A successful licensing program includes two key factors. The first is the ability to negotiate and enter into license agreements that reflect the value of the intellectual property (IP). The second is the ability to monitor and ensure licensee compliance to the various terms of the agreements post license. The ultimate goal of a post-license monitoring program is to cultivate the relationship with your licensees without leaving money on the table.
A royalty audit is a key component of a post-license monitoring program, with the objective of helping a licensor ensure what was bargained for is what is received. A royalty audit (sometimes referred to as a contract compliance investigation) is an analysis or investigation of a licensee’s compliance with the various obligations, particularly the financial terms and considerations, laid out in a binding contract, namely the license agreement.
A company that proactively performs royalty audits can realize the following benefits:
As many as 85% to 90% of licensees fail to accurately report royalties. Many of these inaccuracies take the form of underpayments, which range from 10% to 25%, on average.
Our dedicated team of royalty audit experts will help you realize the full value of your IP by ensuring compliance with existing license agreements.
Our team offers comprehensive services that help our clients systematically monitor and enforce license portfolios to maximize revenue. We leverage specialized auditing techniques, as well as very differentiated skill sets, including technological, negotiation, and interpersonal. Our engagements are executed in a professionally disciplined, skeptical, and planned manner.
We offer several services to meet the specific needs of our clients:
Desk audits include a review of royalty reports and payments, and include a computational and analytical examination. The goal of a desk audit is to identify any red flag(s) for potential royalty underreporting. Our analysis includes:
A desk audit typically can be executed in two to three weeks.
Field audits include a limited or full scope audit of books and records of licensees and a review of controls and procedures within the royalty reporting process. We typically perform field audits at licensee location(s). The goal of a field audit is to identify specifics and the scope of royalty underreporting as well as to facilitate parties to discuss and resolve issues such as differences in interpretation of contract terms. A high-level overview of our approach:
The duration of a field audit is dependent upon the cooperation and schedule of the licensee. Typically, the timeline ranges from two to four months from notification letter to final report.
Licensors should understand that, under certain conditions, their licensee may be required to pay for the royalty audit. We assist clients with negotiating and ultimately receiving unpaid royalties as well as a recovery of our fees and expenses for the audit.
We work with clients to implement systematic programs to actively monitor and enforce license portfolios. The primary goal of such a program is to cultivate the relationship between the licensor and licensee without leaving money on the table.
We provide expert reviews of key clauses of licensing agreements from a risk perspective. The goal of the review is to reduce any likely disputes stemming from poorly drafted agreements. Information provided can also be useful for negotiating and drafting future licensing agreements.
Our professionals have worked with trademark, copyright, brand, and patent owners and/or licensors across a variety of industries, including consumer electronics, telecommunications, computer technology, life sciences, transportation, and nonprofit organizations. Our clients range from individuals to Fortune 100 organizations, including inventors, corporations, universities, and research institutions.