Conducting an IP Audit

How far the audit should go

Depending on its purpose, an IP audit may be narrow in scope, or extensive and rigorous.

Relevant considerations in setting the scope of an IP audit include:

• The context of the audit, that is, whether it is part of a company's asset management, part of due diligence in a sale or acquisition, or part of enforcing or defending legal actions;
• The size of the company and the extent of its operation; and
• The strategic or other significance of IP in the company's corporate plan.

The scope of the audit

If the purpose of an IP audit program is to identify what IP a company owns, its current status and its commercial potential, the audit will be extensive. It might include:

• Questionnaires for present and former employees and contractors to acquire information on, for example, inventions, know-how and methodologies acquired, and computer software developed;
• Interviews with employees to uncover information about discoveries and creations;
• Review of contracts to which the company is, or has been, party. This will determine whether or not normal business activities could have given rise to the creation of IP, and if so, that there are contracts in place stating who owns that IP. Contracts to be reviewed should include agreements with employees and independent contractors, joint venture, licence and research and development agreements;
• Documents of Title as evidence of current registrations;
• Database searches, including commercial patent databases and searches of public registers such as IP Australia's database of patent, trade marks and designs. Court registries could be searched to identify any infringement actions against an audited company; and
• Publication reviews of trade journals and government gazettes (particularly in relation to applications for patents, trade marks and designs), as well as competitors' brochures and other marketing material, information memoranda and prospectuses to be kept informed of possible developments, infringements and compliance with legal requirements.

Other considerations

The size of the company being audited, the length of time it has been conducting business, and the extent of its activities, are further considerations in setting the scope of an appropriate IP audit. A multinational company may, for example, be suitable for an audit of IP rights in Australia and internationally.

If particular IP is strategically significant for the company, the audit should focus on that IP in the first instance.

That said, however, it is always safer for your IP audit to be broader rather than narrower. This will provide a good basis for ongoing IP management.