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IP due diligence is performed in the following contexts:

·Merger and acquisition or joint ventures: aiming to provide a basis for risk and value assessment of relevant IP assets in a proposed acquisition or sale of IP

·Financial transactions: aiming to determine the impact of IP assets on IP related financial transactions such as stock purchasing, security interests, initial public offerings, etc.

·IP assignments and IP licensing: aiming to provide information to the potential assignee or licensor about the IP portfolio, concentrating on verification of ownership and possible restrictions affecting the use of the IP

·Launching of a new product or service: aiming to evaluate any possible infringement risks or freedom-to-operate issues linked to the new product or service

·Bankruptcy and layoffs, etc.: aiming to secure the IP rights in case of bankruptcy, employee layoffs, etc. 

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Broadly speaking, depending on the objectives of the audit, there are two types of IP audits :

General IP audits: General-purpose audits draw an overall but comprehensive picture about the company’s IP assets. Such audits scrutinise the IP portfolio as a whole to review the businesses’ IP management approach, if there is one. If not, general IP audit is a core and fundamental step to develop an IP management approach and an IP-intensive culture within the company.

Specific IP audits: These types of audits are generally known as IP due diligence. They have a narrower scope and usually focus on identification and evaluation of IP assets relevant to the explicit objective of the audit. 

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IP audit is an important business tool, which helps to:

·better identify and monitor the whole intellectual asset portfolio: by clarifying which intangible assets are owned, used or non-used and verifying the owners of these assets

·better secure the IP: by suggesting the most applicable and effective ways to protect the IP assets owned

·effectively exploit the IP: by showing whether the IP is efficiently exploited and by revealing the not used and/or underused IP assets

·set up an effective IP administration structure: by providing guidance for the development of sound and elaborated IP management

·make the IP strategy align with the business strategy: by highlighting possible inconsistencies between the IP strategy and the business targets

·determine the value of IP assets: by assisting in valuation of IP assets to discover the existing value of the company

·foresee and manage possible future risks: by determining whether the company’s IP assets are infringing the rights of others or others are infringing on rights held by the company

·reduce costs: by enabling a reduction in maintenance costs for obsolete IP assets and by helping to avoid costly and tedious court actions for possible infringement cases

·nurture inventiveness and creativity: by building up innovation support mechanisms and encouraging IP creation within the businesses

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An IP audit is a systematic, thorough and solution-focused review of the intellectual assets owned, used or acquired by the businesses to ascertain their legal status, value, potential IP-related risks and the means for protection and to capitalise on them.

A formal IP audit serves two general purposes: (1) identification and evaluation of IP assets (2) anticipating and managing the risks that could be linked to the IP portfolio of the company.