India: Intellectual Property Audit

Last Updated: 12 May 2017
Article by Martand Nemana

Most Read Contributor in India, December 2018


The behest of the changing time has made the consumers evolve and modulate as per the changing standards of the market. From what was once a consumer driven society has now turned into a capital driven society, thus making the business houses control the way the consumers delve into the commodities of the relevant sectors. The world in the past few decades has also witnessed a comprehensive shift and the outlook with which people look upon Intellectual Property (referred to as IP hereafter) as a whole. Though most world leaders of business pastures have realized that their revenues to be directly proportional to their intangible assets which they already hold, the need to further secure, acquire and effectively utilize the principles have called for new reforms in the legal sectors.

Intellectual Property or IP as they know it has evolved as one of the highest revenue earning sources for the companies. With the changing times, companies apart from the physical infrastructure are now seen to emphasize upon the stringent needs to harness a proper intellectual infrastructure. The companies have started realizing the original potential of the their intellectual property in the post 1990 era, where the advent and insurgence of the internet made the companies and their consumers well versed with each other, providing them with ample opportunity and scope to establish themselves as a prominent entity in the relevant sector of the business.

Given the present day scenario where the world seems to be living a dual phased physical and digital life the companies have started to assimilate the value of the IP more than ever before and the IP is now a part of all the major transactions such as business decisions and transactions, and that recognition has increased the demand for IP audits in order to assess the potential and to create a level playing field for the competitors in the relevant market sector.


IP audit has been defined as a systematic review of the IP owned, used or acquired by a business so as to assess and manage risk, remedy problems and implement best practices in IP asset management.

IP Audit is a tool which is mostly used by the companies to take into account the intangible assets which they have generated / developed in the certain span of time. Thought the IP is intangible in nature, but it contributes to a very crucial core value of the company, i.e. the goodwill which they brand has in the market. Tentatively speaking the goodwill of the IP is one of the crucial reasons for which the industries acquire protection. This goodwill thus generated is then represented as the consumer preference and the acceptability of the brand in the market which is now a major reason for generating revenue.

Keeping in mind the changing times and given the digital society we live in, the companies have never been more aggressive regarding their promotion, advertisements and collaborations regarding their products. This has thus resulted them to start delving into the wilderness of the market which makes them susceptible to damage / threats and other legal challenges. The scenario thus has presented an alarming need, which needs the IP owners to be more aggressive and well prepared before an actual impact is caused.


The IP Audit follows the SWOT analysis process as below:

  1. SStrength: To assess the strongest and safest points of the IP of the owner. This could range from the goodwill of the product to the well framed legal and comprehensive protection which would be the best asset of the owner.
  2. WWeakness: One of the major aims of the IP Audit is to identify the weak spots and loose ends which would be the possible breeding grounds to future legal disputes. The Audit would help the owner, to prepare well in advance and also help them to device a full proof mechanism to overcome such abnormalities.
  3. OOpportunities: IP audit can also be seen as preparation which the owner carries out to assess the present situation before proceeding to take any further actions. The owner of an IP could also undertake such preparatory measures before proceedings to use their IP to generate revenues, like licensing, tech – transfer and leasing.
  4. TThreats: The intangible rights being vulnerable and frail are always defenseless without proper protection and legal enforcements. Given the highly digital and technologically advanced competitive market threats to the IP have been imminent and thus the IP Audit serves at timely interval serves the owner to entail and trace the source of possible conflict and take adequate measure to avert it.


'Audit' in normal parlance, refers to a detailed, formal examination and verification of the accounts and processes of an enterprise, which is undertaken to understand the overall picture of its financial position and good standing in the market. An audit is followed by a report on the findings of the diligence, which can be used by the enterprise for planning the future growth of business.

In order to conduct an IP Audit, it is most important to identify and determine in advance to the desired objective of the audit. The major scope of preparing an action plan would depend upon the following grounds:

  1. Duration of the company in the market,
  2. Geographical presence and jurisdictions which the company operates in.
  3. Size of the company and the amount of subsidiaries involved
  4. Creating a target plan to achieve the milestones and meet crucial deadlines in order to harness the complete potential of the IP of the company.

Once, the aforesaid guidelines have been set, it is then important to procure the relevant information relating to the IP of the company, which can be briefly devised into the following criterions:

  1. Collating information about the global IP presence of the company in forms of various filings and existing registrations;
  2. Various contractual, licensing and R&D contracts which the company might have taken in relation its existing IP;
  3. The classification of the existing IP and to understand the future prospects of developing the same;
  4. Legal encumbrances, involvements and responsibilities of the company as a whole which may affect the profile of the company and its intellectual property.

Through various embodiments the IP audit affective provides an assessment over the following concerns:

  1. To identify the scope of the present and to create a future profile for the tangible assets of the company.
  2. To reinforce the IP protection mechanism and device secure portfolio to avoid legal conflicts.
  3. To identify the idle IP and to set them in process and to harness them as a potential.
  4. To assess the financial equivalent of the assets and to be able to use them as leverage or guarantee with other financial institutions.
  5. To foresee and steer clear of any risks or unwanted litigation which may evolve or affect the functioning and profile of the applicant in the market.
  6. To reduce unnecessary cost and legal expenses.


An audit can be classified on the scope and reason for which the audit has been carried out. It is broadly classified into the following types:

  1. General: Mostly carried out as a part of the general audit which the company should undertake time to time, to assess and evaluate the value of their assets.
  2. Specific: Mostly carried out in order to pin point and identify the crucial area which might be either about an existing right or a right which may be procured in the near future.


The changing times have made us realize that the intangible assets have slowly become a significant part of the economic value of the knowledge economy. The most important factor for a long standing market presence in to recognize the scope for IP and to capitalize on its real value.

Though IP protection is available in across the globe in various methods like registrations, filings, licensing, restraining from misuse, however mostly the owners fail to realize the value and to safeguard to asset at hand. For every market entities being caught off the guard to could lead to turmoil, both financially and goodwill wise, which would prove highly detrimental to the organizations future.

Given the concept of global village, and aided with the information technology the world has really become a very small place and hence the rise in the need of protection. It is equally important to create an IP asset and also to safeguard to its ownership and efficient management. It's time that the companies should realize the importance of these rights and put them to right exercise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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