Intellectual Property Audit

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Chapter 24: Intellectual Property Audits and Due Diligence Reviews: 24-4 Postaudit Activity Book Title: Intellectual Property: The Law of Trademarks, Copyrights, Patents, and Trade Secrets Printed By: Nicole Jensen ([email protected]) © 2018 Cengage Learning, Cengage Learning

24-4 Postaudit Activity After the inspection is completed, the legal team will usually prepare a written report identifying the specific items of IP owned by the company, reviewing their status, and making recommendations for protection. If outside counsel prepares the report, confidential information in the report will be protected by the attorney–client privilege, such that it will not be discoverable. The IP audit team may then proceed to take the following actions: filing applications for registration of trademarks, service marks, copyrights, and patents; ensuring that the chain of title for trademarks, copyrights, and patents is accurate (and correcting and filing documents at the USPTO and Copyright Office if the company has changed its name or acquired another’s IP); drafting contracts to be used when the company retains independent contractors (to ensure that all work created by the independent contractors is “work made for hire” or is owned by or assigned to the company); preparing license agreements so the company can license its intellectual property to others; preparing nondisclosure and noncompetition agreements (if allowed by state law); and preparing policies for the protection of trade secrets.

The IP audit team may also assist the client’s human resources department and provide instructions on conducting exit interviews and may redraft the employee manual to include a trade secret policy, Internet and computer use and security policy, and instructions regarding use of the company’s trademarks. The legal team may also advise the company to engage appraisers and analysts to valuate the IP assets so they can be licensed at appropriate royalties or sold at their fair market value to produce revenue for the company.

Exhibit 24–1

Intellectual Property Audit Questionnaire

Intellectual Property Audit Questionnaire

Identified below is a list of subjects to be covered in connection with our review of the intellectual property rights of your company (the “Company”). Please gather any materials and documents relevant to the subjects listed below so they can be reviewed. If no materials or documents exist with respect to a particular subject, please confirm that in writing next to the relevant question.

For all relevant questions, give the name of the person who assisted in the design, development, or implementation of any intellectual property rights; describe the nature of the relationship between the person and the Company (for example,

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employee, independent contractor, and so forth); and indicate whether the person signed any confidentiality or nondisclosure agreements with the Company.

A. General

1. Has the Company ever acquired another entity or the business or assets of another entity or person? (This party may have owned intellectual property that is now owned by the Company.)

2. Has the Company ever sold any assets or business to another entity or person?

3. Is the Company engaged in the development or design of any useful products or parts for useful products?

4. Is the Company engaged in the development, design, or modification of computer software?

5. Are there any individuals who may have developed or designed products or software for the Company who have left employment with the Company? If so, indicate whether each such person signed a confidentiality, nondisclosure, or employment agreement with the Company.

6. Does the Company have multiple websites or are there links from other parties’ sites to the Company’s site? If so, provide documents relating to the registration of the Company’s domain names and website addresses.

7. Does the Company use a docketing system or calendar to provide reminders of due dates relating to any of its intellectual property?

8. Has the Company ever conducted an intellectual property audit, or does it maintain a list of its IP assets? If so, please attach a copy.

9. Has the Company changed its name or address within the past 10 years? If so, records on file with the U.S. Patent and Trademark Office (USPTO) and Copyright Office may need to be updated to reflect such.

10. Does the Company use any trademarks, copyrights, patents, or trade secrets of others? Similarly, do any other individuals or companies use the Company’s trademarks, copyrights, patents, or trade secrets? If so, attach any agreements relating to such uses.

11. Do any employees work from home? If so, do they use their own devices and computers or company-issued computers?

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12. What cybersecurity measures does the Company use to ensure its computers remain secure and are not infiltrated?

B. Trademarks and Service Marks

1. Does the Company use any trademarks, service marks, logos, slogans, trade dress, or designs (collectively “Marks”) in connection with the offer and sale of its products or services? These Marks may have been displayed on products, labels, packaging, letterhead, business cards, in advertisements, brochures, or other marketing materials, including a website.

2. Has the Company ever applied for registration of any Marks with the USPTO or any state trademark agencies?

3. Has the Company ever allowed another party (such as an employee, client, vendor, or competitor) to use any of the Company’s Marks?

4. Does the Company use any Marks that are owned by any third party? Review Company marketing materials, website, and other written documents to determine whether the Company displays or uses Marks belonging to another.

C. Copyrights

1. What written materials does the Company use to advertise its products and services? These may be written materials, scripts or copy for radio or television advertisements, or website materials. Were these developed by Company employees or by independent contractors working for the Company? What agreements exist relating to the development of such materials?

2. What materials does the Company use internally, such as employee handbooks, training materials, company policies, manuals, training or other videos, audios, or modules, relating to the way the Company conducts its business?

3. Do Company employees prepare written materials or electronic materials (such as PowerPoint slides) when presentations are made within the Company and outside the Company? If so, describe.

4. Do Company employees submit articles for publication to any journals, periodicals, or other publications? If so, describe.

5. Has the Company ever applied for registration of any copyrights with the U.S. Copyright Office?

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6. Are articles from periodicals, magazines, trade journals, and other related written materials photocopied for distribution within the Company?

7. What policies exist regarding reproduction of books, articles, journals, and other materials that may be subject to copyright?

8. Is any music piped in through the Company’s offices (whether through the use of CDs or music being simultaneously transmitted by a radio station)?

9. Is music played when callers to the Company are placed on hold?

D. Patents

1. Has the Company or its employees ever invented any useful article, product, method, process, or software? If so, do any inventor or laboratory notebooks exist that document the development of the invention? Does the Company have any present plans to develop any such inventions?

2. Has the Company ever made any improvements to another party’s useful article, product, or invention?

3. Has the Company ever engaged in the reverse engineering or decompilation of another company’s product or software?

4. Has the Company ever applied with the USPTO for issuance of any patent?

5. Does the Company mark all patented inventions with a patent notice?

6. What process does the Company use to ensure all notices of patent are removed when the patent has expired?

E. Trade Secrets

1. What information does the Company possess that would be harmful to the Company if it were discovered by a competitor? Consider proprietary information relating to research and development plans; calculations and financial data; employee manuals and handbooks and personnel information; information relating to the Company’s clients and customers; the Company’s methods of recruiting; methods and processes of production; test results for Company products and services; data concerning the pricing for Company products and services; sales forecasts; research information; manufacturing information; marketing materials; surveys and data relating to customer needs and preferences; and business plans and forecasts.

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2. Do employment, confidentiality, nondisclosure, or other agreements exist that protect such proprietary materials?

3. Does the Company conduct employee orientation for new employees and exit interviews for departing employees to ensure employees understand the need to maintain confidentiality of Company trade secrets?

4. What measures does the Company take to protect confidential and proprietary information? Are documents marked “Confidential”? Are proprietary materials kept in locked cabinets? Are restrictions placed on the access to and copying of such materials? Is access to Company premises monitored by cameras, key access, or any other method?

5. What measures does the Company take to ensure electronic communications are protected and secure? Are any encryption methods in place for electronic communications? Describe restrictions on access to the Company’s computer systems, including password protection methods.

6. Are any legal notices or disclaimers provided at log-in when Company employees access the Company network?

F. Software

1. Has the Company designed, developed, or modified any software?

2. Does the Company have the right to use any software designed or developed by another party? If so, have licenses been obtained for each user?

3. Does the Company allow its employees to copy any software for their home use?

G. Claims and Litigation

1. Are there any presently pending claims relating to any of the Company’s intellectual property? Has any person alleged or claimed that the Company has violated or infringed its intellectual property rights?

2. What claims have been made (whether or not resolved or compromised) within the past five years against the Company relating to alleged infringement or violation by the Company of the intellectual property rights of others?

3. Has the Company observed or made any claims relating to any possible infringements by others of the Company’s intellectual property rights?

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4. Does the Company use any methods to detect possible infringing uses of its intellectual property?

H. General Documents and Information

1. Please assemble all applications and registrations, and all license, royalty, security agreements or other agreements relating to trade names, Marks, copyrights, patents, trade secrets, software, licenses, or other similar rights relating to the Company’s intellectual property rights.

2. Please assemble all agreements entered into by employees (including officers and directors) and any Company handbooks, manuals, or policies relating to Company employees.

3. Please assemble all agreements entered into between the Company and any consultants or independent contractors.

4. To the extent not already covered, please assemble all agreements or licenses entered into between the Company and any other parties that relate to the Company’s intellectual property, which are essential for the operation of the Company’s business, or by which the Company is allowed to offer or use another party’s Marks, copyrights, patents, processes, software, or other related property, including contracts entered into with the government.

5. Does the Company offer its products or services in any foreign countries? If not, does the Company have any plans to offer its products or services in foreign countries within the next three years?

Ethics Edge

Confidentiality and Competence

Throughout this text, many of the ethics tips have focused on two critical duties of paralegals: the duty to maintain confidential information and the duty to provide competent service to clients. Those two core duties play a significant part in IP audits. Consider the following:

IP audits routinely disclose the most important assets that many companies own. Be scrupulous in maintaining the confidentiality of the information to which you will gain access. Do not discuss the results of the audit with others, keep the information securely protected, and mark all documents with notices of confidentiality.