2015 Issue

13 Waiting to perform an audit until there is a problem is not sug- gested. You definitely don’t want to start a new business effort only to find that you have to resolve IP ownership issues first. Audits don’t have to be expensive. Indeed, they tend to be less expensive than being forced to litigate any issues in court. Actively protecting IP assets also sends a message to employees: your company values IP. That knowledge, by itself, can prevent loss of IP, either through carelessness or theft. If you choose to be proactive and perform an IP audit before any defined problem ex- ists, you will be making sure that your trade secrets, for example, are secure and that confidential material stays confidential. You will also be providing statutory protection for IP such as copyrights, patents, and trademarks. Additionally, performing an IP audit can establish the IP’s value, increase IP value when the IP is licensed, prevent or stop someone outside a company from taking the IP, and, if a company is to be sold, make that sale relatively easier and smoother than it otherwise would be if there were ongoing legal questions about IP owner- ship. From an investing point of view, establishing the value of a company’s IP is also helpful. For example, having a benchmark IP value makes it easier to secure investors and financing. This is be- cause IP can be used under those situations as a security interest. The Audit Team Once you decide to conduct an IP audit, who should be part of the audit team? It is possible to hire lawyers who are professional IP auditors. If you do, professional IP auditors will still need people within the company to work with. Your team should consist of, at least, the following: • Trusted company employees • Legal counsel • Security and technical teams These select people should understand your business goals as well as the technical aspects of the company’s IP. With regard to legal counsel, you should look for lawyers who specialize in IP so that they will understand the legal issues involved and can give you expert advice. However, hiring professional IP auditors allows a company to be able to maintain attorney-client privilege if it turns out that the company needs to address any specific problems uncovered by the audit. Everyone involved will need to know what is expected of them. Define the roles for each member of the team, and then make sure they have the appropriate training to carry out those roles during the actual audit. Since audits should be performed periodically, regular review of the training is important. Specific Audit Areas Define the audit’s scope before the audit begins. Areas to include might be copyrights, patents, trademarks, trade secrets, and a review of insurance coverage. Copyrights What can you protect with a copyright? You are probably familiar with the list already: any work that is artistic, dramatic, literary, or musical. The definition of a copyright is anything fixed in a tan- gible medium of expression. A company can copyright computer software, movies, novels, pictures, poetry, songs, among other copyrightable subject matter. If someone infringes a registered copyright, then a cause of action is created, and a lawsuit can be filed. This cause of actionmay allow a company to recover attorney’s fees as well as statutory damages. When an audit on a work that has copyright protection has been initiated, two questions should be asked during the audit. First, does the company still own the copyrights? Second, is the company violating anyone else’s copyrights? To answer those questions, you will need to review any materials that you think have a copyright, and make sure they have been registered. If no registration is on file, then you might want to think about filing. You will also want to check whether anyone else has a security interest in any of the company’s copyrighted works. One area where you should pay particular attention is the com- pany website. Does the company have written permission to use all media currently in use on the website? If music or televisions are located in public areas of the company, then the company should determine whether it has gotten all the correct licenses to disseminate the content. Another area to check is the software being used by company employees. An IT department can help confirm that any software being used has been licensed. You should also confirm that the way the software is being used has been authorized by the license. The final area of concern is making sure that there is an ongoing procedure for monitoring copyright compliance moving forward. Patents Patents can prevent others from making, selling, using, or import- ing goods that embody the inventions protected by the patents within and into the country where the patent was granted during a specific period of time. In the United States, the term of a utility patent is 20 years from its filing date. When a patent audit is conducted, an evaluation of all IP and products should be conducted to determine the most appropriate patent strategy for a company. It may be important to evaluate the IP and products associated with competitors as well. The following question should be asked: 1) are the company’s patents well-aligned with your products; 2) what products is the company planning to sell in the future; and 3) does the company wish to prevent its competitors from making a certain products that are covered in the company’s patents or patent applications? A list of all the patents is obtainable and should be evaluated from a strategic point of view, and each should be reviewed individually. The evaluation should cover whether: • The patent is too narrow in scope; • If it is possible to broaden current patents or to make future patents broader; and • Whether the patents contribute commercially to the company or add to research and development. INTELLECTUAL PROPERTY | continued on page 14