What are IP Audits, and when are they required?

What is an IP Audit?

An intellectual property audit is a process whereby a solicitor or other qualified professional takes a deep dive into a client’s IP, and advises them on their entire IP portfolio. The aim of the exercise is to highlight all IP assets within the business, including those that a business may not be aware of having created during their day-to-day activities, and those that are under-utilised or under-protected.

Once the various IP assets have been identified in this way, the solicitor is able to provide advice as to the current level of protection of those IP assets, and whether they have been managed in a way that ensures ownership is thoroughly in the business’ hands. Where gaps in protection, or issues in relation to ownership are highlighted through this process, an advisor should also be able to guide the business on how to improve protection and management.

This in turn should mean that the business emerges from the other side of the IP audit with a much more comprehensively protected and managed IP portfolio, increasing its value and being able to demonstrate this to third parties.

When is an IP Audit essential?

An IP audit can be useful at any stage of a business’ lifecycle, as it allows a business to ensure that it is managing one of its most important classes of assets in a methodical and value-adding and preserving way. However, there are certain circumstances or events when an IP audit is vital.

• Share sale or purchase

Where you are looking for investment into your business, you want to ensure that you maximise the value of that investment. An IP audit, and a subsequent valuation, not only allows you to do this but also indicates to any potential investors that you are switched on when it comes to managing your IP assets.

• Asset sale

Alternatively, you may be looking to dispose of part of the business, or all the business relating to a sub-brand which mainly comprises of intangible assets. In such a situation, an IP audit and valuation will be crucial given there is no other way to anchor and maximise the price of the sale for your intangible assets.

• IP-backed lending

Banks now offer IP-backed loans to businesses that have valuable IP portfolios. This can in some cases be an attractive way to finance the next stage of growth of the business given you are not giving away equity in the business, or directors’ guarantees. For a bank to lend on the basis of an IP portfolio, it will need to be sure that the IP portfolio is well managed and valuable.

• Following acquisition

If you have just acquired a business, or its assets, this is also an important moment to take stock of your acquired IP portfolio. If the selling business was IP-rich and IP-educated, they may have provided an IP audit, or at the least, satisfactory responses to queries raised on the IP, as part of the negotiations. However, even following this, you will want to be certain that the IP is being protected in the broadest way possible, and that you are able to maximise its potential.

• Grants and funding applications

When it comes to funding applications, whether through government agencies or funding bodies, your IP portfolio can serve as a distinguishing factor. If you are able to show how valuable the IP within the business is, judging panels for grants will have more confidence in the long-term potential of your project or business plan.

What does a good IP Audit look like?

A thorough IP audit should start with an in-depth interview with the client, to understand their business, the IP that may be present, and the current protections and policies in place. Key documents such as assignment agreements, licence agreements, service agreements and court orders may also be requested at this time.

Once this stage is completed you should receive a first draft of the IP audit report, which sets out all the IP rights that would be relevant to your business, their level of protection, and analysis of the current portfolio in terms of ownership and commercialisation, whilst raising any pertinent risks.

The report should also make recommendations as to addressing any gaps in IP protection, or any improvements in internal policies and practices designed to better protect and maximise the value of your IP.

Once the first draft of the report has been discussed with the business, and any final relevant information is exchanged, it can be finalised. Upon finalisation, the business should also undertake the work in the recommendations prior to a valuation or presenting the IP audit to third parties. Once this is complete a follow up report may be desired, to confirm the improvements made to the portfolio.

Valuation of IP

An IP audit allows an IP valuation specialist to fully understand the business and its IP portfolio, with a view to attributing a financial value to it. There are various methodologies used in the valuation process and various factors affecting value such as whether the IP has generated revenue or has the potential to do so, how long the term of protection is, and what the comparable market rates are, amongst others. Whilst historically valuations have been based on a simple cost-based methodology, more sophisticated and realistic methodologies are widely accepted now.

An IP audit is vital prior to this valuation process, as it clearly maps the portfolio for any valuation specialist, and if recommendations are carried out it means the portfolio is in a very healthy state, which in turn should lend itself to a higher valuation.

What is the IP Audit Scheme?

Businesses should also be aware that the IPO offers a scheme whereby qualifying businesses can obtain part-funding of an IP audit. The full scope and cost of the IP audit through the scheme would be £3000 (including VAT), with £2250 being funded, and the business having to pay the remaining £750.

The scheme must be applied for via an advisor from the relevant regional partner, which in the case of businesses based in England, is Innovate UK Business Growth.

If your business is embarking on one of the transactions described above, or requires an IP audit for any other reason, please contact Lakmal Walawage or one of the IP team at Edwin Coe. The team can also connect you with a business advisor at Innovate UK, should you require funding for your audit.

If you would like to maximise the value of your Intellectual Property with an IP Audit,  contact Lakmal Walawage or any other member of the Intellectual Property team.

Event: “Unlocking finance using your IP”

If you are interested in learning more about IP audits, valuations and the monetisation of your IP portfolio, please register your interest for our event in collaboration with Natwest and Inngot,  “Unlocking finance using your IP”, on 7 October 2025 with our events team (events@EdwinCoe.com).

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