Today, 26 April, we are celebrating the World Intellectual Property Day! This holiday emphasises the exceptional importance of protecting intellectual property (IP) rights, which are crucial for every business, as they provide a competitive advantage, prevent others from using or profiting from your innovations, and, moreover, allow you to monetise your intellectual assets through licensing or selling.

This article aims to demonstrate how IP audits help businesses to evaluate, optimise and protect their intellectual assets, ensuring they are used and commercialised correctly.

Introduction to IP audits

An IP audit is a systematic review of a company’s IP assets to ensure legal compliance, identify risks, and maximise IP value. It involves assessing the company’s trademarks, designs, patents, copyrights, trade secrets and other IP to ensure they are properly protected and maintained.

There are many reasons why it is worth using such a tool to assess IP. An audit helps to identify the IP being used, as well as optimising such use. An IP audit is also useful in terms of determining whether there is any infringement of IP rights either within or outside the company, as well as minimising/eliminating potential risks in both cases.

It is recommendable to consider IP audit in the following cases:

  • when developing or reviewing business strategy
  • before attracting investments
  • before transactions (acquisitions, mergers)
  • when seeking opportunities to reduce costs or increase revenue
  • when preparing for licensing agreements
  • when preparing for legal disputes

The IP audit process should be structured. It should: 1) start with creating the audit schedule and determining the relevant scope; and 2) finish with a so-called “audit report” intended to determine measures to tackle deficiencies. Such measures may imply additional filings, registrations, trainings to be held, amendments to existing agreements, etc.

We also suggest having three basic steps to the IP audit process, which should take place between the start and finish, namely:

1) Identifying IP assets

This step involves identifying and mapping all IP assets owned or used by the company. This includes two groups of IP: a) registrable IP (e.g. inventions, designs, trademarks, business names); and b) non-registrable IP (copyright, know-how). It is essential to collect and review all relevant documents related to these assets, such as both national and international registration certificates/patents, applications, agreements (franchising, licensing, assigning, etc.), NDAs, contractor and employment contracts, C&D letters, litigation documents, internal policies and other IP-related documents depending on the IP audit and business specifics. This step helps in creating a comprehensive inventory of IP assets, and assessing their value and importance to the business.

2) Determining ownership and legal status of IP assets

Once the IP assets have been identified, the next step is determining ownership and legal status. Companies need to verify that they have the legal rights to the relevant IP, either through ownership, licences or other legal arrangements. This step involves reviewing and analysing relevant documents (agreements, employee policies, etc.) to ensure that the company has clear ownership/other proprietary rights and control over its IP. Companies also need to confirm the validity and enforceability of their IP by checking registration status, renewal dates, and compliance with applicable IP laws and regulations. Examining not only the documents provided, but also publicly available information (open databases, registers, news, etc.) would also be helpful at this stage.

In addition, the step described above may also include interviews with company employees who could potentially be creating IP or participating in IP creation. Such interviews may be a good opportunity to gain greater insight into not only the types of IP (e.g. copyrighted software or elements of such software) being developed within a company, but also who is developing them. During these interviews, pain points which may need to be addressed after the IP audit may be revealed.

3) Detecting potential deficiencies

This step involves identifying any IP which is not adequately protected, such as unregistered trademarks or disclosed know-how. Companies also need to assess whether their IP assets are being used or exploited without authorisation, either internally or by third parties. By conducting a thorough review of the company’s IP portfolio, companies can identify any vulnerabilities or risks of infringement, and take appropriate measures to protect and enforce their IP rights.

Potential risks may appear from improperly formalised relations with employees or contractors if they create/participate in IP creation. If registrable IP is not actually registered, such IP may lack legal protection. Incompatibility of open-source licences used may also lead to the invalidity of software created based on open-source licences.

Examination of registerable IP: trademarks, designs and inventions

During an IP audit, companies need to review their registered rights, such as trademarks, designs and inventions, to ensure they are valid, enforceable, and properly maintained. This includes conducting searches to identify any potential conflicts or challenges from third parties, reviewing registration certificates and renewal dates, and confirming ownership of these assets. By assessing the status of registered rights, companies can mitigate the risks of infringement and protect the value of their IP assets.

With regard to Belarus, legal protection of such registrable IP is secured by a formal procedure of registration. This means that the relevant protection documents (certificates, patents) should be available regarding such IP. It should also be possible to check registration status (as relates to Belarusian national registrations) via open databases available on the internet on the websites of local patent authorities (available here in Russian). For some types of IP, there are also open databases related to “international” registrations (e.g. Madrid Monitor containing information about international trademarks is available here in English).

Copyright is one of the key IP components which require careful consideration during an IP audit. Companies need to ensure that their creative works, such as software, literary works, and artistic creations, are properly protected and don’t infringe others’ copyrights. This includes reviewing the processes for relevant IP creation and licences to ensure compliance with copyright laws, identifying potential infringements, and addressing any licensing issues which may arise.

It is important to note that copyrighted works (e.g. software) are, as a rule, protected from the moment of their creation. Nonetheless, many countries, including Belarus, allow such works to be deposited or registered. With regard to Belarus, such deposition or registration is not a mandatory requirement in order to obtain legal protection, but it may contribute to the strength of a case for copyright ownership.

Copyrighted works created within the company by its employees and qualified as “works for hire” are rather common subjects of verification during IP audits. Companies should verify the formalisation of labour relations with employees, including relevant regulation for assigning/licensing IP to the employer. This process should aim to identify possible risks related to use of exclusive rights to relevant IP (“works for hire”).

IP transfer: licences and open-source components

Firstly, during an IP audit it is essential to identify typical IP agreements intended for IP transfer. Verification that they contain all the essential conditions provided for by law (including specifics of mixed agreements), and that they are compliant with mandatory requirements should be carried out during analysis. Additionally, deeds of acceptance describing the fact of IP assignment/licence should also be verified.

As for licences, particular attention should be paid to the compatibility of exclusive and non-exclusive licences issued with regard to relevant IP. The scope of licensed rights should also be carefully analysed (e.g. whether the rights to modify or sublicense IP have been granted).

Another important issue is registration of relevant IP transfer agreements with the patent authority. Licences and assignment agreements related to national industrial property (e.g. trademarks or inventions) should be considered invalid without registration with the local patent authority.

Open-source components, in turn, present unique challenges, as they come with specific terms and conditions that must be carefully navigated to avoid the legal risks associated with software transfer. Companies need to conduct a thorough review of the source code and development process to ensure compliance with open-source requirements, and to protect their proprietary software.

During an IP audit it important to verify relevant conditions of open-source licences to check: 1) compatibility of used open-source licences (if the proprietary software is based on several open-source licences); and 2) whether these conditions impose some specific additional obligations on the licensee (e.g. obligation to license the respective proprietary software on open-source conditions as well).

In conclusion, regular IP audits are essential for companies to stay ahead of potential threats, maintain legal compliance, and enhance the value of their IP assets in today’s competitive business landscape.

Our international Intellectual property team is at your disposal, should you need advice on any legal issues you are facing.