IP Audit: Find out how bad it is so you know what needs to be fixed
A less exciting intro to a blog post than what I’m about to write has surely never been written… get an IP audit [stifles a yawn].
Sexy and exciting it may not be. True it definitely is. If your tech business is serious about protecting its IP (it should be!) then the first thing you should do — the absolute first thing — is get an IP audit.
Someone wiser than me once said “in order to know where you’re going, you first need to know where you are.” I can testify to that definitely being true when you’re lost in the mountains and need to find your way out with a map and a compass — if you’re interested, success came more by luck than judgement on that occasion — and it’s also true when it comes to IP management.
(It’s also true that many people responsible for IP in tech businesses feel like they’re lost because they get swamped with jargon and advice that doesn’t relate to their needs, but that’s a story for another day.)
The way you “know where you are” with IP is to get an IP audit. An IP audit gives a snapshot of the IP situation within your business right now. That makes it possible to work out what you need to do to get from where you are to where you need to be and what support you’ll need to get there.
But simply saying “let’s get an IP audit” is not enough for you to get the information that you need. Nowhere near. There are IP audits and there are IP audits and it would be a mistake (and probably a waste of money) simply to let an external advisor, maybe one you don’t yet have a relationship with, go off and prepare an audit without you being actively involved in the process.
You need to know what you need to know and in this blog I’m going to help you with that so you can make sure you get a good audit done that has information in it that you can action and use to move your IP management processes forward.
Who should do it?
In short, you need an IP specialist.
Now, that could be a patent attorney, a trademark attorney or in some instances a solicitor with an IP specialism. Be aware though: a patent attorney will probably finish the audit by recommending you file patents; a trademark attorney will probably finish the audit recommending that you file trademarks; and an IP solicitor will probably finish the audit by recommending that you have lots of contracts drawn up. To someone with a hammer, everything is a nail.
Also, those advisors are often not experienced in dealing with the broader aspects of IP like trade secrets, designs, copyright, and designing and building internal IP management processes. They’re also pretty expensive because they have niche, specialist knowledge.
In my view, the best person to ask to prepare your audit is someone with IP management experience. Someone who has been on the client’s side of the wire in the past and knows a little about a lot, rather than a lot about a little. Look for a consultant with a commercial outlook and ask them what experience they have working with clients to manage their IP. You’re looking for someone who understands and has experience of aligning a full IP strategy (not just patents or trademarks) with a commercial strategy, and someone who has experience of designing internal systems and processes for IP management.
How much should it cost?
In my view, you can get a decent audit done for around £3,000-£5,000, but that is probably not the case if you use someone who bills themselves out at over £400 an hour, like a patent or trademark attorney does. As I say above, a consultant who has broader knowledge and is cheaper than a patent or trademark specialist is probably the best way to go.
You can (at the time of writing) actually get a grant from the UK Intellectual Property Office to pay some or all of the cost of an IP audit. If you’re interested in this then you can contact the office by email firstname.lastname@example.org.
What should be in it?
Okay, now we get to the meat of it. The next few sections give you an idea of the sort of information you’ll need to ensure is included in your audit so it’s a useful document. It makes sense for you to set these things out and guide the process from the start.
1. A description of your R&D function and your commercial strategy
Okay, I know that you already know how your R&D function operates, and that you already know what your commercial strategy is. Also, any information on those topics included in the audit will be high-level at best. So what will you learn from this?
You will learn that the person doing the audit understands how your R&D function operates and what your commercial strategy is! It’s very important that they do otherwise the recommendations they make will not be set in the right context.
Ask the person undertaking the audit to make sure they understand the way R&D takes place in your business, the major projects you are working on, what your commercial goals are and how you intend to achieve them and then get them to write that out in the audit report.
2. An assessment of your current IP portfolio
All of your IP should be sorted into bins (patents, trademarks and designs — trade secrets if you’re more sophisticated already) and then assessed to determine:
· Any ownership issues — these are more common than you think;
· Whether any patent applications cover the technologies that are core to your business;
· Whether any trademarks cover relevant brands;
· Whether any designs cover products and technologies that are core to the business;
· Comment on whether the portfolio is of roughly the correct size and has the right mix of patents, trademarks and designs; and
· A brief look at the future in terms of budget implications and future patent applications and/or trademark and design registrations.
This will give you good information on whether there are any holes in what you have and whether you need to consider protecting different types of IP and/or increasing or decreasing the number of IP rights you have. This is important when deciding what your IP strategy will be.
3. An assessment of the contracts & agreements you’ve signed
Contracts and agreements that relate to IP should be gathered up and reviewed. Any issues should be raised in the audit so that they can be rectified where possible and accounted for where they can’t be rectified.
The issues identified in the contracts and agreements usually relate to ownership of your IP, i.e. you don’t own it when you thought you did! This can be really important if you are looking at a funding round or when your commercial goal is to be acquired. Serious investors and acquirers will do hefty due diligence on your IP and ownership issues can be serious and can prevent a deal happening.
The sort of documents that need to be reviewed are:
· Employment contracts
· Consultancy contracts
· Joint venture agreements
· Licensing agreements
· Non-disclosure agreements
· Memorandums of Understanding with partners
· Collaboration agreements with other companies or universities
4. A review of you IP management capability
The person conducting your IP audit should understand how you manage your IP currently. They will need to ask a lot of questions about this and understand what process you have in place, even if that process is simply that Viren talks to Sarah when he has a good idea and together they decide whether to ask a patent attorney to file a patent application.
In the mind of the person undertaking the audit, there should be an understanding of what ‘good’ processes for managing IP look like. Ideally, they should have some experience of implementing these processes in other organisations. There is an ISO standard for this, ISO 56000 series, which you can find here. It’s really good and gives a solid approach to IP management that you can use — I recommend ISO 56005 in particular.
Understanding what your current process is will allow them to compare that process to a ‘good’ process and understand where you will need support and what that support should look like.
At the end of everything, you need recommendations that you can implement. In particular, the audit should recommend at least the following
· A size and shape of your IP portfolio that is aligned with your commercial strategy
· A process for extracting inventions from your engineers’ heads and writing them down
· A decision flow for determining the commercial value of each invention and what protection to seek for it
· How to fix any holes in the ownership of your IP, including redrafting standard contracts and agreements
· A process for integrating risk management into your R&D process to ensure you don’t infringe 3rd party IP
· Recommendations for staff training and education
If the audit itself doesn’t make those recommendations then there should be a meeting where the audit can be used to determine these points.
So there you have it — get an audit and use this guide to make sure you get a good one that you can actually use.