What is Intellectual Property
An Intellectual Property refers to creations of the mind - inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.
Intellectual Property is divided into two categories :
Firstly, Industrial Property which includes inventions (patents), trademarks, industrial designs and geographic indications of sources.
Secondly, Copyright which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs.
Over the last few decades, IP has become a significant area of emphasis for major companies.
In an industry where brand awareness and monetization of compelling products is crucial, companies have understood the importance of maximizing their revenue streams from their IP Library.
HOW DO YOU SECURE IP AND MAXIMIZE REVENUES?
To protect your IP and reduce revenue leakage, we recommend the following:
Assess whether your existing license agreement protects and maximizes the value of your IP Library. This includes a cost/benefit review to improve agreement terms and identify niche opportunities to develop or reinforce relationships with business partners,
Ensure that agreement terms and structure are in line with the company’s business model,
Design an effective model to secure best practices and mitigate licensing violations or revenue leakages,
Identify areas of focus since different attention is required for each business. Agree and plan suitable audit strategies to provide companies with the highest level of confidence and transparency towards their licensing partners,
Build upon and grow a tailored compliance program. Help provide necessary tools & training to reduce risks, improve reporting efficiencies going forward, and guarantee a full compliance to the agreements over the long term,
Review licensees’ controls and perform a thorough royalty review. Use customized forensic audit techniques to lead review for any type of licensing agreement and to perform an exhaustive royalty examination.
WHY YOU SHOULD DO A ROYALTY EXAMINATION?
A license agreement is certainly a binding contract that is not necessarily understood by all internal stakeholders.
Most companies perceive their licensees as “reliable” partners. But trust should not exclude a licensor’s right to ensure their IP is maximized. Most companies trust their employees but still verify their expense claims.
Ninety five percent of audits performed show significant monetary findings resulting from clerical or accounting errors, omissions or fraud.
A compliance audit and royalty examination do not fall under regulatory requirements conducted by external auditors. A common misunderstanding is to assume that external auditors are required to validate completeness of royalty declarations as a part of their financial statement audits.
95% of audits performed show significant monetary findings resulting from clerical or accounting errors, omissions or fraud.
WHAT IS A ROYALTY EXAMINATION?
A royalty examination assesses compliance with the license agreement. Conducting an examination includes:
Pre-fieldwork:
Gain an understanding of the industry and the cultural environment, to perform corroborative inquiry with Category Management, to review license agreements, to analyze royalty statements and to perform financial analysis in order to identify potential non-compliance issues,
Fieldwork examination:
The performance of tailored calculations to verify the accuracy of the royalty declarations at the licensee’s premises. This is not a definite and static approach but rather a customized forensic approach to determine whether royalties reported are complete and accurate,
Post Fieldwork & Settlement:
Findings raised during the audit are introduced and evidenced to the licensee’s executive Management. The purpose is to gain clarity and an understanding before issuing the final audit report disclosing all monetary and non-monetary findings.
Licensing companies may not be as familiar with proper implementation and monitoring of their Intellectual Property (“IP”) programs. Quite frequently, license compliance audits address monetary findings which turn into significant revenues streams for licensors and valuable points for improvement for licensees.
WHEN DO WE DO A ROYALTY EXAMINATION?
As regularly as possible since the examination provides licensor and licensees with mutual benefit:
Licensor:
Recovery of royalties owed
Avoid costly misinterpretation issues
Improve distribution agreements going forward
Establish confidence in information received
Improve forecasting and budgeting of royalty revenues
Promote a control orientated image to other licensees
License:
Full and permanent compliance with agreement
Trust with licensor which reinforces business relationship
Establish confidence in information sent