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Why intellectual property audits are make or break for businesses, according to Houston expert

A thorough IP audit separates the wheat from the chaff. Image via Getty Images

Every company with a business based in whole or in part on important intellectual property should protect that property with regularly scheduled intellectual property “audits.” Failing to do so may not only endanger valuable, company-owned patents and trademarks, but also make the business less profitable than it could be.

An IP audit is especially critical when a business is being sold, when a company is planning to buy another business, when a patent is being challenged by a competitor, when a company is looking for new financing or going public, and when there is a change in top management or employees in critical positions have left. A regularly scheduled IP audit can prevent panic, confusion and unwelcome surprises when these major events occur, because management will already have a good working knowledge of the status of all intellectual property.

To begin with, a thorough audit separates the wheat from the chaff. Which patents are central to the company’s business and must be carefully maintained in force? Are there other patents that are no longer important or have been superseded by newer developments and can safely be ignored and allowed to lapse?

Patents should be filed wherever the company’s products are sold and fees on all important patents must be carefully kept up to date. Fees to maintain international patents are often especially expensive but should be updated when necessary, nonetheless. Sometimes, when a company’s trademarks are reviewed, management learns that they have never been federally registered.

Auditors also may find that existing patents are no longer adequate to protect the products that are actually being sold. The products may have “moved on” through further development or application to new uses, but the relevant patents have not. Those patents should be updated immediately with new filings. It’s also critical to determine whether the products made and sold by the company could possibly infringe patents held by competitors—or whether the reverse is true, that other companies’ products are infringing the patents held by the company being audited.

A careful examination of intellectual property can also result in positive developments: auditors may discover that some patents are more valuable than anyone knew and can be licensed to produce another revenue stream for the company—or licensing can be expanded beyond the present level.

Beyond the focus on patents and trademarks, an IP audit should entail a close examination of all contracts and agreements relating to intellectual property. Pinning down exactly who owns the property is just as important as keeping patents up to date. This entails delving into development agreements, nondisclosure agreements, employment agreements, work-for-hire and sales contracts, to make sure ownership of a company’s intellectual property has not been ceded to, or shared with, a third party.

Software is particularly problematic when it comes to inadvertent infringement of the rights of others. What software is being used internally? Where did it come from and what are the limitations on its use? IT professionals don’t always realize that even open-source code requires a license.

This entire process also needs to be applied to analyzing the intellectual property of a prospective acquisition. Investigators may discover that patents belonging to the acquisition are not all appropriate for the acquiring company’s products, fees are not up to date or there are issues with IP ownership or validity. All of these factors may result in substantial savings on the purchase—or a decision not to purchase at all.

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Puja Detjen is an intellectual property attorney and partner in the Houston office of Patterson + Sheridan.

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Building Houston

 
 

Here's your one-stop shop for innovation events in Houston this month. Photo via Getty Images

Houstonians are transitioning into a new summer month, and the city's business community is mixing in networking and conference events with family vacations and time off. Here's a rundown of what all to throw on your calendar for July when it comes to innovation-related events.

This article will be updated as more business and tech events are announced.

July 10 — Have a Nice Day Market at the Ion

Stop by for a one-of-a-kind vendor market - #HaveANiceDayHTX - taking place at the Ion, Houston's newest urban district and collaborative space that is designed to provide the city a place where entrepreneurial, corporate, and academic communities can come together. Free to attend and free parking onsite.

Have a Nice Day is a creative collective with a goal of celebrating BIPOC makers, creators, and causes.

The event is Sunday, July 10, 4 to 8 pm, at The Ion. Click here to register.

July 12 — One Houston Together Webinar Series

In the first installment of the Partnership's One Houston Together webinar series, we will discuss supplier diversity an often underutilized resource for business. What is it and why is it important? How can supplier diversity have long-term impact on your business, help strengthen your supply chain, and make a positive community impact?

The event is Tuesday, July 12, noon to 1 pm, online. Click here to register.

July 14 — Investor Speaker Series: Both Sides of the Coin

In the next installment of Greentown Labs' Investor Speaker Series, sit down with two Greentown founders and their investors as they talk about their experiences working together before, during, and after an equity investment was made in the company. Attendees will get a behind-the-scenes look at one of the most important relationships in a startup’s journey and what best practices both founders and investors can follow to keep things moving smoothly.

The event is Thursday, July 14, 1 to 2:30 pm, online. Click here to register.

July 15 — SBA Funding Fair

Mark Winchester, the Deputy District Director for the Houston District Office of the U.S. Small Business Administration, will give a short intro of the programs the mentors will discuss. There will be three government guaranteed loan mentors and two to three mentors co-mentoring with remote SBIR experts.

The event is Friday, July 15, 10:30 am to 1 pm, at The Cannon - West Houston. Click here to register.

July 16 — Bots and Bytes: Family STEAM Day

Join the Ion for a hands-on learning experience to learn about tech and robotics and gain insight into the professional skills and concepts needed to excel in a robotics or tech career. This event will be tailored for 9-14-year-olds for a fun STEM experience.

The event is Saturday, July 16, 10 am to 1 pm, at The Ion. Click here to register.

July 19 — How to Start a Startup

You have an idea...now what? Before you start looking for funding, it's important to make sure that your idea is both viable and valuable -- if it doesn't have a sound model and a market willing to pay for it, investors won't be interested anyway.

The event is Tuesday, July 19, 5:30 to 7:30 pm, at The Ion. Click here to register.

July 20 — Perfecting Your Pitch

Join the Ion for their series with DeckLaunch and Fresh Tech Solutionz as they discuss the importance and value of your pitch deck when reaching your target audience.

The event is Wednesday, July 20, 5:30 to 6:30 pm, at The Ion. Click here to register.

July 21 — Transition On Tap: Investor Readiness with Vinson & Elkins LLP

Attorneys from Greentown Labs’ Gigawatt Partner Vinson & Elkins LLP, a leading fund- and company-side advisor for clean energy financing, will present an overview of legal considerations in cleantech investing, geared especially toward early-stage companies and investors. The presentation will cover the types of investors and deals in the cleantech space and also provide background on negotiating valuation, term sheets, and preparing for diligence.

The event is Thursday, July 21, 5 to 7 pm, at Greentown Houston. Click here to register.

July 28 — The Cannon Community 2nd Annual Town Hall Event

Partner of The Cannon, Baker Tilly, has played an integral part in the success of Cannon member companies. Join the Cannon community for The Cannon's 5-year anniversary celebration!

The event is Thursday, July 28, 4 to 7 pm, at The Cannon - West Houston. Click here to register.

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