The tips and expert strategies you’ll gain could save you tens or hundreds of thousands in lost royalty dollars, while ensuring your licensed IP reaches its full potential.
Studies have repeatedly shown that more than three quarters of royalty payments made by licensees are based on reports that contain errors, misinterpretations, or omissions. In the vast majority of these cases, the result is a significant underpayment of royalty dollars – and in today’s budget-crunched world you can’t afford to sit back and let revenue – and sometimes very big revenue — slip through the cracks.
Here are a couple of examples to illustrate why this is such a common problem that typically goes undetected in the absence of stringent audit procedures:
Your TTO licenses a technology used in microscopes to a precision optics supplier, which in turn sells many units to manufacturers. You get a hefty check and everyone’s happy – except the supplier also begins making its own microscopes, using the technology and “selling” it internally to its new manufacturing division. These sales are never reported, and tens of thousands of royalty dollars are lost.
A start-up license is completed and defers royalty payments until the new company reaches profitability. However, the terms don’t specify what constitutes allowable expenses, and the founder’s salary rises every year to eat up any potential earnings. Annual reports show a loss, but the CEO is making a fortune while your TTO keeps waiting for the red ink to turn black.
Establishing a best-practice royalty audits process – beginning with assessing contract language to ensure terms are defined with an eye to potential future disputes over definitions and calculations – can mean literally hundreds of thousands of dollars for your TTO in payments that might otherwise get lost in translation, misinterpretation, error, confusion, and oversight. It’s an area most TTOs can improve on significantly, and bring much-needed revenue that’s rightfully yours straight to the P&L.
But where do you start?
You can start with an eye-opening and practical webinar that will provide a blueprint for adopting royalty audit best practices and capturing every dime you’re due:
The Who, When, Why and How of Royalty Auditing
As the title suggests, this program is designed to identify all the major players for a successful royalty audit program while instructing you on how to establish an audit process for maximum success.
Join our expert panel and get the guidance you need to:
- Identify all major players that should be on your audit team
- Know when a desk audit is appropriate versus a full royalty audit
- What should be included in your license compliance program
- Establish optimum audit schedules
- Implement license drafting tips for:
- Objection period
- Audit rights
- Reimbursement of audit costs
- Reporting requirements, and more
- Understand reasons for underreporting and other non-compliance with your licensing agreements
- Use “red flags” to target audit candidates and activity
- Keep the peace with licensees while maintaining your audit rights Common mistakes to avoid while:
- Drafting the license agreement
- Monitoring licensees
- Performing desk audits
- Legal issues to consider before you enter into a full-fledged audit
Meet Your Expert Team of Presenters:
Glenn Tautrims, CA, CFE is a Director with Global Royalty Audits Inc. (GRA). Prior to co-founding GRA in 2005, Glenn was a Vice President in a large international accounting firm, where he was responsible for implementing and overseeing its Canadian Revenue Recovery and Licensing Management practice. Glenn was also one of the original members of the team that created the Royalty Audit practice for the accounting firm in 1996. In addition to his experience in a range of industries, Glenn has presented papers and conducted seminars on various intellectual property issues including Conducting Royalty Audits and Licensing Management Best Practices. Some of the groups Glenn has addressed include the Association of University Technology Managers, Osgoode Hall Law School of York University (Professional Development Program), the Licensing Executive Society, the Advocates Society, The Patent and Trademark Institute of Canada, The Canadian Bar Association, Infonex and the Federated Press.
Mr. Matthew A. Hurewitz, CPA, is Managing Partner at Hurewitz, Boschan & Co. LLP. The firm’s auditors have helped clients recover in excess of $50 million from royalty and participation compliance audits. Its principals’ 25 years of professional experience, an international network of experts, and sophisticated computer analytics yield reliable, timely and cost-effective audit results. Auditors analyze voluminous data, often excavating through layers of records to expose buried but critical information. In most audits they find calculation errors, errors in contract interpretation, and a variety of other mistakes that may otherwise remain undiscovered.
Robert Baron is a partner at the law firm Ballard Spahr LLC, where he is Vice Chair of the Intellectual Property Department, a partner in the Litigation Department, and a member of the Intellectual Property Litigation, Complex Commercial Litigation, Higher Education, and Life Sciences/Technology Groups. He regularly prosecutes and defends cases at the trial and appellate levels involving patent, copyright, trademark, and trade dress infringement; theft of trade secrets; licensing disputes; unfair competition; and business terminations. He has litigated royalty disputes, and advised clients on the use of audit provisions in such disputes.