By Matthew O'Neill and Julie Ballance

This article was also published in Food New Zealand, Feb/Mar 2002

Traditionally, the average business has been based on tangible assets, such as plant, equipment, and stock, rather than non-tangible assets.

Increasingly however, start-up companies are being based around non-tangible assets. Although intellectual property ("IP") is not the only form of non-tangible asset, it is now coming to be viewed as a core asset by many companies, both large and small. In the 'New Economy' those who are aware of the extent and value of their IP portfolio will be in a good position to exploit it for commercial gain. One of the better ways to find out the extent and value of your IP is to conduct an audit of intellectual property assets (an IP audit).

Why conduct an IP audit?
While some businesses have sophisticated processes and systems in place to identify, protect, and manage IP assets as they are created, a surprising number do not. Some businesses have systems for managing those IP rights that can be registered (patentable inventions and registrable trade marks for example), but find themselves in trouble when valuable staff members leave, taking undocumented know-how with them. Even for "IP aware" businesses, systems should be periodically reviewed and staff trained or reminded of how to get the most out of the IP assets their business has.

Different types of IP audit
An IP audit will be tailored to the exact needs of the business, but is generally designed to identify existing IP assets, ensure proper protection (such as documenting know-how, where appropriate), and put in place or review systems for ongoing management of IP assets, from creation through to expiry.

Examples of different ways IP audits may be carried out are where: 
An R&D based business may wish to concentrate on establishing a system to identify and protect assets. This is best achieved by obtaining IP registrations for the relevant technologies and documenting or recording non-registrable assets. A business may also wish to increase its competitors' time to market in order to obtain an edge in the market place. This is usually achieved by monitoring the marketplace for infringement and by reviewing and selectively objecting to the IP registrations of competitors.

A start-up company will usually want to gain the appropriate IP protection for its core technologies and/or other IP assets. Setting up systems for identifying IP at an early stage in the life of a company can also increase ingenuity based growth.

A business acquiring or investing in another business will want to focus on valuing the assets of that business, including assessing the extent of IP rights. This is also an important consideration for businesses that are considering selling key IP assets.

How an IP audit works
1. The auditor meets with representatives of the business to decide on the areas of concern for them, the type of research to be carried out, the personnel to be interviewed, and other factors affecting the audit.

2. Initially the auditor will concentrate on identifying the IP assets. This is usually achieved by conducting interviews with key personnel, including company officers and managers, and staff who make and/or implement decisions in departments such as engineering, operations, marketing, and finance.

3. Analysis of the IP portfolio is carried out to determine which assets require protection. The auditor can also determine where gaps in protection lie or where competitors could potentially challenge IP rights.

4. If required, the auditor can assist with setting up systems to ensure that IP is identified and dealt with in the appropriate manner. If systems are already in place, changes may be recommended depending on the findings of the audit. The auditor may recommend the use of a 'watching service' to ensure a business is up to date with their competitors' IP protection strategies.

An IP audit can have a big impact on the future potential of a business. As Intellectual Property assets become more important to businesses, those with a full appreciation of the value of these assets and strategies in place to deal with their protection will be in an excellent position to get the most out of their innovations.

This is a general summary only and should not be taken as a substitute for specific advice.

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