procedures and agreements in place for protecting those secrets, and
• (c) if those procedures and agreements are defective, recommend ways to fix them.

Again, a good example is trade secrets.

In 2016, Congress enacted the Defend Trade Secrets Act (“DTSA”), which federalizes trade secret law and provides companies a clearer path to enforce their trade secrets. But, as with the preexisting laws in the fifty states, a company has to demonstrate to the court that it has taken reasonable steps to keep such information secret. Those “reasonable steps” include appropriate confidentiality language in the company’s employment agreements, consulting agreements, and contractor agreements. And to take full advantage of all the remedies provided under the DTSA, those agreements and the company’s manuals have to include a special new notice regarding “whistleblower” protections.

Thus, it’s important to make sure a company’s agreements meet the requirements for protection of its trade secrets under the new federal trade secrets law.

It all depends upon your enterprise, including its size and the scope of its operations. For some, an audit reviews the procedures used by the organization to obtain and protect its intellectual property and to protect itself from infringing the intellectual property of others. For others, the audit includes an attempt to evaluate and/or identify defects in the existing intellectual property assets.

Thus, the first step in the audit is to determine its scope, which involves a discussion with the Capes Sokol attorney who will perform the audit. That discussion usually leads to interviews by that attorney with knowledgeable persons within the company and a review of key documents. We schedule those interviews at convenient times and conduct them efficiently.

When that is complete, the attorney will prepare an audit report, a draft of which will first be shared with the executive who authorized the audit for review and comment.

Again, it depends upon your enterprise and, just as important, the format that you believe will be most helpful and most instructive for your organization.

We conduct the IP Audit on a fixed-fee basis. The cost depends upon the size of your organization and the scope of its intellectual property. The actual fee will be discussed and established before the Audit starts.