The benefits of Intellectual Property Audit in The Middle East

Intellectual Property Rights (IPRs) has long been recognized as the most important intangible assets of a business. Assets falling into this category will include any registered trademarks, copyrights, designs or patents owned by the business, any licenses to third parties and any licenses from third parties, including cross-licenses. Also included in this category are other means such as in-house work manuals, databases, recipes, franchise agreements, publications and product/process know-how. In the Middle East, the IPRs is concentrated on creating brands to identify products or services provided by enterprises such as Aljazeera, Rotana, Fine, and Zain. Through broad and continuous use such brands are becoming house hold names, for example, the majority of people refer to tissue paper as Fine or Kleenex (being the other popular brand and a competitive to Fine) demonstrating how the notoriety of a brand may replace the generic name given to a product or service. Similar perception is evident in the reference to news real where it is very common to hear someone asking to switch the TV to Aljazeera while others may ask for Alarabiya.
In our region, businesses are focusing on protecting and enforcing trademarks where other categories such as copyrights, designs or patents are not as widely available. However, there is a growing interest in the region on the importance of utilizing IPRs as an investment and a vital source of income. The lack of enforcement measures has created negative perception of IPRs among the majority of businesses in the region. Up until few years ago, enterprises were reluctant to even think about creating, promoting and protecting trademarks associated with their line of products and/ or services; To end up illegally copied and used on counterfeited similar or identical product or services by an infringer.
Recent issuance of deterring measures and public crack down on counterfeited goods, have restored some confidence in businesses and led them to rethink about adopting permanent strategy toward promoting their trademarks and other IPRs. The majority of such businesses found themselves struggling to understand the complicated steps surrounding such vital issues. In such panic, they opted to obtain an advice from lawyers and their in-house legal departments, but were even more disappointed to find that such
issue should only be discussed with well trained professionals working in the area of Intellectual Property and not Common Law. Such expertise is required to answer questions such as: What is the purpose of investing in IPRs? How to manage your investment in IPRs? What to gain from investing in IPRs? And most of all how much it will cost to invest in IPRs?
Professional consultancy firms in our region have long been conservative in taking a step toward venturing in to the IPRs consultancy area. The existence of properly trained professionals with adequate familiarity with local companys culture and needs, would be highly beneficial not only in providing extra added service but also in raising the level of professional work way above the competition. Although few firms attempted to provide such service to their client, yet they were concerned with locating the proper trained professionals needed to tackle such mission without jeopardizing the reputation and goodwill of the Firm. Through our long work, we have witnessed the departure of few clients to similar firms, to return back to us seeking targeted IP specialist.
We believe that our firm may offer significant assistance to your clients by conducting a review their IPRs or IP Audit. IP Audit is defined as a systematic review of the IP assets owned, used or acquired by a business. Its purpose is to uncover under-utilized IP assets, to identify any threats to a companys bottom line, and to enable business planners to devise informed strategies that will maintain and improve the companys market position.
Lets take for example company (A) that has a house brand (company name & Logo) and a number of product brands. The first step in the Audit process is to identify their IPRs assets including any registered trademarks, copyrights, designs or patents owned by the business, any licenses to third parties and any licenses from third parties, including cross-licenses. Also included in this category are things such as in-house work manuals, databases, recipes, franchise agreements, publications and product/process know-how.
In trying to estimate the value of any of these items, a good question to ask is how much will it cost to replace the item if it were lost, what is the expected income, e.g. in the next five years, that can be generated by the underlying IP assets and how is it being used. Several IPR valuation methods can be used to establish the value of an underlying IP asset.
Such review will uncover hidden assets found in any company and how an IP audit can facilitate the identification of importance, in terms of contribution to companys competitiveness and bottom line, different IPRs assets it own or use.
Having made this assessment the Company Management may then take informed decisions measures to be adopted in the event that a Companys IPR is infringed. In addition, the management would be in a position to optimize an IP strategy with the objective on ensuring that the companys IPR assets are used effectively and appropriately. Understanding which of the companys IPR assets are most important enables their full value to be realized and protected.
The benefits gained from providing such service are enormous; imagine informing a falling company that they can obtain adequate fund by selling, licensing or mortgaging their IPRs. To receive bailout fund from the US government, Chrysler Corporation (filed for bankruptcy) sold their famous brands JEEP, CHRYSLER and DODGE to the newly formed Chrysler Group LLC.
Trademarks are bought and sold for a variety of reasons. For example, in early 1982, Procter &Gamble Co., Cincinnati, purchased the international prescription and non-prescription drug business of Morton-Norwich Products Inc. of Chicago for $371 million cash, or about 17 times the divisions 1981 pre-tax earnings and 24 times its 1981 after-tax earnings. Procter & gamble wanted a major entry into the pharmaceutical business; Morton-Norwich wanted cash to repurchase a block of its shares to protect itself from any unfriendly acquirers, and to invest in areas it considered potentially more attractive.. Zareer Pavri, Senior Manager, Price Waterhouse
In conclusion, in the absence of proper measuring tools businesses in the Middle East must be on the lookout for experts to evaluate their IPRs value. IP Audit will identify company strengths and weaknesses and is proven to be an extremely useful tool that can be used to bring together all of the different departments within an organization. All departments within a company have an interest in some shape or form as to how a product is made, what goes into the product, how it is packaged, marketed and the price at which it is placed on the shop shelf.
ABOUT THE AUTHOR: Abdelaziz Alawneh
Zeina intellectual property firm provides comprehensive representation for all matters related to intellectual property and portfolio management needs. Our mission is to provide the highest level of intellectual property services in Oman and abroad.