Case Experience 3 – IP Audit for a Start Up
The case experiences are based on the 120 audits we had performed in India over the last ten years. The audits gave us invaluable insights into the role of IP in business in the Indian context, and we have tried to encapsulate some basic results/learnings at a macro level through these experiences. The names of companies and business details have been consciously avoided to comply with confidentiality covenants and professional obligations.
A start-up in the creative art space requested for an audit to identify potential IP, and devise/frame an IP Strategy/Policy as it moves from stabilization to growth phase. The primary focus of the company’s business is creative works. It creates works such as characters, cartoon strips, artwork, etc., and posts the same on Facebook. When a work gains popularity among the public, the company creates merchandise around the work and sells them. It also generates revenues from content licensing, endorsements, etc.
After its initial success, the start-up went for first round of funding to scale up its operations. The investor advised the start-up to build IP assets, and therefore, it decided to go for an IP audit.
The purpose of the IP audit was:
- To identify potential IP in the start-up;
- To assess IP risks and infringements; and
- To frame an IP strategy and policy/process for the company.
Overall, the goal of the start-up was to increase financial valuation by building IP assets before positioning for acquisition.
Though the company was small in size, the audit took more than two weeks. It took a long time because of the huge volume of works, violations, and sources that had to be reviewed. The IP Audit Team carried out a series of activities ranging from gathering and review of information to website audit and tracking infringements/violations.
The audit started with an interview with the founder, and gathering of information and materials. Information was gathered from various sources ranging from Facebook pages to e-commerce portals. The information was reviewed to arrive at an idea inventory.
Thereafter, the IP Audit Team focused on IP Risks to the Start-Up and third party infringements. Websites, portals, and several other sources were reviewed to identify infringements by the start-up, and infringement of start-up’s IP. On completion of the said task, a proposed IP strategy was devised.
In brief, the IP audit reported the following results:
- More than 4000 protectable ideas were discovered. The said ideas were categorized based on value to business;
- Several IP risks in the form of infringements by the start-up were identified;
- Numerous infringements by third parties were pointed out;
- Appropriate legal instruments were found to be missing;
- Marking/notice requirements were not being followed; and
- Defensive, moderate and aggressive IP strategies were proposed for consideration by the start-up.
The IP audit was performed recently, and the company is now in the process of protecting and cleaning up. The company has decided to adopt an aggressive IP strategy, for which the policy/process is being drafted. The goal of the company is to increase its valuation by at least five times by building IP assets along with revenues.
Contributed with the support of the IP Strategy and Consulting Division of BananaIP Counsels.
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