Most attorneys appreciate that their clients -- particularly those in high-technology areas -- have intellectual property assets as well as physical assets. As more corporate managers are becoming aware, one cannot overstate the importance of identifying, valuing and protecting the corporation's intellectual property assets.
Those assets are particularly relevant when a corporation is seeking to in- or out-license technology, to develop partnerships with other companies, to obtain funding or to attract investors.
One tool that counsel and managers alike may use to benefit the corporation and to assist in the refinement of its business development strategies is the intellectual property (IP) audit. Such an audit not only provides an appraisal and valuation of an organization's intellectual property assets, it may also be useful in the evaluation of the organization's policies and procedures for the creation, protection and management of these assets. Briefly, here are the details IP audits.
Who? The designation of who is to perform the audit will depend upon the nature and scope of the audit. A company's own personnel may have sufficient familiarity with the facts and issues involved to perform an audit, especially if it is narrow in scope. Generally, because of the inherently legal nature of an audit, a company's in-house legal counsel (if there is one) should be involved in the audit, at least in a coordinating role. In more complex situations, however, it is doubtful that company personnel alone will have either the time or the expertise to perform a full-scale audit. In such situations, outside legal counsel should probably conduct the audit. Be sure to select counsel that have expertise in the technology and legal principles involved, as well as experience in providing remedies for any legal defects found in the audit.
What? Those performing the audit should be given access to all relevant information and documentation regarding the nature of the property and transactions to be investigated, including an overview of the history of the pertinent technology. Ideally, an audit plan should be drawn up in advance, to define the scope of the audit and to maximize each participant's efficiency.
Depending upon the scope of the audit, relevant documents may include (a) license and maintenance agreements; (b) distribution agreements; (c) government contracts; (d) correspondence; (e) patents, copyrights and trademark registration certificates, and related recordation documents; (f) federal registration application files; (g) logos, slogans, product packaging, brochures and related written materials; (h) employee agreements; and (i) consultant agreements, to name but a few.
A complete IP audit should also ascertain whether the agreements used to obtain various IP rights, including those developed by a company's employees, are adequate. Invention reporting and review procedures, as well as exit interviewing procedures, should be evaluated to ensure that company innovations do not "evaporate."
When? IP audits are appropriate before a significant acquisition of technology takes place. Audits should also be performed in the early stages of a technology company's formation, so that systematic procedures for protecting IP rights are instituted. Follow-up audits may then be appropriate at critical junctures in an organization's life cycle, as a means of validating the adequacy of the organization's IP policies and procedures and to detect and remedy any defects in those policies and procedures at the earliest possible time.
Why? There are several reasons why an organization might wish to undertake an IP audit. For example, an IP audit is useful in (1) determining the origin and scope of the IP assets; (2) determining the extent of the owner's interest in the IP assets, and the scope of IP rights a third party might have in those assets; (3) evaluating the organization's policies and procedures for creating, protecting and perfecting its IP rights; (4) revealing defects in existing IP assets that may diminish the value of these assets, if those defects are not corrected; (5) lessening the potential liability from third-party infringement claims when an organization is seeking to develop a new product; and (6) obtaining a realistic financial valuation of existing IP assets.
If the circumstances are such that a written report will be privileged and not discoverable, the results of an intellectual property audit should normally be memorialized in a report. The report should discuss the development history of the technology at issue, describe and evaluate intellectual property defects uncovered in the audit, propose and describe specific remedial action that needs to be taken (or that has been taken), and respond to any other specific need for information the organization may have.
In summary, the reports generated as a result of an IP audit may be particularly useful to managers and their counsel, for a variety of reasons. Ideally, information gleaned during the audit may be used to ensure that existing and future IP assets will be properly protected and appropriately managed.
April C. Logan is patent counsel for Prizm Pharmaceuticals Inc. Her e-mail address is aclogan@prizmpharm.com.
Go to the Self Help Legal Clinic
Liberty's Educational Advocacy Forum 
©1994-2008 Updated Daily by
The OtherOne Computer Consulting International, Ltd.