In the modern economy, intellectual property (IP) is often an organisation’s most valuable asset. Yet, many companies lack a clear understanding of what they actually own, use, or have acquired. An IP Audit serves as a systematic review to compile a comprehensive inventory of these assets. While a standard audit identifies what is there, IP due diligence takes the process further by investigating the “health” of those assets; verifying ownership, validity, and potential risks like third-party infringement.
Not every audit requires the same level of intensity. The scope and resources used depend entirely on the audit’s purpose.
- A general-purpose IP audit is used for routine management and strategic planning. It is often conducted when establishing a new business or developing new internal policies.
- An event-driven IP audit is triggered by a specific milestone, such as a merger, acquisition, or a new product launch.
- A limited purpose IP audit is a narrow, situational audit often used for specific legal justifications, such as preparing for litigation or determining ownership after staff turnover.
Failing to perform a comprehensive IP audit can lead to multi-million-rand mistakes. A real-world case which highlights these risks is the BMW // Volkswagen // Rolls Royce case:
In a prominent example of insufficient IP due diligence, Volkswagen (VW) intended to acquire the Rolls Royce Motor Cars Group, including the brand, from Vickers PLC. While VW successfully purchased the factory, equipment, and automobile designs, they failed to secure the Rolls Royce trade marks because they were actually owned by Rolls Royce PLC rather than the selling party. Vickers held only a non-transferable licence to use the marks, which allowed BMW to subsequently acquire the trade marks and lease them to VW for only a limited duration. This oversight demonstrates how a failure to perform an exhaustive IP audit during a merger or acquisition can result in a company paying for assets without securing the essential rights to own the intellectual property.
A thorough audit looks beyond just registered IP rights. It requires identifying both registered and non-registered IP. Registered IP includes patents, trade marks, designs, plant breeder’s rights and domain names. Verification is key here, as one must inspect registers at various patent offices to confirm the current status and ownership. Non-registered IP is often more complex to track and includes:
- Copyrights and trade secrets, which are essential for software and proprietary processes.
- Contracts – reviewing employment agreements, lab books, and collaborative R&D agreements to see who actually holds the ownership rights.
- Chain of title is the chronological history of ownership transfers. Investigating whether the links in ownership from the creator to the current holder are legally sound.
Best practices for conducting an IP audit should include these core steps, to ensure a successful outcome:
- Secure Stakeholder Support: Management buy-in is essential for accessing the necessary resources.
- Formulate a Plan: Define the purpose, scope, and methodology before you begin.
- Tailor Your Checklists: Do not inundate researchers or engineers with standard forms; customised questionnaires yield more accurate data.
- Verify Everything: An IP audit is a factual exercise—never take ownership at face value.
A proactive IP audit is not just a cost; it is an investment in stability and a prerequisite for sustainable growth. By identifying IP that is no longer fit for purpose, organisations can save on maintenance fees while aligning their portfolio with long-term strategic goals.
Contact our team today to schedule a preliminary discussion about your business’ IP health.
Author: Tumelo Mashabela | Managing Director and Registered Patent Attorney
